Chandigarh

StateCommission

A/207/2024

NITIN TREHAN AND ANOTHER - Complainant(s)

Versus

SENIOR BRANCH MANAGER NATIONAL INSURANCE COMPANY LTD., CHANDIGARH - Opp.Party(s)

ASHIT MALIK AND SAGAR AGGARWAL

15 Oct 2024

ORDER

STATE CONSUMER DISPUTES REDRESSAL COMMISSION,

U.T., CHANDIGARH

 

(ADDITIONAL BENCH)

 

Appeal No.	:	207 of 2024
Date of Institution	:	28.05.2024
Date of Decision	:	15.10.2024

 

 

 

 

 

 

1]       Nitin Trehan son of Arjun Trehan, aged about 45 years, resident of Village Manpura Pargna, Dharampur, Tehsil Nalagarh, District Solan, H.P. (Presently residing at House No.39, Sector 7, Panchkula, Haryana).

 

2]       AIR-O-FIL PACKAGING, Village Manpura Pargna, Dharampur, Tehsil Nalagarh, District Solan, H.P. through its Proprietor Nitin Trehan son of Arun Trehan.

 ….Appellants/Complainants.

Versus

1]       Senior Branch Manager, National Insurance Company Limited, Chandigarh Branch-III, SCO 305-306, Sector 35-B, Chandigarh – 160022.

2]       Divisional Manager, National Insurance Company Limited, SCO 57, 1^st Floor, Sector 26, Madhya Marg, Chandigarh.

3]       Chief Regional Manager, SCO 332-334, Sector 34-A, Chandigarh.

 

...Respondents/Opposite Parties.

ARGUED BY :-    

Sh. Ashit Malik & Sh. Sagar Aggarwal, Advocates for the appellants.

Sh. J. P. Nahar, Advocate for the respondents.

Appeal No.	:	209 of 2024
Date of Institution	:	30.05.2024
Date of Decision	:	15.10.2024

 

 

 

 

 

1]       Senior Branch Manager, National Insurance Company Limited, Chandigarh Branch-III, SCO 305-306, Sector 35-B, Chandigarh – 160022.

2]       Divisional Manager, National Insurance Company Limited, SCO 57, 1^st Floor, Sector 26, Madhya Marg, Chandigarh.

3]       Chief Regional Manager, SCO 332-334, Sector 34-A, Chandigarh.

Now all through its Authorised Signatory Paranob Sen, Regional Manager and power of attorney holder of National Insurance Company Limited, Regional Office, SCO 332-334, Sector 34-A, Chandigarh.

 ….Appellants/Opposite Parties.

Versus

1]       Nitin Trehan son of Arjun Trehan, aged about 45 years, resident of Village Manpura Pargna, Dharampur, Tehsil Nalagarh, District Solan, H.P.

 

2]       AIR-O-FIL PACKAGING, Village Manpura Pargna, Dharampur, Tehsil Nalagarh, District Solan, H.P. through its Proprietor Nitin Trehan son of Arun Trehan.

...Respondents/Complainants.

 

BEFORE:    JUSICE RAJ SHEKHAR ATTRI, PRESIDENT

                   MRS. PADMA PANDEY, MEMBER

                   MR. RAJESH K. ARYA, MEMBER

 

ARGUED BY :-    

Sh. J. P. Nahar, Advocate for the appellants.

Sh. Ashit Malik & Sh. Sagar Aggarwal, Advocates for the respondents.

 

PER  RAJESH  K. ARYA,  MEMBER

                    Vide this order, we are deciding above captioned two appeals i.e. appeal bearing No.207 of 2024 filed by the complainants and appeal bearing No.209 of 2024 filed by the opposite parties against order dated 03.04.2024  passed by District Consumer Disputes Redressal Commission-II, U.T., Chandigarh (in short ‘District Commission), vide which, consumer complaint bearing No.247 of 2022 filed by the complainants has been partly allowed in the following manner:-

“8.     In view of the above discussion, the present complaint deserves to be partly allowed and the same is accordingly partly allowed. The Opposite Parties are directed to pay a sum of Rs.2,17,59,941/- on indemnity basis plus Rs.24,36,399/- i.e. 25% wrongly deducted by the Surveyor on account of the stocks in its Interim Survey Report to the complainants along with interest @ 9% p.a. after one month of the submission of the final survey report dated 13.11.2020 by S.K.Aggarwal and Co., Loss and 19 Surveyor to the Company till the date of its actual realization to the complainants.

