1. These two Revision Petitions are filed under Section 21(b) of the Consumer Protection Act, 1986 (the “Act”) against order dated 26.05.2016, passed by Rajasthan State Consumer Disputes Redressal Commission, Jaipur (‘State Commission’) in FA Nos.781 and 782 of 2013 respectively wherein the State Commission allowed the Appeals and set aside the District Consumer Disputes Redressal Forum, Nagaur (District Forum) order in CC Nos.229 and 233 of 2012 dated 02.07.2013 wherein the Complaints were dismissed with costs. 2. Since the facts and questions of law involved in both Revision Petitions are substantially similar, except for minor variations in dates and events, both the petitions are being disposed of by this common Order. For ease of reference, RP No.2572 of 2016 is considered as the lead case, and the facts below are drawn from CC No. 229/2012. 3. For convenience, the parties involved in this matter are referred to as per the Complaint before District Forum. "M/s. Sunrise Bio Fuel through Partners Rajpal Singh and Rakesh Kumar" is referred to as the Complainant and "Bank of Baroda” is Opposite Party No.1 (OP-1) and National Insurance Company is Opposite Party No.2 (OP2). 4. Brief facts of the case, as per the complainant, are that the complainant who had bank A/s with OP-1 (Bank) was provided Rs.30 lakhs loan along with a cash credit facility of Rs.10 lakhs. As security for the loan, their business assets, such as raw materials, stock, plant & machinery and furniture & fixtures were equitably mortgaged. The bank also took out an insurance policy for Rs.5 lakhs for the building and Rs.50 lakhs for the plant, machinery, and stock. The insurance premium was deducted from the account. On 11.05.2012, an incident occurred at the complainant's premises that caused damage to the building, plant, machinery, and stock. They submitted a claim of Rs.8,42,470 to OP-2 (insurer) through OP-1 (bank), but this claim was rejected on 11.07.2012. Later on, 02.08.2012 a fire broke out at their business premises, damaging about 400 tons of raw material. The complainant reported the incident on 03.08.2012 to OP-2 through OP-1. A loss claim for Rs.8,00,000 was also submitted. OP-2 rejected both claims as the stock was not insured under the policy. While the complainant claimed that the bank had deducted the insurance premium, the insurer argued that the policy only covered fire and earthquake damage for building and machinery, not the stock. Being aggrieved, they filed the CC No. 229/12 seeking Rs.8,42,470 with interest for the first incident; and CC No. 233/12 seeking Rs.8,00,000 with interest for the second incident before the District Forum. 5. In its Reply, OP-1 admitted that the cash credit facility and the insurance premium deduction were made, but they argued that they had forwarded the claim information to the insurer on time and that the insurance company was responsible for the claim denial, not the bank. The bank claimed that there was no deficiency in service on their part and requested the dismissal of the complaints. 6. In its Reply, OP-2 stated that a standard fire and special perils policy was taken out, which covered fire and earthquake damage for the building (Rs. 5 Lakhs) and machinery (Rs. 50 Lakhs), but not the stock. The claim for the stock loss was denied because it was not covered under the policy, and they contended that no premium was paid for stock insurance. The Surveyor's report assessed the complainants' losses as Rs.68,927, which was also not covered under the policy. 7. The learned District Forum vide order dated 02.07.2013 dismissed the both the complaints as under: “18. According to the Insurance proposal and Insurance Policy, respondents are not liable to pay any compensation with regard to stock because respondent No. 2 has not charged any premium for the stock. As far as the question of insurance of stock by the respondent No. 1 is concerned, complainants themselves have not given information of stock to the respondent No. 1 upto 3.4.12. Therefore, complainants have failed to clarify that how without getting information of stock the respondent No. 1 could have submit the said information to respondent No. 2 in the insurance proposal and how respondent No. 2 could insure the stock without proposal. Besides above, respondent No.1 has made the payment of premium only for the compensation of amounts mentioned in the proposal. It is also baseless statement