1.      The complainant company obtained a ‘Standard Fire & Special Perils’ policy from the OP on 01.04.2014, in respect of its building, plant and machinery, silos, pipes, rakes, fittings, tank farms with foundation & dyke wall, furniture/fixture etc., stock in process lying anywhere in the plant, weigh bridge, stock of raw materials, semi-finished goods, finished goods etc. in its factories at various locations including 121/135, near MLA RIICO Industrial Area, Roondh Dherinath, Tal. Ramgarh, Dist. Alwar.  The total cost of the aforesaid plant was declared to be Rs.641,00,00,00/-.  The policy was valid for the period from 01.04.2014 to 31.03.2015.  An ad-on cover in respect of certain risks including spontaneous combustion was taken by the complainant from the OP.  The case of the complainant is that on 14.05.2014, the Silo Operator at the above referred plant noticed burning of mustard seeds with smoke and flame coming out of central point of one of the Silos where mustard seeds had been kept.  The Fire & Safety team was requisitioned and subsequently, the Silo was inspected from inside. According to the complainant, an internal enquiry conducted by it concluded that the fire might be due to ignition caused by the flash in the burnt motor of sweeper and might have started in the small pocket of mustard seeds stock.  Since the aforesaid loss, according to the complainant, was covered under the policy taken by it, a claim was lodged by it with the insurer on 14.05.2015 claiming re-imbursement to the extent of Rs.2,49,71,385/-.  A surveyor appointed by the OP namely United Technical Services assessed the loss at Rs.1,75,83,635/-.  It was reported by the surveyor that the loss had occurred due to spontaneous combustion only without a fire associated with it.  The Surveyor thus returned a finding that the spontaneous combustion which happened in the seeds, had not converted to a fire.  The report of the surveyor to the extent concludes his finding, reads as under:

5. From the above you will please observe that the extension/add on cover Spontaneous Combustion is qualified to be covered once the fire sets in which is absent in this case, there are no symptoms, site situation substantiating any fire to have occurred (please note that no fire tender was called) to the mustard stock in silo as discussed elsewhere in the report.

6. Please note that under specified/specific peril policy i.e. SFSAP the onus of proving that the loss is because of fire is on insured which they have failed to establish reasonably.

7. In light of above the loss claimed by insured is falling out side scope of the Policy, Insured has not agreed to above & thus are quantifying the loss regardless of Admissibility after appraising the same to Underwriters for their reference & records.

2.      Based upon this report of the surveyor, the claim repudiated vide letter dated 18.06.2015 which to the extent it is relevant, reads as under:

This is with reference to captioned claim, we are in receipt of surveyor’s report where he has stated his findings on cause of loss as under:-

“The most probable cause of damage was spontaneous combustion.  However No Signs of “fire” were found.  Hence the loss falls outside ambit of the policy.

The policy is extended to cover spontaneous combustion clause which reads as under:

“In consideration of the payment of additional premium as stated in the schedule to the policy, The Company agrees notwithstanding what is stated in general exclusions of this policy to the contrary that the insurance by (items as stated in the schedule to the policy) of this policy shall extend to include loss of or damage by fire only of or to the property insured caused by its own fermentation, natural heating or spontaneous combustion.”

Provided always that all the conditions (except in so far as they may be here by expressly varied) shall apply as if they had been incorporated herein as under for this extension clause.”

In view of above, we regret that we are constrained to repudiate our liability for the said loss and close the file as No Claim.

          Being aggrieved from the rejection of the claim, the complainant is before this Commission seeking payment of Rs.2,57,13,85/- alongwith interest.

3.      The learned senior counsel appearing for the complainant however, states that since they have not led evidence before this Commission to prove that the actual loss was more than what the surveyor had assessed, they are restricting their claim to the quantum assessed by the surveyor alongwith compensation in the form of interest on that amount.

4.      The complaint has been resisted by the insurer primarily on the same ground on which the claim had been repudiated.  Thus, the stand taken by the OP is that no fire had actually taken place and therefore, the loss due to a spontaneous combustion was not covered under the insurance policy taken by the complainant. In other words, the case of the OP is that in order to cover the risk on account of loss due to spontaneous combustion, a fire must necessarily take place and mere combustion alone without fire will not be sufficient to honour the claim.

5.      The survey report, to the extent it appears to be relevant, reads as under:

b. You will please observe that there are no signs of fire & heat on outside/inside sheets which holstered our stand that this is a case of spontaneous Combustion of mustard seeds in the core of material/mustard seed stored in Silo & not a case of fire to the mustard seed stock in silo #1.

D.2 During first visit no causation was expressed however discussions with Sh. Sanjay Singh & others in the plant, commercial & finance dept. revealed that the mustard seed is subject to oxidation/ spontaneous combustion on its own.

D.3 They were indicated that such situations might not be covered in the policy given the spontaneous combustion coverage narration where in indication of setting up of a fire is an essential ingredient to enable loss to become indemnifiable.

