JUSTICE A. P. SAHI, PRESIDENT  

1.           The complainant participated in a tender floated by the opposite party number 3, Western Coal Limited for construction of 2022 toilets across the State of Madhya Pradesh that were to be constructed in Primary and Middle Schools. The tenders were finalized and on 24.04.2015 a letter of acceptance is said to have been issued in respect of particular areas of the State followed by other letters of acceptance. The sites were shown to the complainant contractor but all sites were not made available according to the complainant. The opposite party number 3 gave a new list of 1227 sites but those sites were also not handed over for the completion of the work within the period as stipulated under the terms of the contract.
2.           The complainant alleges that only 418 sites were made available and that too ran in rough weather when a resistance was put forward to the taking over of the sites by local officials of the local bodies. What could be gathered from the allegations is that no interest was taken by the opposite party number 3 and it is they who lacked in their sincerity to not offer the sites to the complainant.
3.           On being awarded the contract and the issuance of the letter of acceptance the complainant made a proposal that was accepted by the respondent number 1 and 2, the Insurance Company for issuance of a Contractor’s All Risk policy. The sum insured was Rs. 32,71,86,982. The premium paid there on was Rs. 2,45,462. The duration of the insurance policy was from 07.05.2015 to 06.11.2015.
4.           Since the time period allocated for the completion of the work was coming to an end, the complainant states that he kept on requesting the opposite party number 3 to hand over the sites so that the work may be completed within the time span as provided for in the letter of acceptance but according to the complainant no heed was paid to this repeated request of the complainant as a result of where the time period expired due to the default of the Opposite Party Number 3.
5.           The complainant alleges that the opposite party number 3 did not inform the complainant about some developments which had taken place and it was later on learnt that on 10.06.2015 the opposite party number 3 and the Government of Madhya Pradesh had entered into a Memorandum of Understanding according to which all the construction work was to be handed over to the managing committees of the schools where the toilets were to be constructed. This according to the complainant was behind their back and was a deal for which the opposite party number 3 was responsible, and whatever work had been commenced by the complainant on the 418 sites came to be damaged as the complainant was forced to leave the sites and a lot of material was also lost as the local bodies and the schools disrupted the functioning of the complainant.
6.           The complainant lodged a criminal complaint against the officials of Opposite Party Number 3 in a Court at Hyderabad being criminal complaint 960 of 2015 in September, 2015.
7.           Having incurred this loss, the complainant alleges that it lodged its claim before the Insurance Company on 04.11.2015 and represented the same before the Regional Office of the respondent insurance company.
8.           The Senior Divisional Manager responded on 23.11.2015 stating that the claim had been lodged after 5 months. Certain information was also sought and simultaneously, it was identified that condition number 5 of the policy clearly stipulated that the notice of loss must be given immediately, which in the present case was done after 5 months, the said letter is extracted hereinunder

Date:23.11.2015

To

Variety Polysters Limited,

Survey No:16/18,

Thimmasamudram,

KVB PURAM (Mandal),

RAGIGUNTA (Post),

CHITTOR (Dist)

ANDHRA PRADESH-517643

                    //REGISTERED-A/D//

//WITHOUT PREJUDICE//

//WITHOUT ATTACHING LIABILITY//

            Re: Claim reported under Contractors All Risks  

                Policy No.: 431300/44/2016/2

            Ref: Your letter dated 04.11.2015

***

This has reference to you letter dated 04.11.2015 on the captioned subject.

In order to understand better we request your goodsleves to send us the duly completed and signed claim form (enclosed- the claim form submitted by you is not relevant for this claim) with all relevant documents/information along with the following:

1. Occurrence Report stating property/items lost/destroyed/damaged and taken over property supported with a list of items in detail
2. Cause/nature of Loss in detail
3. Please let us know where the destroyed/damaged/taken over property/items are available for our inspection and disposal of salvage, if any.
4. Incidentally, regarding claim intimation we are governed by the policy condition no: 5 which states that notice of loss must be given immediately. But in the instant case you have intimated the loss on 04.11.2015 ie., after 5 months of loss, which please note.

This communication is only to ascertain the estimated loss under the policy, if any. In the meanwhile, please be informed that there is no liability under the policy & its terms and conditions.