of the complainants that respondent No. 1 should have not send the proposal for compensation at its own, the proposal should have been sent for total compensation for insurance, because if complainants had any objection with regard to any act of the respondent No. 1 then they should have taken necessary steps timely. If they had any objection in this regard, they should have contacted the respondent No. 1. It is also pertinent to mention here that respondent No. 1 is not liable to pay any amount with regard to insurance in question because they have not taken any benefit from the complainants. Therefore, in our opinion, both the complaints of complainants are liable to be dismissed. ORDER Accordingly, both the complaints of the complainants are dismissed with costs of Rs.two thousand each.” (Extracted from translated copy) 8. Being aggrieved, the complainant filed FA Nos.781 and 782 of 2013 and the State Commission vide order dated 25.05.2016 allowed the said appeals and directed as under: “We have heard the learned counsels of both the parties in detail and perused the files carefully. The main issue to be considered in this case is that whether above-said compensation is covered under the policy or not. In this regard we have perused the policy Exh. A-3. From the perusal of this policy it appears that it is a standard fire and special perils policy and in this policy mention of earth quake (fire & stock) has been made. On the basis of same, it has been argued by the Insurance company's Surveyor and their learned counsel that this policy was only for earthquake and fire. Ruling of III (2010) CPJ 432 (NC) New India Insurance Co. Ltd. versus Anil Traders has been produced on behalf of Insurance Company. In the present case, it was clearly mentioned in the policy that FST excluded form policy, on the basis of which claim was not found payable. But in the present case, only in the column of premium in the policy, FST excluded has been written. Risk covered has not been mentioned clearly. In the column of premium its mention has been made for the purpose of calculation of premium or for exclusion, it is not clear and it has also not been mentioned by the Insurance company that what is covered under special perils. Therefore, this ruling does not help the Insurance company. We feel that Insurance company has rejected the claim of the complainant cunningly on the basis of this report of Surveyor that Add-on description has been mentioned where earthquake (fire & shock) was written, it means earth quake (fire & shock) was written only as Add-on description, for which additional premium of Rs.550/- was taken. It is completely incorrect to say that this policy was for earth quake (fire & shock). In this regard the learned counsel has contended that in this policy no premium has been paid for STFI, which means that the risks related to storm, tempest, fluid are not covered. In this regard, STFI exclusion has been written in the policy. Learned counsel has contended that there is no mention of taking additional premium for the same, but there should be no need to pay additional premium for exclusion and also in the policy there is mention of basic rate 4.125 permille. Rate of separate premium for each risk has not been mentioned because it appears a composite policy and therefore separate rate for each peril has not been given. Another question arises here is that it was a special perils policy, but Insurance company has not given any evidence about the risks covered under it. They have also not included any list of such risks with this policy. It has been stated by the Insurance company in a fraudulent manner that this policy is only for earthquake (fire & shock). Insurance company has not clarified that which risks are covered under the special perils. The second question was that whether stock was covered under this policy or not. In this regard, the learned counsel for complainant has drawn our attention towards the proposal form Exh. 7. In the Insurance proposal form, there is mention of building Rs.5,00,000/-, plant and machinery Rs.50,00,000/-, wooden sawdust, gutka etc. raw material. Also, as per the perusal of policy Exh. A-3, mention of coal/coke/charcoaIba11/ briquettes manufacturing has been made in it as stock and it has been mentioned on it that risk is covered for the following items. In this manner, on the one hand there is mention of raw material in the