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Judgment
The present First Appeal under Section 19 of the Consumer Protection Act, 1986 (for short, “the Act”) has been filed by the Appellant Insurance Company/Opposite Party in Complaint (hereinafter to be referred to as “the Insurance Company”) questioning the legality of the Order dated 22.08.2013 passed by the State Consumer Disputes Redressal Commission, Tamil Nadu at Chennai (hereinafter to be referred to as “the State Commission”) in Consumer Complaint No. 20 of 2011. By the Impugned Order, while partly allowing the Complaint filed by the Complainant/Respondent herein, the State Commission has directed the Insurance Company to pay to the Complainant the balance claim amount of ₹24,52,589/- along with interest @ 6% p.a. from the date of filing of the Complaint i.e. 08.04.2011 till realization in addition to costs of ₹10,000/-.
The brief facts of the case are that the Complainant Company had insured their Building, Plant and Machinery, Transformer etc. with the Opposite Party Insurance Company against loss/damage caused by fire and break down for a total sum of ₹44 Crores for a period from 15.03.2008 to 14.03.2009 after paying the necessary premium which was accepted by the Insurance Company. During the validity of the policy, on 30.07.2008 at about 7.53 hours, one of the insured machineries, i.e. D.G. # 3 Turbo Charger had suddenly stopped working which was duly intimated to the Insurance Company. Upon intimation, the Insurance Company deputed the Surveyor, M/s. Puri Crawford & Associates India Pvt. Ltd. to assess the loss suffered by the Complainant. After spot survey and investigation, the said Surveyor submitted the Preliminary Report. On 25.08.2009, on advise of the Surveyor, the Complainant submitted the claim form with estimated loss/damage of ₹58,01,571/- caused to the insured machinery to the Insurance Company with the relevant purchase Bill and Invoices. However, the Insurance Company did not settle the claim of the Complainant. Suddenly, on 03.03.2010, the Complainant had received an e-mail from the Insurance Company stating that the claim had been approved for ₹25,50,582/- by the Competent Authorities as full and final settlement and requested the Complainant to discharge the Loss Voucher. However, no statement of the settlement at ₹25,50,582/- was forwarded to the Complainant along with e-mail. Therefore, the Complainant wrote a letter dated 04.03.2010 to the Insurance Company to furnish the details of the claim settlement at ₹25,50,582/- but Insurance Company did not respond to the said letter. Ultimately, as the Complainant was in dire need of money, they signed the Loss Voucher and received the payment of ₹25,50,582/- on 31.03.2010 against the claim amount of ₹50,20,385/-. However, on 01.04.2010, the Complainant immediately wrote a letter to the Insurance Company stating that the claim amount was received “under protest” and they are entitled to receive the balance claim amount in terms of the policy. Instead of settling the claim for the balance amount, the Insurance Company only furnished the details of Assessment of Loss assessed by their Surveyors to the Complainant.
Hence, the Complainant preferred Complaint before the State Commission to recover the balance claim amount of ₹24,52,589/- along with interest @18% from the date of complaint till realization and compensation of ₹25,000/- for harassment and mental agony caused to the Complainant.
After hearing the learned Counsel for the Parties and on perusal of the material available on record and the evidence adduced by the parties, the State Commission rejected all the contentions of the Insurance Company observing as under:-
“ The rulings cited by the Complainant squarely apply to the instant case before us. Therefore, placing reliance on the above decisions, we hold that the discharge voucher in full and final settlement issued by the Complainant is not a bar to claim more compensation in terms of the amount claimed in the claim form. Therefore, the contention of the Opposite Party in that the Complainant cannot make any further claim is untenable.
It is to be further noted that the Opposite Party did not urge any other point but even then we are bound to decide the other issues raised in the version.
A point raised in the version is that the Complaint is barred by limitation. We find that the Complainant has filed the complaint on 08.04.2011 within two years of repudiation of the claim by the Opposite Party, which is well within the statutory period of limitation as contemplated under Section 24-A of the Consumer Protection Act and, therefore, the contention that the complaint is barred by limitation is unsustainable
The further contention of the Opposite Party is that as per Clause 12 of the policy, dispute should be referred to Arbitration and the Complaint is not maintainable under the Consumer Protection Act.
Section 3 of the Consumer Protection Act reads as follows:-
“Act not in derogation of any other law.The provisions of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force.”
In view of Section 3 of the Act, law is well settled that the Complaint is very well maintainable before the Consumer Forum and the contention of the Opposite Party in this regard cannot be sustained.
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It is relevant to note that in the final survey report filed by the Opposite Party, it is stated that vide the claim form submitted by the insured their claim is Rs.61,62,423/- being the actual cost incurred by them during the restoration of Turbo Charger (b), affected generating set and they also submitted various documents like invoices, bills, proof of payments etc. for the values claimed by them.