Senior Divisional Manager

9.           In response to the same, the complainant sent a reply on 17.12.2015 where it was explained that the deficiencies and the loss suffered was spread over throughout the State of Madhya Pradesh and therefore time was consumed in receiving information under the Right to Information Act that caused the delay. It was asserted that the opposite party number 3 did not reply to any of the letters and later on they had given this information before the High Court of Andhra Pradesh where the complainant had filed a writ petition. Thus, there was no delay on their part and hence the claim was raised timely before the Insurance Company.
10. The Insurance Company appears to have appointed a surveyor, namely, Professional Insurance Surveyors and Loss Assessor Pvt. Ltd. through Mr. P K Narayanan who intimated the complainant about the task entrusted to him vide letter dated 28.12.2015.
11. The surveyor on 04.02.2016 dispatched a letter raising 18 queries; the said letter is extracted hereinunder.

“Sub: Loss/damages to construction of extension toilets under "Swachh Vidyalay Abhiyan" at various places in M.P. Claim under CAR Pol. No. 431300/44/2016/2

This has reference to the recent visit of the undersigned to your office and the discussions held regarding the Subject loss. We confirm having explained to you in brief the various policy conditions of CAR and the scope of cover and also our requirements of various details / documents to proceed further. Without prejudice, we request you to forward the following details / copy of documents to proceed further.

01. Detailed occurrence report.

02. Complaint to police regarding the incident/s and FIR and Panchanama obtained from them for each and every claim.

03. Contract and Agreement copy along with letter of awarding of the contract.

04. Bill of quantities location and item wise.

05. Layout drawing of the toilets.

06. Detailed statement showing the description and quantities of materials supplied / received at these locations where construction of toilets is awarded.

07. Documents in support of purchases, dispatches and receipts at these destinations where work commenced/planned to be commenced.

08. Progress of construction work and consumption of materials as on the day of loss.

09. List of locations where work was commenced.

10. Contact details of the site personnel involved in the construction work at the time of occurrence.

11. Detailed list of damages / loss along with their values.

12. As explained during our meeting, the Surveyors need to visit some of these spots where work has been commenced and/or materials received. Towards this, kindly advice the name of the person who would be coordinating and accompanying us to these locations.

13. Details of eye witness if any to the loss / damages to the properties claimed by you.

14. Your final claim bill location wise.

15. Photographs / video if any has been taken of the affected locations either at the time of loss or prior/later to the loss.

16. Newspaper reports if any regarding the occurrence.

17. Correspondence exchanged between WCL and other parties regarding the execution of the project, loss/damages occurred and claim of reimbursement made on them.

18. The final investigation report obtained from the Police against your complaints/ registration of FIRs.

An early action from your end would be highly appreciated. Kindly note that the above details/documents have been requested without prejudice and admission of liability would depend upon the terms and conditions of the policy issued to and held by you. Please also note that we reserve the right to request for more details/information/clarification based on the details/copies of documents provided by you and also on the findings after our site visits.

Thanking you.”

12. Another letter was dispatched on 09.03.2016 where after a reply is said to have been tendered by the complainant on 11.03.2016. The surveyor taking notice of the reply of the complainant again raised a query under 21 heads on 25.03.2016 and also analysed the documents and information that had been tendered by the complainant. This analysis led to a prima facie conclusion, and in the opinion of the surveyor, it amounted to a criminal breach of trust as against the opposite party number 3, and therefore the allegations about the loss if any did not fall within the scope of the policy as no such risk was covered therein. The said letter dated 25.03.2016 runs in almost 7 pages in detail and it is on record.
13. The surveyor through his report dated 18.05.2016 came to the conclusion as follows:

Conclusion:

