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Judgment
Subhash Chandra, Presiding Member
This complaint is filed under section 21 of the Consumer Protection Act, 1986 (in short, ‘the Act’) alleging deficiency in service on account of repudiation of his claim under the Standard Fire and Special Perils Policy issued by the opposite party.
The facts, in brief, of the case are that the complainant which is a partnership firm had obtained Standard Fire and Special Perils Policy no.360300/11/11/01/00000205 for the period 29.07.2011 to 28.07.2012. It is contended that this policy had been initially obtained by it in 2008 as the complainant is engaged in the business of exporting stainless steel houseware and cookware products. The policy was categorised as Engineering Workshop including plant and machinery and stocks, furniture, fixtures and fittings uptill 2011. In 2011-2012 the complainant did not include the plant and machinery in the policy related to its trade. The word ‘Stainless Steel Kitchenware and Packing Material’ has been included in the description of risk. The policy was paid by way of premium for a sum of Rs.2,54,00,000/-. On 25.10.2011 at around 10.00 pm there was fire on the insured premises due to short circuiting. The opposite party was informed on 26.10.2011 as a consequence of which M/s Sanjay Dwivedi and Associates, Surveyors and Loss Assessors were appointed by the opposite party. The surveyor assessed the loss between 27.10.2011 and 30.05.2012 when the final survey and assessment report was submitted.
The loss assessed by the complainant was initially valued at Rs.1,80,00,000/-. However the loss assessed and submitted to the surveyor was Rs.1,00,48,385.83 which included the following:
S No.
Description
Claimed amount in Rs.
1.
Burned items
68,22,600.10
2.
Packing material
15,53,053.49
3.
Miscellaneous items burned
2,47,646.34
4.
Reworking expenses
6,69,975.30
5.
Freight incurred on burnt material
1,08,363.10
6.
Taxes payable on burnt items
4,74,281.50
7.
Handling and miscellaneous charges
1,72,466.00
Total
1,00,48,385.83
The surveyor after providing for disposing the salvage and auction netted the salvage disposal at Rs.8,70,202/- which was deducted from the total loss assessed by him. The surveyor reported the loss at Rs.73,43,353.18.
The complainant pursued the claim filed with the opposite party through letters dated 19.06.2013, 31.07.2012 and 02.08.2012. The opposite party sent a letter repudiating the claim on the grounds that the complainant was guilty of material non-disclosure while obtaining the policy since he had not conveyed the change in the nature of his business from manufacturing activity to trading activity. Consequently the policy was wrongly issued covering risks for an ‘Engineering Workshop’ while it should have been issued for covering storage risks for trading entity. As per condition no.1 of the policy, the repudiation was also done on the grounds that packing material was not covered under the policy as it was not relevant to an engineering workshop.
Following discussions between the two parties, it was submitted by the complainant that an offer was made by the opposite party to settle the claim on sub-standard basis, i.e., to settle the claim at a lesser amount than assessed by the surveyor without assigning any reasons for the same and that a consent letter was obtained without indicating the settlement amount. This was contested by the complainant through an e-mail dated 14.09.2012.
As per the surveyor’s final report dated 30.05.2012, the net loss was assessed at Rs.73,43,353,18. As per this document no breach of any policy condition or violation by the complainant was mentioned. There was no dispute about the cause of fire which was short circuiting which was peril covered under the policy. The complainant appears to have made several efforts with the opposite party’s Regional and Divisional Offices and sought various documents under the Right to Information Act, 2005 as well. He is before this Commission with the following prayer:
a. Pass an order setting aside the repudiation of the complainant’s claim by the opposite party for amounting to deficiency in service provided by the opposite party to the complainant pursuant to the Standard Fir and Special Perils Protection Policy bearing number 36030011110100000205 dated 29.07.2011 and directing the opposite party to pay a sum of Rs.91,84,883.93 as indemnification of the actual net loss suffered by the complainant due to the incident of fire at its premises on 25.10.2011;
b. Pass an order directing the opposite party to pay interest to the complainant at the rate of 18% per annum on the amount of Rs.91,84,883.83, the actual net loss suffered by the complainant from 30.06.2012, the date by or before which the opposite party was liable in law to honour the claim of the complainant, till the date of actual payment by the opposite party, including interest pendent lite;
c. Pass an order directing the opposite party to pay a sum of Rs.25,00,000/- as compensation for the harassment, mental pain and agony suffered by complainant on account of deficiency in service provided by the opposite party;
d. Award punitive and exemplary damages to the complainant and against the opposite party;
e. Award costs of the instant complaint to the complainant; and
f. Pass such other and further order (s) as may be deemed fit and proper in the facts and circumstances of the present case.