proposal form, its clear mention has been made in the policy of Insurance company on the other hand. Also, Bank cannot give the limit against the stock without Insurance, therefore in this condition this contention cannot be accepted that stock was not covered under this policy. In this manner, as per above discussion, we are of the opinion that both the complaints deserve to be allowed and repudiation of claims of the complainant by the Insurance company was not justified. Insurance company even did not appoint any Surveyor for the assessment of damages suffered on 2.8.2012 and no inspection was made. On the basis of above entire discussion, we allow both the above-mentioned appeals of the complainant and order the Insurance Company to get assessed the losses suffered by the complainant at his premises on 11.5.2012 and 2.8.2012 and make the payment of compensation within one month. Also the amount of Rs.51,000/- be paid to the complainant as compensation for mental harassment and Rs.21,000/- as costs of complainant, appeal. Order be complied with within one month. Complaint against the respondent No. one - Bank of Baroda is dismissed.” (Extracted from translated copy) 9. Hence, the present Revision Petitions by the Insurer. 10. In her arguments, the learned Counsel for Petitioner/OP-1 reiterated the grounds in reply and asserted that the petitioner challenges the impugned order dated 26/05/2016 allowing the Appeals (Appeal No. 781/2013 & Appeal No. 782/2013) filed by Complainant. The State Commission reversed the order of the District Forum, Nagaur, which had dismissed the complaint with costs on 02.07.2013. She asserted that the insurance policy taken by OP-1 was a Standard Fire and Special Perils Policy, covering fire and earthquake. The policy insured the building for Rs. 5 lakhs and plant and machinery for Rs.50 lakhs. The bank did not include the stock in the insurance proposal form and thus the stock was not insured. The loss sustained by the complainants was due to a heavy storm, which was not covered under the policy. She further contended that the Proposal Form clearly mentions that the insurance covered only the building (Rs. 5 lakhs) and plant and machinery (Rs. 50 lakhs). The Schedule of Policy further corroborates that the policy covered only fire and earthquake, and no other risks such as storms or rain were covered. The complainant’s loss was caused by a heavy storm and rain. However, as per the insurance proposal and policy, there was no provision for compensation of losses caused by storm or heavy rain. Such compensation would only be payable if the policy had been taken under STFI (Storm, Typhoon, Flood, and Inundation) coverage, which was not the case here. The licensed surveyor, Shri BK Modi, submitted a survey report dated 29.06.2012, stating that the policy did not cover stock and no premium was taken for stock insurance. The policy did not cover losses caused by storm, typhoon, flood or cyclone. Despite this clear report, the State Commission completely ignored the findings of the surveyor. Without prejudice to the petitioner's case, the survey report assessed the net loss payable at Rs.68,927. Even so, the surveyor reiterated that the policy did not cover risks related to storm, typhoon, flood, or cyclone, and that the stock was not insured. The insured had not agreed with surveyor’s assessment, so the loss was calculated without prejudice to the policy terms. Yet, the State Commission overlooked this aspect entirely. She sought to allow the Revision Petitions and the set aside the impugned order dated 26.05.2016 of the State Commission. 11. On the other hand, the learned Counsel for the complainant/ Respondent No.1 reiterated the issues in the complaint and argued in favour of the State Commission’s order. It is clarified the principles of interpreting exclusion clauses in insurance contracts and the burden of proof lies on the Insurer to demonstrate that the claim falls under an exclusion clause. He further contended that there is no error of law or jurisdictional which requires interference by this Commission under the scope of 21(b) of the Act. He sought to dismiss the present Revision Petitions with costs. He relied upon the following judgments in support of his arguments: A. Lourdes Society Snehanjali Girls Hostel vs. H&R Johnson (India) Ltd., III (2016) CPJ 27 (SC); B. Rubi (Chandra) Dutta vs. United India Insurance Co. Ltd., II (2011) CPJ 19 (SC); C. Leatheroid Plastics Pvt. Ltd. vs. Canara Bank, II (2019) CPJ 147 (NC). 