• From your complaint to Hon’ble Court filed on 14.08.15, it is observed it is a breach of contractual obligation by the WCL and hence in our opinion, such breach of contractual obligations would not fall within the scope of Contractors All Risk policy No. 431300/44/2016/2 for the period from 08.05.2015 to 06.11.2015 issued to and held by you.
• Further, we are also of the opinion, that none of the insured perils covered by CAR policy has operated that has resulted in loss to you and hence your claim is not admissible under CAR policy.
• Further as alleged in your complaint to Court in para 12, that WCL has transferred all the 2022 sites vide MOU dt. 10.06.2015 between WCL and AMR (Dept. of Education, Govt. of M.P.) on 10.06.2015, i.e., within 8 days of receipt of work order to the respective Dist., Collectors who in turn awarded the same works to Gram panchayats and who in turn awarded to local contractors, who took over the sites forcefully. Under the circumstances, we fail to understand the reason why you have stored so much of construction materials as claimed by you at these sites, especially when all the sites have been transferred to some other body, it is reasonably assumed that you are no more a party to the contract.
• Further, in Point 30 of the complaint made to the Hon’ble court, you have stated that the principal have handed over the designated sites meant for you to another agency and insisting you to continue work knowing fully that all your sites were taken away by other agencies is a deliberate act with intent to cause injury to you amounts to cheating with dishonest intention by inducing to do or omit to do u/s. 415, 420 IPC with a common intention which causes damage or harm to the person, body, mind or reputation of complainant’s company and the accused have hatched a plan to dupe you wherein you have invested large amounts and the same is misappropriated with dishonest intention and criminal breach of trust. This clearly proves that it is a case of criminal breach of trust by your principal and such acts does not fall within the scope of CAR Policy No. 431300/44/2016/2 and hence in our opinion, your insurers have liability for such claims.
• Further, as per general exclusions of Contractors All Risk Insurance Policy under item (a), requisition or destruction by order of any Government de jure or de facto or by any public, municipal or local authority. In this case, you have alleged that the premises reportedly allotted to you initially were all re allotted by the Collector of various districts to panchayats who in turn allotted the same to various local contractors and hence such losses would not fall within the purview of the CAR Policy No. 431300/44/2016/2 issued to and held by you.

Hence, without prejudice, we conclude that in our opinion that your insurers have no liability of what so ever nature in respect of the claim made under CAR Policy No. 431300/44/2016/2 issued to and held by you and accordingly, we are recommending to your insurers to treat your claim as NO CLAIM and CLOSE the concerned file.

Thanking you,

Yours Sincerely,

For Professional Insurance Surveyors &

Loss Assessors Pvt Ltd.,

P.K. Narayanan

Principal Surveyor & Director

14. The said conclusion categorically states that once the contract of construction of toilets had been awarded to someone else, there was no occasion for the complainant for having staked a claim of having stored construction material at the sites, and further the contract having been impliedly repudiated, the allegations amounted to either a breach of contract or a breach of criminal trust as against the opposite party number 3. Such breach of contract or breach of trust was nowhere covered under the policy so as to allow any insurable claim to be considered. The surveyor accordingly recommended to treat the claim as having been closed.
15. The complainant responded on 21.05.2016 which appears to be a reply to the 18 points raised in the letter 09.03.2016. This response nowhere refers to the surveyors recommendation dated 18.05.2016 extracted hereinabove. This reply dated 21.05.2016 reflects the defence taken by the complainant offering its comments on the queries raised in the letter dated 09.03.2016. The said reply dated 21.05.2016 is extracted hereinunder.

Date:11.03.2016

Dear SIRS,

Sub: Loss/damage to construction of extension toilets under “Swachh Vidyalay Abhiyan” at various places in M.P. Claim under CAR Pol. No. 431300/44/2016/2

Ref: Your LETTER DATED 9.03.16

During the recent visit at the undersigned office and the discussions held regarding the subject loss. We confirm having explained to you that all detail as requested by you have been submitted to the insurance office on 4.11.2015 along with our claim. You have in brief explained the various policy conditions of and limited your scope to the physical survey to access the loss on account of theft only but declined to understand the all risk category and the scope of cover AS DETAILED UNDER:

Contractor’s All Risk Insurance offers comprehensive and adequate protection against loss or damage in respect of contract works, construction plant and equipment and/or construction machinery, as well as third party claims in respect of property damage or bodily injury arising in connection with the execution of a civil engineering project.