The complaint has been resisted by the opposite party by way of reply. Parties led their evidence. I have heard the learned counsel for both the parties and perused the record. Learned counsel filed their written arguments.
On behalf of the opposite party it has been contended that the present complaint is not maintainable since the policy in question was issued as per the disclosure of the complainant stating that the insured premises houses an engineering work shop. The premium paid covered manufacturing risk and the premium of the said risk had been charged as premium at the time of the policy. Since the surveyor in his report had pointed out that the complainant was doing the business of trading, which involves storage risk and not manufacturing risk and was ratable under different rating parameters on which basis the premium is liable to be charged, the policy had been obtained through non-disclosure and the claim could not be accepted. It was also stated that the complainant did not disclose the change in his trade at the time of obtaining the policy and hence there was material breach/ violation of clause nos.1 and 3 of the Terms and Conditions of the policy. Accordingly, the complainant was not entitled for any loss under the said policy and therefore, repudiation was reasoned, legal and justified and did not amount to deficiency in service on the part of the opposite party. It has been further stated that the manufacturing risk under the AIFT is less hazardous as compared to risk under trading business which falls under Category 1 - normal hazardous stocks. It has also been further contended that 20% of the stock comprised of packing material, cellophane paper, cardboard cartons, etc., which fall under the higher fire hazard risk category. Such items are not covered under the category of engineering work shop and are also not relevant to insurance coverage under the category of engineering work shop. Hence, these items cannot be admitted for loss under the claim filed.
It is contended by the opposite party that as per the order of this Commission in Daya Ram Sharma vs M/s United India Insurance Co. Ltd., in RP No. 2851 of 2006 2012 (3) CPR 367 (NC) compensation cannot be granted beyond the terms of the insurance policy. Since insurance was obtained for “engineering workshop” covering manufacturing risks, claim under trading for “storage risk” which is higher than that for a workshop cannot be considered and admitted.
The opposite party has also contended that the complainant was aware of the change in nature of his business since it had reduced the insurance cover from Rs.4.43 crores in the policy for 2009-2010 to Rs.2.74 crores in the policy 2010-2011.
I have heard the learned counsels for the parties and perused the record. The issue in the matter is whether the Standard Fire and Special Peril policies were for engineering workshop or for trading stocks. The complainant has contended that the policy was a succession policy to the policies he had obtained since 2008-2009 when he was engaged in the business of manufacturing. However, the policy for the year 2011-2012 was for the purpose of trading stocks. In support of his argument it has relied upon the policy document in which there were endorsements entered by hand. These endorsements have been stated by the complainant to be the standard practice followed by the insurance company. It is contended that the policy was indeed for the purpose of trading since words ‘Stainless Steel Kitchenware and Packing Material’ had been added in the column bearing the heading ‘Description of Risk’ between the words, ‘Scaffolding’ and ‘Hardware items’. The column bearing the heading, ‘Plant and Machinery’ had been cancelled and no sum insured was sought for the same. It has also been contended that as per the copies of the internal communication between the Divisional and Regional Offices of the opposite party and the complaint. Hub of the opposite party obtained by the complainant under Right to Information Act, it was evident that there had been no suppression or material disclosure by the complainant and that the opposite party had, in fact, erred in not recording the risk covered correctly. Accordingly, it is submitted by the complainant that his claim is genuine and should be honoured by the opposite party.
On its part, the opposite party has argued that the complainant was in violation of the clause nos.1 and 3 of the Standard Fire and Special Perils Policy. The general conditions of the Terms and Conditions of the policy mandate that violation of material disclosure makes the policy well. It is contended that since the premium for storage risk is higher than that for manufacturing risk, the complainant had intentionally not disclosed the change in the trade in order to pay lower premium to cover his risk. According to the opposite party, it was admitted by the complainant that there was no manufacturing activity undertaken for manufacturing of utensils on the premises and that the Plant and Machinery had not been covered under the risk included under the policy.