12. I have examined the pleadings and associated documents, including the orders the learned District Forum and the learned State Commission placed on record and rendered thoughtful consideration to the arguments advanced by learned Counsels of both the parties. 13. The primary issue to be determined in the case is whether the complainant is entitled to reimbursement under the insurance policy for losses occurred on 11.05.2012 and 02.08.2012. They claimed compensation for damages caused by a storm on 11.05.2012 affecting their building, plant, machinery, stock, and raw materials for Rs.8,42,470, and fire damage on 02.08.2012, which destroyed 400 tons of raw material stock for Rs.8,00,000. 14. It is a matter of record that the complainant obtained a Standard Fire & Special Perils policy No. 371104/11/12/310000003 from OP-2 valid from 12.04.2012 to 11.04.2012, covering building, plant, machinery and accessories. The sum insured under the policy was for Rs.55,00,000 (Rs.5,00,000 for building and Rs.50,00,000 for plant, machinery, and accessories). The policy also included add-on cover for earthquake, fire and shock. The complainant paid total premium for Basic Rate Per Mille @ 4.125 with respect to Building and Plant, Machinery and Accessories along with Add on cover for Earthquake (Fire and Shock) Rs.26,728 (Rs.2,063 for Building + Rs.20,625 for Plant, Machinery and Accessories+ Add on cover Rs.550 for Earthquake (Fire and Shock). Post the incidents stated, the complainant claimed Rs. 8,42,470 for storm damage to the building, machinery, and stock on 11.05.2012 and Rs. 8,00,000 due to fire damage to raw material stock on 02.08.2012. 15. The Insurance Company repudiated both claims on the grounds that the losses due to fire and storm were not covered under the terms of the insurance policy. While the policy covered fire, the coverage did not extend to losses from storm on 11.05.2012. Further, as stock was not insured, the loss from fire on 02.08.2012 is not covered. As regards the incident on 11.05.2012, OP-2 appointed a surveyor. who assessed the net loss at Rs.68,927, but the claim was repudiated as storm damage was not covered. With respect to the fired incident on 02.08.2012, no surveyor was appointed, and no assessment was conducted as the stock was not insured. 16. Perusal of the policy cover note reveals that it is a Standard Fire and Special Perils Policy. The Terms and Conditions of the Policy in question reveals that the Standard Fire and Special Perils Policy (Material Damage) are attached and reveal the following: I. Fire Excluding destruction or damage caused to the property insured by: - i) its own fermentation, natural heating or spontaneous combustion.
ii) its undergoing any heating or drying process. - Burning of property insured by order of any Public Authority.
… VI. Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation Loss, destruction or damage directly caused by Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood or Inundation excluding those resulting from earthquake, Volcanic eruption or other convulsions of nature. (Wherever earthquake volcanic eruption or other convulsions of nature” shall stand deleted). 17. In the present case, the claim was repudiated on the grounds that FST was excluded from the policy. However, this is a Standard Fire and Special Peril Policy for which premium was paid by the complainant and the risks covered are mentioned in the annexure thereto which includes Fire and Storm damage losses, which are in question. The complainants also obtained add-on description which included cover against earthquake, fire and shock, for which they paid additional premium of Rs.550 to OP-2. Thus, it is untenable to contend that this insurance policy was only for earthquake, fire and shock. In fact, it is over and above the insurance against Standard Fire and Perils, which means that the risks related to storm, tempest, fluids are inherently covered. As regards coverage for stocks, the proposal form reveals that the building was to be covered for Rs.5,00,000 and the plant and machinery, wooden sawdust, gutka etc which are raw material were for Rs.50,00,000. The specific inclusion of stocks and contents is made in the policy in question as well. While the first loss claim was investigated by a surveyor, OP-2 did not appoint any Surveyor for the assessment of damages suffered on 02.08.2012. In catena of judgements, the nature of insurance contracts, scope and restraint to be exercised in interpreting the terms of contract are well discussed and crystallized by this Commission and Hon’ble Supreme Court. 