D.6 Based on our observations of the site, analysis of the symptoms & the signs available the situation was clearly a situation of spontaneous combustion only which had not converted to a fire.

D.12 Thus in light of our above deliberations the loss is concluded to have occurred due to Spontaneous Combustion only (without a fires associated with it).

6.      The issue involved in this case came to be considered by this Commission in CC No.115 of 2007, Saurashtra Chemicals Ltd. Vs. National Insurance Co. Ltd., decided on 06.01.2015.  In Saurashtra Chemicals Ltd. (supra), the claim lodged by the complainant was rejected by the insurer on the ground that the loss had not been caused only by fire though it was not in dispute that it was spontaneous combustion which had diminished/destroyed the stock of coal and ignite.  The stand taken by the insurer in Saurashtra Chemicals Ltd. (supra) was that their claim even for the loss/damage due to spontaneous combustion was not admissible unless fire had ignited in the process.  Relying upon the earlier decisions of this Commission in Murli Agro Products Ltd. Vs. Oriental Insurance Co. Ltd. I(2005) CPJ1 (NC), Roshan Lal Oil Mills Ltd. Vs. M/s United India Insurance Co. Ltd. I(1992) CPJ 293 (NC), and Saraya Sugar Mills Ltd. Vs. United India Insurance Co. Ltd. II (1996) CPJ 6 (NC), this Commission inter-alia observed and held as under:

5. The ground on which the claim of the complainant company was repudiated by the insurance company came to be considered by this Commission in Murali Agro Products Ltd. Vs. Oriental Insurance Co. Ltd., I(2005) CPJ 1 (NC). In the aforesaid case the complainant had taken an insurance policy to cover the risk to the stock stored in his godown. The complainant in the aforesaid case had also taken cover on account of the loss/damage due to spontaneous combustion by paying additional premium to the insurance company. The insurance policy issued and the additional cover taken by the insured in Murali Agro Products Ltd. (supra) was identical to the insurance policy and the additional cover taken by the complainant before us. During the course of the hearing in Murali Agro (supra) attention of this Commission was drawn to its earlier decision in M/s. Roshanlal Oil Mills Ltd Vs. M/s. United India Insurance Co. Ltd., 1 (1992) CPJ 293 (NC) and Saraya Sugar Mills Ltd. Vs. United India Insurance Co. Ltd., II (1996) CPJ 6 (NC).

In Saraya Sugar Mills (supra) this Commission had inter alia observed as under:

The definition of combustion and spontaneous combustion was considered by this Commission in M/s. Roshanlal Oil Mills Ltd. Vs. M/s. United India Insurance Co. Ltd., I (1992) CPJ 293 (NC). It was observed: In scientific literature combustion is defines as under:

The burning of any substance, whether it be gaseous, liquid or solid. In combustion, a fuel is oxidized evolving heat and often light.

The combustion of solids such as coal and wood occurs in stages. First, volatile matter is driven out of the solid by thermal decomposition of the fuel and burn in the air. At usual temperature, the burning of the hot, solid residue is controlled by the rate at which oxygen of the air diffuses to is surface(McGraw Hill Encyclopedia of Science & Technology, New York, Vol.3 1982).

Another test defines combustion as under:

The term combustion signifies the process of burning associated generally with fire, flame, the generation of heat and certain products of reaction.(Enclyopaedia Dictionary of Physics Chief Editor Thewlis, Pergamon Press, Oxford, 1961).

As noticed above, the case of the insurance company is that auto combustion/spontaneous combustion did not cause fire. Therefore, the loss is not covered under the policy. Fire had been defined in Chambers 20th Century Dictionary as follows:

the heat and light of burning: a mass of burning matter, as of fuel in a grate: flame or incandescence: a conflagration: firing: fuel: a heating apparatus: heat or light due to other casues than burning.

In the concise Oxford Dictionary the meaning of fire has been given as follows:

Active principle operative in combustion in which substances join chemically with oxygen in air and usu.give out bright light and heat: flame, incandescence.

From the above definition of fire given in the two dictionaries, it is clear that fire need not necessarily be accompanied by flame. Fire is a form of heat energy which causes smouldering, burning, heating, melting and perhaps some few more words.

The complainant had paid additional premium at the rate of 0.25 per thousand for spontaneous combustion over and above the basic rate. If the basic rate for the damage by fire simplicitor covered the risk there was no precise purpose of charging additional premium for spontaneous combustion. As remarked in Roshal Lals case (supra) by this Commission if the contention of the insurance company is to be accepted it would mean that the risk spontaneous combustion is merely tautological inasmuch as it already falls under Fire for which basic premium has been prescribed. We have not been able to understand why the additional premium for spontaneous combustion was charged if the loss was payable only if its leads to fire.  

In Roshanlal Oil Mills (supra) this Commission had observed as under:

We may, further, observe that if it was the intention to exclude damage by damage by spontaneous combustion in the pre-ignition stage i.e. combustion without fire as contended by the respondent, this ought to have been stated much more clearly and directly. In any case, it has already been observed that the language used in the insurance policy is unqualified and the rejection of the insurance claim by the respondent was not justified in terms of the insurance policy.