It is also submitted that the complainant had admitted that the loss due to fire was Rs.68,22,600.10. It is contended that items relating to packing material, miscellaneous items, reworking expenses, freight incurred on burnt material, taxes payable on burnt items, handling and miscellaneous charges had been included without any documentary evidence and the net value of the loss was Rs.91,84,883/-. According to the opposite party, this was essentially done to meet the pecuniary threshold of this Commission. It is also submitted that the actual loss assessed by the surveyor is Rs.68,22,600/- relating to utensils and re-working expenses for repairable stock of Rs.6,69,975/- has not been disputed by the complainant. It has also been submitted that deduction of Rs.4,52,281/- was on account of dead stocks at 5% from the gross loss. Exclusion of damage to packing material was Rs.15,53,053/-, for miscellaneous burnt items Rs.2,47,646/-, on freight for transporting the damaged goods Rs.1,08,363/-, taxe of goods Rs.4,74,281/- and handling/ loading/ unloading charges of Rs.1,72,466/- have also been excluded on justifiable basis. It was therefore been prayed that the complaint be dismissed with costs.
From the above, it is clear that the issue involved relates to whether the insurance policy under which the claim has been preferred covered manufacturing risk or storage risk. The complainant admits that the nature of his business had indeed charged from manufacturing to trading. There is no dispute regarding the nature of risk covered in manufacturing/ engineering workshop and trading being different. The complainant’s case is that he had informed the opposite party of the change and that endorsements of the opposite party on the document was evidence of this. However, the opposite party has contended that there was material non-disclosure by the complainant in not conveying the change from manufacturing to trading as per the General Conditions of the Policy.
The general conditions of the terms and conditions referred to by the opposite party reads as under:
“Clause no.1: This policy shall be voidable in the event of mis-representation, mis-description or non-disclosure of any material particular.
Clause no.3: Under any of the following circumstances the issuances ceases to attach as regards the property affected unless the insured before the occurrence of any loss or damage obtains the sanction of the company, signified by endorsement upon the policy by or on behalf of the company.
If the trade or manufacture carried or be altered, or if the nature of the occupation of or other circumstances affecting the building insured or containing the insured property be changed in such a way as to increase the risk of loss or damage by insured perils……..”
From the above, it is evident that the Standard Fire and Special Perils Policy obtained by the complainant for the year 2011-2012 covered risk to manufacturing and not storage. Notwithstanding the internal communication that has been referred to it by the complainant, the policy document relied upon by the complainant himself indicates that the policy was for storage of ‘Stainless Steel Kitchenware and Packing Material’. The premium paid was for manufacturing risk and not for storage risk. Accordingly the Surveyor’s report cannot be faulted for deducting a sum of Rs. 3,86,492.27 on account of inadmissible items under the storage risk.
The complainant has relied upon internal correspondence and his understanding of procedural practices of the opposite party to buttress his agreement that there was no material non-disclosure. However, if indeed the practice of the opposite party was to change policies through endorsements, there is no evidence produced to indicate why the premium charged was different. The onus was on the complainant to inform the opposite party for change of his business and therefore, the risk to be covered. The contention of the complainant is that it was inserted in the policy by overwriting. The fact is that the final policy issued does not specifically mention risk covered to be for the storage. The previous policies produced by the complainant are categorical and specific. The policy for the year 2011-2012 when the incident of fire occurred cannot be any different. The argument that the opposite party followed the convention of such endorsement is therefore, not justifiable and cannot be accepted. There is also merit in the contention of the opposite party as per this Commission’s order in the case of Daya Ram Sharma (supra) relating to coverage of risk. It is apparent that the change in the coverage of risk had not been conveyed to the opposite party by the complainant. This was a concealment of a material fact since the premium to be paid would have been revised and the coverage of risk changed as per the risk for “storage”.
In view of the above, the repudiation of the claim by the opposite party cannot be construed to be deficiency of service warranting any relief under the complaint filed before this Commission. For the reasons stated above, the complaint is accordingly disallowed.