18. Hon’ble Supreme Court in United India Insurance Co Ltd Vs M/s Hyundai Engineering & Construction Co. Ltd. & Ors., 2024 LiveLaw 409 has held that : “16. Insurance is a contract of indemnification, being a contract for a specific purpose, Oriental Insurance Co. Ltd. v. Sony Cheriyan, (1999) 6 SCC 451, which is to cover defined losses, United India Insurance Co. Ltd. v. Levis Strauss (India) (P) Ltd., (2022) 6 SCC 1. The courts have to read the insurance contract strictly. Essentially, the insurer cannot be asked to cover a loss that is not mentioned. Exclusion clauses in insurance contracts are interpreted strictly and against the insurer as they have the effect of completely exempting the insurer of its liabilities, New India Assurance Co. Ltd. v. Rajeshwar Sharma, (2019) 2 SCC 671; Canara Bank v. United India Insurance Co. Ltd., (2020) 3 SCC 455; Oriental Insurance Co. Ltd. v. Samayanallur Primary Agricultural Coop. Bank, (1999) 8 SCC 543. 17. In Texco Marketing P. Ltd. v. TATA AIG General Insurance Company Ltd., Oriental Insurance Co. Ltd. v. Samayanallur Primary Agricultural Coop. Bank, (2023) 1 SCC 428, while dealing with an exclusion clause, this Court has held that the burden of proving the applicability of an exclusionary clause lies on the insurer. At the same time, it was stated that such a clause cannot be interpreted so that it conflicts with the main intention of the insurance. It is, therefore, the duty of the insurer to plead and lead cogent evidence to establish the application of such a clause, National Insurance Company Ltd. v. Vedic Resorts and Hotels Pvt. Ltd., 2023 SCC OnLine SC 648. The evidence must unequivocally establish that the event sought to be excluded is specifically covered by the exclusionary clause, National Insurance Co. Ltd. v. Ishar Das Madan Lal, 2007 (4) SCC 105. The judicial positions on the nature of an insurance contract, and how an exclusion clause is to be proved, shall anchor our reasoning in the following paragraphs.” 19. In Civil Appeal No.10671 of 2016 between Narsingh Ispat Ltd Vs Oriental Insurance Company Ltd. & Anr 2022 LiveLaw (SC) 443, the Hon’ble Supreme Court while reiterating National Insurance Co Ltd vs Ishar Das Madan Lal (2007) 4 SCC 105 (Para 12) held that the burden is on the insurer to show that the case falls within the purview of exclusion clause. In case of ambiguity, benefit goes to the insured. 20. In view of the foregoing, the complainants paid total premium for coverage of building, plant, machinery and accessories along with add-on cover for earthquake (fire and shock). The claims for losses due to storm and fire are, therefore, valid under the policy terms and conditions. Therefore, the order of the learned State Commission dated 26.05.2016 is modified as under: - For the claim in respect of the incident on 11.05.2012, the surveyor assessed the loss as Rs.68,927. As no counter-evidence has been presented, the Petitioner/OP-Insurance Company shall pay the complainant Rs.68,927 along with simple interest 9% per annum from the date of filing of the complaint until realization of the entire amount within one month from the date of this order. In the event of delay beyond one month, the simple interest rate applicable shall be @ 12% per annum for the extended period.
- With regard to incident on 02.08.2012, the Petitioner/OP- Insurance Company is directed to get the losses suffered by the complainant assessed at his premises on 02.08.2012 settle the claim within two months from the date of this order, along with simple interest 9% per annum from the date of filing of the complaint until realization of the entire amount within one month from the date of the surveyor report. In the event of delay beyond one month, the simple interest rate applicable shall be @ 12% per annum for the extended period.
- The order of the learned State Commission with respect to award of compensation of Rs.51,000 to the complainant for mental harassment is set aside.
21. The Revision Petitions No.2572 and 2573 of 2016 are disposed of accordingly. 22. There shall be no order as to costs. 23. All pending Applications, if any, are also disposed of accordingly. |