This Commission in Murali Agro (supra), declined to take a view different from the view taken in Roshanlal Oil Mills (surpa) and Saraya Sugar Mills (supra) inter alia on the following grounds:

(a) Firstly, undisputedly, if the damage to the property is because of fire for any reason, there is insurance coverage. The exclusion clause does not provide that loss or damage caused by fire on account of spontaneous combustion is excluded. Reading the term as it is, it can be held that what is excluded is loss or damage caused by spontaneous combustion which may or may not cause fire or flame.

(b) Secondly, for the peril which is excluded, namely, the spontaneous combustion, insurance coverage is given, i.e., to say, if the insured property is destroyed or damaged by spontaneous combustion the insurance company is liable to pay to the insured the value of the property. Therefore, it can be stated that it is agreed that insurance coverage is given for spontaneous combustion which could be item 7, as per the policy which covers damage by such items namely fire, lightning, explosion, etc..

(c) thirdly, recovery of additional premium indicates the nature of the contract that subsits between the parties. That contrat cannot be of giving insurance coverage only in case of damage by fire. If that contention is accepted, the object and purpose of payment of additional premium is frustrated. Recovery of additional premium indicates acceptance of risk by the insurance company for the perils contemplated.

6. In Murali Agro (supra) when the learned counsel for the insurance company referred to some English cases, this Commission observed as under:

The aforesaid principles laid down by the English courts would have no bearing to the policy in question. The policy, in the present case, is not a simplicitor fire policy but a comprehensive policy covering various perils including fire. By taking additional premium, risk by one part of the exclusion clause is given insurance coverage, namely, for loss caused by its own fermentation, natural heating or spontaneous combustion.

7. When the counsel for the insurance company relied upon the slip attached to the insurance policy covering the spontaneous combustion submitted that even for spontaneous combustion there should be fire, this Commission rejected the contention observing as under:

Firstly, it is to be stated that under item No.8 of the policy spontaneous combustion is covered for which additional premium is recovered. Secondly, the aforesaid term is apparently vague. It provides that for consideration of additional premium the company agrees-

notwithstanding what is stated in the printed exclusion of this policy shall extend to include loss or damage by fire only of or to the property insured caused by its own fermentation, natural heating or spontaneous combustion.

By a bare reading of this clause, it would be difficult to conclude that what it exactly conveys. It is required to read down as-

this policy shall extend to include loss or damage by fire only, or loss or damage to the property insured caused by its own fermentation, natural heating or spontaneous combustion.

In any case, if it was intended to cover only loss or damage by fire, there is no question of taking additional premium, because the first part of the policy itself provides that it gives coverage by loss or damage by fire.

8. While allowing the complaint in Murali Agro (supra) this Commission held as under:

Further, it is settled law that contract of insurance is based upon good faith. It is the duty of the insurers and their agents to disclose all material facts within their knowledge since obligation of good faith applies to them equally with the assured [Re. M/s. United India Insurance Co. Ltd. Vs. M.K.J. Corporation, III (1996) CPJ 8 SC = (1996) 6 SCC 428]. If the insurance coverage was not extended even by taking additional premium for the damage caused by spontaneous combustion/natural heating which may not result in fire, it ought to have been clearly stated.

Secondly, if the contract is vague, benefit should be given to the insured. The exclusion term of the insurance policy must be read down so as to serve the main purpose of the policy that is to indemnify the damage caused due to fire [(B. V. Nagaraju Vs. M/s. Oriental Insurance Co. Ltd.) II (1996) CPJ 28 (SC) = (1996) 4 SCC 648)].

9. In view of the aforesaid decisions of this Commission, it cannot be disputed that there is ignition even in spontaneous combustion and consequently, we hold that damage/loss, due to spontaneous combustion was covered under the policy, irrespective of whether fire was ignited in the process or not.  

7.      As noted by this Commission in Murli Agro Products Ltd. (supra), the appeal preferred against the decision of this Commission in Saraya Sugar Mills Ltd. (supra) being Civil Appeal No.15376 of 96 was dismissed by Hon’ble Supreme Court on 17.02.1997.

8.      In view of the above referred pronouncements of this Commission, there is no escape from the conclusion that the rejection of the claim on the ground that there was no fire and the spontaneous combustion took place without igniting of fire is not sustainable.  The complaint therefore needs to be allowed to the extent the quantum of loss was accepted by the surveyor.

9.      For the reasons stated hereinabove, the complaint is disposed of with the following directions:

(1)     The OP shall pay a sum of Rs.1,75,83,635/- to the complainant.

(2)     The OP shall pay compensation in the form of simple interest @ 9% per annum w.e.f. six months from the date on which the claim was lodged till the date on which the entire principal amount alongwith compensation in the form of interest in terms of this order is paid.

(3)     The payment in terms of this order shall be made within three months from today.

(4)     In the facts and circumstances of the case, there shall be no order as to costs.