9.       This order be complied with by the OPs jointly and severally, within ninety days from the date of receipt of its certified copy.”

2]           The facts, in brief, were that the complainants, running a company called Air-O-Fil Packaging, took out a Standard Fire and Special Peril Insurance Policy for Rs.6.25 crores covering their factory in Solan, HP. On 31.01.2019, a fire broke out, causing significant damage to the building, stock, and machinery. The complainants promptly informed the opposite parties - insurance company and submitted a claim on 01.04.2019. A preliminary survey conducted on 04.02.2019, mistakenly cited a machine spark as the cause of the fire instead of an LPG gas leak. The final surveyor, S.K. Aggarwal & Co., assessed the total loss but deducted 25% of the stock value due to the absence of stock registers, which were destroyed in the fire. As per the complainants, the plastic material burned and melted due to prolonged exposure to the fire and water used by the fire department. The surveyor assessed losses for the building, machinery and stock but the complainants disputed these findings, especially regarding the value of a new Air Bubble Machine and the reconstruction cost of the building. Despite providing necessary documents and repeated requests, the insurance company delayed settling the claim. The complainants eventually sent a legal notice but received no satisfactory response. They filed a complaint seeking Rs.7.25 crores with 18% interest, compensation of Rs.50 lakhs for mental agony, and legal costs.

3]                The insurance company, in its defense, acknowledged the fire and the policy but raised several objections, including the absence of necessary parties in the complaint and the complainants’ alleged lack of cooperation. It was stated that the stock assessments were incomplete and they questioned the cause of the fire. They also stated that the complainants had not completed the property reinstatement, a requirement under the policy. The opposite parties ultimately repudiated the claim on 29.06.2021, citing non-compliance and non-cooperation by the complainants.

4]                After hearing the parties and going through the material available on record, the District Commission partly allowed the complaint, as stated above.

5]                In their appeal bearing No.207 of 2024, the complainants have stated that the District Commission partially upheld their claim, acknowledging the fire was accidental and that the opposite party’s claim repudiation constituted a deficiency in service and unfair trade practice. However, the District Commission awarded compensation on an indemnity basis, totaling Rs.2,17,59,941/- plus Rs.24,36,399/- for wrongful deductions, with 9% interest from one month after the final surveyor report dated 13.11.2020. It has been stated that the compensation should have been based on the reinstatement value as per the insurance policy, which would cover the full loss of Rs.6.25 crores. It has further been stated that the District Commission also failed to account for the delay in the surveyor's report, which exceeded the IRDA's 90-day guideline, thus, interest should have been awarded from 01.04.2019. Additionally, it has been stated that the opposite party’s handling of the salvage process and the survey of the building contributed to further delays. It has further been stated that the District Commission did not award any compensation for harassment, mental agony, or trauma despite this being the second round of litigation for the complainant. In support of their contentions, the complainants placed reliance on the judgments of Hon’ble Supreme Court of India in cases, New India Assurance Co. Ltd. & Ors. Vs. M/s Mudit Roadways, Civil Appeal No.339 of 2023 decided on 24.11.2023, M/s Oswal Plastic Industries Vs. Manager, Legal Deptt. N.A.I.C.O. Ltd., Civil Appeal No.83 of 2023 decided on 13.01.2023; Karnavati Veneers Pvt. Ltd. Versus New India Assurance Company Limited and others, Civil Appeal No.3893 of 2013 decided on 09.02.2023 and CPL Ashish Kumar Chauhan (Retd.) Versus Commanding Officer & Ors., 2023 AIR Supreme Court 4935. Thus, the complainants prayed for modification of the impugned order.