It is mentioned in the final report that the gross assessed loss is Rs.59,66,636/- and the assessed loss is Rs.50,05,000/- and the adjusted loss is Rs.25,52,411.00. But it is significant to note that there is no proper reasoning and no reasons for furnishing as to how the loss was assessed by the Surveyor.
Therefore, having regard to the relevant facts and the peculiar circumstances of the case and in the interest of justice and equity, we are inclined to allow the saving of Rs.15,385/- and reinstatement of premium of Rs.1829/- to be deducted from the Gross Assessment Loss and we are not inclined to allow the under insurance and the policy excess in view of the fact that the machinery is insured for Rs.44 crores and that the deductions are arbitrary and unjustified.
Feeling aggrieved by the Order dated 22.08.2013 passed by the State Commission, the Appellant Insurance Company has filed the present First Appeal.
We have heard Mr. S.M. Tripathi, learned Counsel appearing for the Appellant Insurance Company and Mr. Kamal Budhiraja, Advocate for the Complainant at some length and also perused the material available on record as well as the Written Arguments filed by the Appellant. Despite, opportunity having been granted vide Order dated 19.03.2019, the Complainant did not opt to file his Written Submissions.
Learned Counsel appearing for the Appellant Insurance Company fervidly submitted that the damage claimed in respect of turbine wheel was found by Surveyors to be purely due to wear and tear and hence not considered the same. The insured had claimed air freight in various items, however, the same is not admissible under the terms and conditions of the policy and as such, the Surveyor has allowed a reasonable amount on account of sea freight. He further urged that as the Complainant Company was availing CENVAT Credit, they were not entitled to claim excise duty, VAT and Service Tax. He also vehemently contended that the property was found to be under insured to the extent of 39.01% and was subject to an excess clause of 5% of the claim amount subject to a minimum of ₹5,00,000/-. After disallowing all the aforesaid claims, the Surveyor had assessed the net loss at ₹25,52,411/- and on further adjustment of ₹1,829/- towards premium for reinstatement of sum insured, the Complainant was paid an amount of ₹25,50,582/- towards full and final settlement of their claim and accordingly, the Discharge Voucher was signed by them. He further submitted that there was no deficiency in service on the part of the Appellant Insurance Company as the wear and tear was not an insured peril and deduction for under-insurance was in terms of the conditions of the policy. The adjustments/deductions were made by the Surveyor in accordance with the provisions contained in the policy and the admissible amount was immediately paid to the Complainant. Placing reliance upon the decision of the Hon’ble Supreme Court in the case of United India Insurance Company Ltd. Vs. Ajmer Singh Cotton and General Mills – 1999 (6) SCC 400, he further pleaded that the Complainant had completely failed to lead any cogent evidence to show that they were coerced or unduly influenced by insurers to accept the claim amount.
As against this, Learned Counsel for the Complainant rigorously urged that the Surveyor assessed the Gross Loss at ₹50,20,385/- but this fact was suppressed by the Appellant Insurance Company and they obtained the receipt as full and final settlement from the Complainant by exercise of undue influence and misrepresentation which can be construed as fraudulent. He also submitted that the Discharge Voucher was signed by the Complainant due to financial constraints and to avoid further delay in payment by the Insurance Company, however, immediately on the following day i.e. 01.04.2010, the Complainant wrote a letter to the Insurance Company stating that the claim amount was accepted under protest only. He further submitted that the deductions made on the ground of Under Insurance and Excess Clause of Policy were not authorized by the terms and conditions of the Policy and, therefore, these deductions were illegal, arbitrary and unjustified. He supports the well-reasoned order passed by the State Commission based on the due appreciation of the facts and evidence adduced by the parties.
Having bestowed our anxious consideration to the rival contentions of the parties, we are of the view that the dispute involved in the present the case revolves to the question as to whether the Insurance Company was justified in deducting the amount on ground of Under Insurance and Excess Clause as all the preliminary issues were rightly rejected by the State Commission with detailed reasons and case law.
The undisputed facts of the case are that the Complainant had obtained an industrial all risk Insurance Policy from the Appellant Insurance Company for a sum of ₹44 crores for the period from 15.03.2008 to 14.03.2009 covering inter—alia the machinery breakdown risk in respect of their Plant and Machinery, Transformer and Switch Yard. On 30.07.2008, there was a breakdown of the Generator Set No.3 and the Complainant submitted the claim for ₹61,62,423/-. The Surveyor assessed the loss as under:-
Sl.
Amount (in Rs.)
1.