Contractor’s All Risk provides ‘all risk’ cover unless the hazard is specifically excluded. It covers the risk of fire, lightning, explosion, flood, inundation, rain, snow, earthquake, theft, burglary, bad workmanship, lack of skill, negligence, humane Error

  Major Exclusions

This policy is subject to only few exclusions, Loss or damage to nuclear reaction, consequential loss, loss or damage due to faulty design, loss or damage due to war or war-like operation etc

RISKS INVOLVES IN OUR CASE:

1. Theft of property: fir filed,
2. Human deliberate error.
3. Negligence.
4. Concealment of facts;(not excluded specifically): criminal case filed.
5. Organised crime: (not excluded specifically): criminal case filed.
6. Others not excluded specifically: criminal case filed.

ON DATED:7.5.2015 WE SUBSCRIBED TO YOUR POLICY NO:431300/44/2016/2 VALID TILL:6.11.2015 TIME:MID NIGHT FOR Contractor’s All Risk Insurance to cover comprehensive and adequate protection against loss or damage in respect of contract works, construction plant and equipment and/or construction machinery, as well as third party claims in respect of property damage or bodily injury arising in connection with the execution of a civil engineering project arising out of the Work orders with numbers : NGP/WCL/CIVIL/158,159,160,161,162,163,164,165,166,167,168,169,170,171,172 dated 12.5.15 from Western coal fields limited Against All The Risks Stated Above. Due to the events as described below our company was put to loss and damages much more than the sum insured (details explained in the case below). As most of the events are categorized under the risks in the all risk category we are protected to the extent insured.

Our comments on your queries are as follows:

1. Detailed occurrence report …………… already submitted
2. Complaint to police regarding

the incident/s and FIR and

Panchanama obtained from

them for each and every claim……….. already submitted

3. Contract and Agreement copy

along with letter of awarding

of the contract……………………………….already submitted

4. Bill of quantities location

and item wise………………………….……. already submitted

5. Layout drawing of the toilets ..………already submitted
6. Detailed statement showing

the description and quantities

of materials supplied/received

at these locations where construction

of toilets is awarded………………………..already submitted

7. Documents in support of purchases,

dispatches and receipts at these

destinations where work was

commenced/planned

to be commenced……………………….…..already submitted

8. Progress of construction work

and consumption of materials

as on the day of loss..………………….. already submitted

9. List of locations where work was commenced………………………………….. already submitted
10. Contact details of the site

personnel involved in the construction

work at the time of occurrence…….… already submitted

11. Detailed list of damages/loss

along with their values…………………….already submitted

12. As explained during our meeting,

 the Surveyors need to visit some

of these spots where work has

been commenced and/or materials

received. Towards this, kindly advice

the name of the person who would be

coordinating and accompanying

us to these locations………..Mr. KSR MURTHY AND MR A V RAMAKRISHNA

13. Details of eye witness if any

of the loss/ damages to the

properties claimed by you………………………….NO

14. Your final claim bill

location wise……………………..already submitted in FIR

15. Photographs/video if any

has been taken of the

affected locations either at

the time of loss or prior/ later

to the loss………………………….……………already submitted

16. Newspaper reports if any

regarding the occurrence………..……….already submitted

17. Correspondence exchanged

between WCL and other

parties regarding the execution

of the project, loss/damages

occurred and claim of

reimbursement made on them………already submitted

18. The final investigation report

obtained from the Police

against your complaints/registration

of FIRs…………………………………………………..………….NONE

An early action from your end would be highly appreciated. Kindly note that the above details, documents have been SUBMITTED 4 MONTHS AGO ALONG WITH CLAIM AS MUCH LESSER THAN THE DAMAGES AND LOSS THAT OCCURRED the process adapted by the insurance company is deliberate procrastination and delay tactics to avoid paying the claim.

Thanking you,

Yours Sincerely,

RUPA ROY

ADVISOR FINANCE

 A similar response was sent on 04.07.2016 highlighting the claim regarding the alleged loss suffered on account of the circumstances explained therein.

