M.K.J.CORPORATION vs UNITED INDIA INSURANCE CO. LTD.

THE Complainant had taken an Insurance Policy from the Opposite Party United India Insurance Company. It is a fire policy which was operative during the period 31.3.1986 to 31.3.1987 and was thereafter renewed from 31.3.1987 to 31.3.1988 covering various perils like Fire, Riot, Strike, Damage (RSD), Malicious damage (MD) etc. and in particular "Spoilage". The property insured against the above perils was building, plant, machinery, stocks and "stocks in process".

THE present claim under the complaint is m limited to the damage sustained by the "stocks in process" due to the strike in the works between 16.2.1987 to 12.3.1987 and again labour unrest from 8.6.1987 till the 27th of July, 1987. During the later period the management declared a lock-out from 16th June, 1987 which lifted on 28th July, 1987 after reaching a settlement with the workmen. During this strike and labour unrest the works in process of the insured got damaged.

IN the schedule of assets to the insured which gives details of assets insured and which is attached to the policy of insurance, Item Nos. 8 and 10 read as under: 8. Stocks of Leather of all kinds in progress during Soaking, Liming, Fleshing, Tanning, Wet Bluk, Sammying, Splitting, Shaving, Dye Liquering setting, Vacuuming Drying Rs. 10,00,000.00 10. Spoilage of material in process Item No. 8 above. Rs. 10,00,000.00

THE Opposite Party Insurance Company repudiated the claim on 26th June, 1991. The letter of repudiation is reproduced below: "With reference to your aforesaid claims, we inform you that in terms of Riot and Strike damages perils covered under the above noted Fire Insurance Policy, the loss so claimed is not due to any visible physical damage to plant and machinery caused by rioters/strikers resulting in spoilage of material under process. In view of the above, we regret for our inability to entertain the claim and in accordance the claim is hereby repudiated, which please note."

The limited question to be considered is whether the damage to stocks or spoilage of materials is insured only if the loss is caused by any visible physical damage by rioters and strikers.

IT has been contended by the complainant t|at the Insurance Policy covers different perils, fire, RSD, MD, spoilage etc. and that peril or "spoilage" is different and distinct from other perils like fire or RSD.

AGAIN , "stocks in process" also forms a distinct item of property insured different from building, plant, machinery and other stocks. Item No. 8 of the Schedule of Assets index to the policy only defines the different types of stocks in process such as in the process of soaking, in the process of Liming, in the process of Fleshing, in the process of Tanning etc. Item 8 also indicates the value of the stocks in process. Necessarily item No. 10 indicates the expenditure to which spoilage of stocks in process falling under serial No. 8 is insured viz, Rs. 10 lacs.

AT the hearing, the Counsel for the Insurance Company stated that under the Policy of Insurance, the spoilage of the stocks in process is covered only if the spoilage is caused by rioting or strike. He produced the instructions of the Tariff Advisory Committee in relation to fire policies in which it is laid down that "loss or damage resulting from total or partial cessation of work or the retarding of interruption or cessation of any process of operation or omissions of any kind" is not covered by the insurance. He, however, could not >how that such a clause was incorporated in the Policy of Insurance which was issued to the complainant.

WE have repeatedly held that instructions of the Insurance Tariff Advisory Committee are not binding on the insured so long as they are not incorporated in the contract of insurance i.e., the Insurance Policy issued. We also regret to observe that the Counsel for the Opposite Party Insurance Company went on insisting that the instructions of the Tariff Advisory Committee form part of the contract of insurance though he was unable to show that the particular clause was incorporated in the contract. We have no hesitation in coming to the conclusion that the repudiation of the liability of the Insurance Company under the Insurance Policy was not bonafide and that it had placed a far-fetched and unreasonable interpretation on the insurance clause pertaining to insurance of stocks in process and has thus been guilty of deficiency in service. We cannot help but forming the impression that the Opposite Party Insurance Company was somehow wanting to repudiate the liability.

THE complaint petition is, therefore, allowed as under: (i) The Insurance Company shall pay a sum of Rs. 4,99,453 as compensation for loss of the value of stocks spoiled during 16.2.1987 to 12.3.1987; (ii) Rs. 5,000/- as compensation for loss suffered during 16.6.1987 to 27.7.1987; (iii) Interest at 18 % on the above amounts from the expiry of one month after these were lodged.

IN this case, we consider that the period of one month was sufficient because no long time was required for examination of the quantum of damage to the stocks as the liability was to be fixed only with reference to the interpretation of the contract of insurance. In addition, we allow Rs. 5,000/- as costs to the complainant.