6]                In appeal bearing No.209 of 2024, the opposite parties have sought setting aside of the order impugned on the grounds that the surveyor identified discrepancies in the complainant’s records, which were outlined in the repudiation letter. The cause of the fire remained unclear and the claim amount increased significantly from the initial Rs.4-5 crores to Rs.7.25 crores. It has further been stated that the District Commission failed to consider the repudiation letter and incorrectly awarded Rs.2.17 crores to the complainant and wrongly relied on an interim survey report instead of the final survey report, which calculated the net liability at Rs.2.11 crores after applying 5% policy excess. It has further been stated that the District Commission erroneously added Rs.24.36 lakhs based on the complainant’s affidavit, ignoring the surveyor’s findings on stock discrepancies. Reliance has been placed on the judgment of Hon’ble National Commission in the case of Oriental Insurance Company Ltd. v. Mehta Wool Store III (2007) 317 (NC) wherein it has been held that “The Surveyors are independent assessors and their report has to be given due importance and weightage unless there is overwhelming evidence to the contrary.” Further reliance has been placed on the judgment of Hon’ble National Commission in the case of Aristo Texcon private Limited v. United India insurance Company Limited & Ors IV (2022) CPJ 5 (NC), wherein it has been held in Para 13 that “The Insurer is justified to repudiate the claim invoking clause-8 of General Terms and Conditions of the Insurance Policy, as the above facts and circumstances prove that the claim was exaggerated and based upon fabricated papers.”  Lastly, prayer for setting aside of the impugned order has been made.

7]                We have heard the rival contentions of the parties and gone through the impugned order and material available on record.

8]                The moot question, which falls for consideration before this Commission, is as to whether the complainants are entitled to indemnification of their loss on indemnity basis or reinstatement value basis. The Ld. District Commission has correctly concluded in its order that once the Surveyors appointed by the opposite parties - Insurance Company conducted an assessment of the loss or damages and this assessment went undisputed by the Insurance Company, the subsequent repudiation of the claim by the opposite parties constituted a clear deficiency in service. This refusal to honor the claim, despite the established assessment, reflected not only a failure to fulfill their contractual obligations but also embodies an unfair trade practice. The action of the opposite parties demonstrated a disregard for the rights of the complainants, who relied on the Insurance Company to act in good faith and uphold the terms of the insurance policy. By repudiating the claim, the opposite parties not only caused undue distress to the complainants but also engaged in practices that undermine consumer trust and the integrity of the insurance industry. Therefore, it is imperative that such conduct is recognized and addressed, as it not only violated the principles of fair service but also detracted from the overall fairness that should characterize business transactions in the insurance sector. It may also be stated here that the Ld. District Commission, while allowing the complaint, has directed the opposite Parties to pay a sum of Rs.2,17,59,941/- on indemnity basis plus Rs.24,36,399/- i.e. 25% wrongly deducted by the Surveyor on account of the discrepancies in the stocks. No doubt, the policy in question is subject to designation of property clause and reinstatement value clause, however, to settle this controversy, it is imperative to minutely go through Section II (Clause 9) of the Standard Fire and Special Perils Policy, Annexure OP/R-8,  and recommendation made by the Surveyor Sh. S. K. Agarwal in Para 11.1 at Page 135 of his survey report.

9]                Section II (Clause 9) of the Standard Fire and Special Perils Policy states that if the Company at its option, reinstate or replace the property damaged or destroyed, or any part thereof, instead of paying the amount of the loss or damage, or join with any other Company or Insurer(s) in so doing, the Company shall not be bound to reinstate exactly or completely but only as circumstances permit and in reasonably sufficient manner, and in no case shall the Company be bound to reinstate exactly or completely but only as circumstances permit and in reasonably sufficient manner, and in no case shall the Company be bound to expend more in reinstatement than it would have cost to reinstate such property as it was at the time of the occurrence of such loss or damage nor more than the sum insured by the Company thereon. If the Company so elect to reinstate or replace any property the insured shall at his own expense furnish the Company with such plans, specifications, measurements, quantities and such other particulars as the Company may require and no acts done, or caused to be done, by the Company with a view to reinstatement or replacement shall be deemed an election by the Company to reinstate or replace. It further states that if in any case the Company shall be unable to reinstate or repair the property hereby insured, because of any municipal or other regulations in force affecting the alignment of streets or the construction of buildings or otherwise, the Company shall, in every such case, only be liable to pay such sum as would be requisite to reinstate or repair such property if the same could lawfully be reinstated to its former condition.