Gross Assessed Loss
50,20,385
2.
Less : Salvage
15,385
3.
Less: Under Insurance 39:01%
19,52,589
4.
Less: Excess
5,00,000
5.
Less: Reinstatement Premium
1829
6.
Net Payable
25,50,582
It is submitted by the Learned Counsel for the Complainant that the procedure adopted by the Surveyor to calculate the loss at ₹25,50,582/- is wrong and the same followed by the Insurance Company is contrary to the terms and conditions of insurance policy and violation of preamble clause of the Policy. We find substance in the said submission of the Learned Counsel for the Complainant. The Surveyor has assessed the total value of the plant and machinery as under:-
STATEMENT PROVIDING DETAILS OF VALUATION OF PLANT AND MACHINERY
Insured: OPG Energy Private Limited
STATEMENT PROVIDING DETAILS OF VALUATION OF PLANT AND MACHINERY
Insured: OPG Energy Private Limited
Year Capitalized Amount (Rs.) RBI Index Multiplication Factor Indexed Cost (Rs.)
2003-04
45,39,83,193.00 156.50 1.315655
59,72,85,236.03
2004-05
12,44,583.00 166.30 1.238124
15,40,947.92
2005-06
3,000.00 171.50 1.200593
36,017.49
2006-07
0.00 179.00 11,50,279
0.00
2007-08
11,18,22,829.00 187.80 1.096379
12,26,00,215.61
DOL
0.00 205.90 1.000000
0.00
56,70,80,605.00 72,14,62,417.05
Value at Risk
72,14,62,417.05
Sum Insured
44,00,00,000.00
Value at Risk
28,14,62,417.10
Say (%)
39.01%
A bare perusal of the afore-extracted Chart would reveal that the Surveyor has not adopted an appropriate method to calculate the exact value of the affected DG# 3 Turbo Charger. The Hon’ble Supreme Court in the case Sikka Papers Ltd. Vs. National Insurance Company Ltd. – (2009) 7 SCC 777 while dealing with the question of Under Insurance of the Policy has held as under:-
In the Dictionary of Insurance (Second Edn.) by C. Bennett, “under-insurance” is explained thus:-
“ under-insurance occurs when the amount of insurance is less than the full value of property insured and means that the insured pays a smaller premium than that required as the rate is fixed on the basis of full values being insured. It leads to partial loss claims being scaled down by average (qv.).”
The expression “average” is explained thus:-
“ In non-marine property insurance if a sum insured is subject to average’, and the sum insured is less than the value at risk at the time of loss, the claim will be reduced in the same proportion. The measure combats under-insurance.”
As per the invoice, the diesel generating set and the alternator was purchased by the complainant in the year 1997 for Rs.45,25,000/-. The complainant, however, got the insurance cover valuing diesel generating set (Rs.26,00,000/-) and alternator (Rs.9,00,000/-), in all for Rs.35,00,000/-. Apparently, therefore, there is an element of under-insurance. There is merit in the contention of learned counsel for the insurer that the value of the item is always declared by the insured at the time of issuance of the insurance policy while the element of under-insurance is calculated by the insurer at the time of assessment of loss.
Although on behalf of the complainant, it was contended that under-insurance, if any, must be calculated at the time of issuance of policy and could not be deducted at the time of assessment of the loss but we find it difficult to accept the same. The policy provides that if the sum insured is less than the amount required to be insured, the insurer will pay only in such proportion as the sum insured bears to the amount insured. In accordance with the said provision in the policy if the surveyor applied the pro-rata formula and deducted 25.71% from the loss so assessed i.e. Rs.3,71,509.50 from the sum payable as under-insurance, such deduction cannot be faulted.”
We fully agree with the view taken by the Hon’ble Supreme Court that if the sum insured is less than the amount required to be insured, the insurer will pay only in such proportion as the sum insured bears to the amount insured. But, in the present case, the Complainant has obtained the Insurance Policy for Plant and Machinery for a total sum of ₹44 Crores and they had made the claim for affected DG # 3 Turbo Charger for a sum of ₹61,62,423/- only. Under such circumstances, it cannot be construed that there was any under insurance by the Complainant and, in our considered view, the deductions made by the Insurance Company on account of Under Insurance and Excess Clause were unwarranted. Hence, we do not find any illegality of perversity in the impugned order passed by the State Commission. Consequently, the First Appeal filed by the Appellant Insurance Company stands dismissed without any order to costs.
Vide Order dated 28.11.2013, the Appellant Insurance Company was directed to deposit the entire awarded amount with the State Commission. If any such amount is lying deposited with the State Commission, we direct that the amount may kindly be released in favour of the Complainant along with interest accrued therein.