16. Learned counsel for the complainant advanced his submissions by narrating facts and urging that the terms of the policy, which have been filed along with the written version, were never supplied to the complainant and there is no formal repudiation of the claim by the Insurance Company. It is urged that the losses were suffered on account of the obstruction caused by the local village officials and also negligence on the part of the opposite party number 3 in not being able to hand over the balance of the working sites. This also resulted in loss of reputation and goodwill, but such risks were covered as the policy was a comprehensive policy in respect of loss or damage to the construction works, equipment as well as third party claims caused on account of human error and negligence on their part. Some property was also stolen and therefore the risk of theft and human error was clearly identifiable.
17. The subsequent loss suffered at the 418 sites caused on account of human error and negligence and theft entitles the complainant to stake his claim under the insurance policy and was therefore liable to be indemnified by the opposite party number 1 and 2. This deficiency in service on the part of the insurance company in not indemnifying the claim has been raised contending that such loss or damage had occurred due to human errors as indicated above. The negligence of the opposite party number 3 as well as certain goods which were stolen and lost were reported. This entire evidence had been collected within a period of 2 months and was reported to the Insurance Company after receiving the information through the RTI Act and also after having filed a writ petition in the Andhra Pradesh High Court. Thus, this was not a simple breach of contract or criminal liability but it was also an insurable claim.
18. Responding to the aforesaid submissions, learned counsel for the Insurance Company has vehemently opposed the complaint contending that as a matter of fact the complainant had no lawful authority conferred on the opposite party number 3 for executing the contract without the participation of the Government. Even otherwise the timeline within which the work had to be performed was allowed to lapse on account of the transactions between the complainant and the opposite party number 3 which was a breach of contract. The terms of the policy nowhere covered any such risk and the filing of the criminal complaint also indicates that the allegation is of breach of trust which is not part of the insurable risks under the policy. It is urged that there was no lawful contract subsisting nor was the complainant entitled to continue with the work after 10.06.2015 when the work had already been awarded under the Memorandum of Understanding to the schools and its committees as well as other local authorities under the monitoring of the District Magistrate of the district concerned. Consequently, there was nothing available to the complainant lawfully to claim continuance of his contract. This termination of the contract therefore could not attract any risk coverage under the policy which itself did not include within its fold any loss of the termination of the contract.
19. Learned counsel submits that whatever be the reason of the dispute between the complainant and the third respondent as well as the Government of Madhya Pradesh, the same did not in any way create any liability on the Insurance Company. If the complainant had any grievances against the third respondent arising out of the letter of acceptance dated 24.04.2015, then this was clearly a breach which could be raised before the appropriate forum and did not give rise to a cause for a consumer complaint for indemnification through an Insurance Policy.
20. Having considered the submissions raised and perused the communications exchanged it is evident that whatever contract the complainant alleges to have entered into with the respondent number 3, was clearly snapped with the Memorandum of Understanding dated 10.06.2015. Any continuance of work or storing of material after 10.06.2015 was not authorized under any contract enforceable in law and therefore any breach thereof could be complaint of by the complainant before the Court of competent jurisdiction. Such a breach by itself does not get converted into a loss or damage so as to set up an insurance claim. Apart from this, non-performance by the complainant for whatever reasons as demonstrated, resulted in complete cessation of work on the part of the complainant. This also excludes any coverage under the policy.
21. The Insurance Company is perfectly justified in taking a plea that if such developments had taken place, it was the obligation of the complainant to have intimated the Insurance Company as the same requires a prompt disclosure which in this case was done for the first time through the claim dated 24.11.2015 after 5 months. The surveyor therefore was correct in suggesting that there was a delay of almost 5 months in informing the Insurance Company about the alleged incidence of loss that was a violation of the terms of the policy condition no. 5.
22. It is also evident that the complainant and the opposite party number 3 had no back to back tie-up with the Madhya Pradesh Government and there was no mandate, at least not placed on record, to indicate that the Madhya Pradesh Government had finalized the steps taken by the respondent number 3 for proceeding further. The Insurance Company does not appear to have formally repudiated the claim but the written version clearly denies any liability arising out of the incident.

23. In the background above, the nature of the allegations therefore indicate an allegation of breach of the terms of contract and violation of the contract as against the respondent number 3 and further a criminal complaint lodged indicates an allegation of criminal breach of trust. On a cumulative assessment of the aforesaid facts and nature of the claim it appears that the stand taken by the Insurance Company is correct as apart from the delay in sending the information it is also evident that the policy does not cover any such loss or damage as claimed by the complainant in the background of the facts and circumstances indicated above. There is neither any element of unfair trade practice or deficiency of service established against the OP no. 1 and 2. The complaint has no merits and is accordingly rejected without prejudice to the rights of the complainant to seek his remedy before the appropriate forum.