10]              In Para 11.1 of his recommendations, the Surveyor has stated that “The insured has not yet started the work of reinstatement. We have worked out the assessed loss on indemnity basis as well as on reinstatement basis for building and plant & machinery, based on historic cost and quotes. The loss in stocks has been assessed on details as submitted by the insured. Before settlement of claim on reinstatement basis, it is mandatory that the insured reinstate damages and provide the supporting bills. Till the reinstatement is pending, the indemnity value assessment shall be basis of claim settlement.”.

11]              It is very much clear from bare reading of above clause that the true intent of this clause is to cap the insurance company’s financial responsibility at the cost of reinstating or repairing the property as it was before the damage occurred, without considering new legal requirements. In essence, the insurance company is responsible for covering the hypothetical cost of restoring the property to its original state but not for the costs of meeting updated legal standards or regulations that might make such a restoration impossible or more expensive. The policy in question grants the opposite parties discretion to either reinstate or replace the damaged property or any part thereof instead of disbursing the full amount of the assessed loss or damage. This provision further enables the Company to engage with other insurers or companies in facilitating such reinstatement or replacement. In instances, where the Insurance Company elects to proceed with reinstatement or replacement, the insured party bears the responsibility to provide, at their own expense, any necessary documentation, including but not limited to plans, specifications, measurements, quantities, and other particulars as required by the Company. Additionally, it is very much clear from the above clause that in case the opposite parties are rendered unable to reinstate or repair the insured property due to existing municipal regulations or other legal restrictions, such as those affecting street alignment or building construction, the opposite parties’ liability shall be limited to the amount that would have been requisite to restore or repair the property to its former condition, contingent upon lawful reinstatement. Further, per above recommendation of the Surveyor, the insured - complainants have not yet commenced the reinstatement of damages. The assessed loss has been calculated on two bases: indemnity basis and reinstatement basis for both building and plant & machinery, using historical costs and obtained quotations. Additionally, the loss of stock has been assessed based on the details provided by the insured. In order for the claim to be settled on a reinstatement basis, it is essential that the insured completes the reinstatement of the damaged property and submits supporting invoices and documentation for the incurred costs. Until reinstatement is completed, the indemnity value assessment has to be the basis for settling the claim. Thus, it is clear from the above discussion that the insurer had the option to reinstate or replace the property rather than pay the claim directly but this reinstatement could be limited to what was reasonably achievable and within the policy limits. The insured must first complete the reinstatement and provide evidence before a settlement was made on that basis. If the insured failed to do so, the claim was to be settled based on the indemnity value, which generally represented a lower payout compared to the reinstatement value.

12]              We have gone through the judgments relied upon by the complainants, in support of the contentions, in cases New India Assurance Co. Ltd. & Ors. (supra), M/s Oswal Plastic Industries (supra), Karnavati Veneers Pvt. Ltd. (supra) and CPL Ashish Kumar Chauhan (Retd.) (supra) and are of the concerted view that the same are distinguishable on facts.

13]              In this view of the matter, we are of the concerted view, the Ld. District Commission has rightly directed the opposite parties to pay a sum of Rs.2,17,59,941/-, assessed by the Surveyor on indemnity basis plus 25% deduction, which was wrongly done by the Surveyor, as stated above. The Ld. District Commission has awarded interest @9%  p.a. on the awarded amount after one month of the submission of the final survey report dated 13.11.2020 by S.K.Aggarwal and Co., Loss and 19 Surveyor to the Company till the date of its actual realization to the complainants. In our view, the rate of interest @9% per annum is just and adequate to cater for the harassment and mental agony suffered by the complainants and litigation expenses. Therefore, no case is made out for enhancement as prayed for by the complainants in their appeal.

1.               In views of the facts and circumstances of the case, we do not find any infirmity or material irregularity in the impugned order passed by the Ld. District Commission, which is legal, just and fair.

15]              For the reasons recorded above, both the appeal bearing No.207 of 2024 and 209 of 2024 stand dismissed with no order as to costs.

16]              Pending application(s), if any, in both these appeals also stand dismissed having rendered infructuous.

17]              Copy of this order be placed in the file of appeal No.209 of 2024.

18]              Certified copy of this order be sent to the parties free of charge.

19]              Files be consigned to the Record Room after completion.

Pronounced.

15.10.2024.

(JUSTICE RAJ SHEKHAR ATTRI)

PRESIDENT

 

 

(PADMA PANDEY)

MEMBER

 

 

(RAJESH  K. ARYA)

MEMBER

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