M/S Rainbow Apparels vs New India Assurance Company Ltd

This complaint has been filed by the complainant, M/s. Rainbow Apparels against the opposite party, the New India Assurance Company Ltd. Brief facts of the case are that complainant has purchased a fire policy "C" including FST (flood, storm & tempest) from the OP bearing no.02297/96 on 18.3.1997. The said policy was valid w.e.f. 18.3.1997 to 17.3.1998 for a total sum assured of Rs.56 lakhs covering the stocks. On 22.8.1997 due to heavy rainfall and flood, water entered in the complainant's premises and the stocks were damaged. On 23.8.1997 intimation was given to the OP who deputed one surveyor Mr. Mulchand of M/s. Inspection Consultancy Service Bureau for assessment of loss. The complainant also expressed its unwillingness for the assessment by this surveyor. On 7.4.1998 claim form was submitted by the complainant for a sum of Rs.35,52,546/-. On 7.9.1998 surveyor submitted his survey report wherein loss was assessed to a sum of Rs.24,48,462/-. On 9.9.1998 the complainant gave their consent for settlement of claim for Rs.20,33,462/- after deduction of salvage and policy excess. On 24.11.1998 another surveyor M/s. Parimal R. Shah & Co. was appointed by the OP for reassessment of loss. On 24.11.1998, 2nd surveyor assessed the loss to a sum of Rs.10,31,659/- which was approved by the OP company and intimation of the same was given to the complainant. On 30.11.1998 acceptance was given by the complainant but for partial settlement and not for full and final settlement of claim. The cheque was encashed by the complainant. However, being aggrieved, the complaint was filed.

The complaint was resisted by filing written statement by the OP. on the other ground that the complaint was time barred since according to the OP the complaint was filed in the year 2007. It was stated that claim of the complainant for Rs.75,84,226.37 was not covered under the pecuniary jurisdiction of this Commission. It was stated that complicated question of law and facts are involved which cannot be adjudicated in a summary manner. Claim of settlement was delayed due to non-cooperation of the complainant in providing necessary documents for loss assessment and the claim was filed without supporting documents/evidence, balance sheet, profit and loss account were also not certified. On 5.6.1998 surveyor in its report has assessed the loss to Rs.11,87,976/- on the basis of certified copy of Balance Sheet, P & L Account, Rs.18,66,728.50 on the basis of extent of production and thirdly loss was assessed to Rs.20,33,519/- on the basis of uncertified statement of general cost. Survey report was full of contradictions and not supported by any documents therefore, second surveyor was appointed for re-assessment of loss. The claim amount as assessed by the second surveyor was sent through cheque dat. 30.11.1998 for Rs.10, 31,658/- and the cheque was duly encashed by the complainant. Thereafter, protest letter dt. 10.12.1998 was sent by the complainant after accepting the claim amount.

Both the parties filed their affidavit of evidence.

Heard both the parties and perused the record.

Learned counsel for the complainant stated that after the claim of insurance was filed by the complainant to the insurance company, 1st surveyor was appointed who submitted his report on 5.6.1998 and assessed the loss by three different methods.

Based on Certified balance sheet, profit and Rs.11,68,690/-

loss account

Based on Total Production from the time of commencement Rs.16,48,618/-

Based on uncertified statement of general cost working valuation of stocks Rs.16,62,710/-

Learned counsel further contended that the surveyor then sent amendment to his report vide letter dated 30.7.1998 where the surveyor has stated that the second method is more reliable and it was the best method on which the claim should be settled. The surveyor further sent amendment to his report vide letter dated 7.9.1998 wherein he increased the value of per shirt from Rs.180/- to R.214/- and thereby increased the assessed loss to the tune of Rs.20,33,462/- . It was argued by learned counsel that this should have been the actual amount which should have been paid by the insurance company. However, the insurance company appointed second surveyor without any basis who submitted his report on 26.11.1998. The second surveyor has assessed the net loss at Rs.10,31,659/- and the insurance company offered the same to the complainant which was accepted by the complainant under protest as the complainant company was in dire need of finance. However, the complainant sent protest letter dated 10.12.1998 stating that the amount of Rs.10,31,659/- has been taken by the complainant as part payment of the claim and complainant is entitled to the remaining amount as assessed by the first surveyor. Therefore, the signing of discharge voucher by the complainant cannot be taken as full and final settlement of the insurance claim. Moreover, Circular No. IRDA/NL/CIR/Misc/173/09/2015 dated 24.09.2015 issued by Insurance Regulatory Development Authority of India (IRDA) to all the General Insurance Companies, with regard to the use of discharge vouchers in settlement of claim, clearly states that merely signing of discharge voucher by the insured does not disentitle the insured to approach the competent forum for payment of additional amount of insurance. Thus, signing of discharge voucher is not an estoppel against the complaint.

The learned counsel for the complainant further stated that no justification has been given by the insurance company for appointing second surveyor when the report of first surveyor was very clear and there was no ambiguity in the recommendation of the first surveyor. The first surveyor has clearly recommended the settlement of the insurance claim as per the loss assessed under the second method adopted by the surveyor as amended vide his letter dated 7.9.1998.

Pointing out the inappropriateness of the report of the second surveyor, learned counsel argued that the second surveyor has observed in his report that production cost of one shirt is Rs.170/-, however, on the basis of market survey and assessment he has taken Rs.120/- per shirt as the value for assessing the loss. It was asserted by learned counsel that surveyor was not justified in taking the value of Rs.120/- per shirt for assessment of the loss whereas the actual production cost itself was Rs.170/- per shirt.

It was further pointed out by learned counsel for the complainant that though the complaint bears No.167 of 2006 but the fact is that the complaint was filed on 10.5.2000 which was received on 28.9.2000 as would be clear from the stamp put on the top of complaint, by the Registry of this Commission. When the complaint was filed, this Commission had the pecuniary jurisdiction to decide the complaint and the complaint was filed in time.

It was argued by learned counsel for the complainant that there are number of judgments of the Hon'ble Supreme Court and of this Commission that the insurance company is not entitled to appoint second or third surveyor to suit them to get the desired report. Thus, clearly the appointment of second surveyor was illegal and against the rules and report of the second surveyor cannot be considered.

On the other hand, learned counsel for the OP/insurance company stated that the complaint is time barred as the claim was settled for Rs.10,31,659/- and the discharge voucher was signed by the complainant as full and final settlement of the insurance claim with full satisfaction on 30.11.1998 and the complaint has been filed in the year 2006. Clearly, the complaint is time barred. Learned counsel did not agree with the contention of the counsel for the complainant that the complaint was filed in the year 2000 as the affidavit in support of the complaint was filed in the year 2007. It was not possible for the complainant to file the complaint without this affidavit, therefore, the fact is that the complaint has been filed in 2006 or 2007. It was also argued by learned counsel for the insurance company that this Commission does not have the pecuniary jurisdiction to decide the present complaint as the claim involved is less than Rs. One crore. These two preliminary grounds were taken in the written statement filed by the insurance company on 16.11.2007. It was requested that the complaint is liable to be dismissed only on these two preliminary grounds.

Coming to the merits of the case, learned counsel for the OP stated that complainant has already accepted the cheque of Rs.10,31,659/- and has signed discharge voucher as full and final settlement in the year 1998 itself. Thus, the contract of insurance was complete in the year 1998 itself and therefore after that date, OP does not have any privity of contract with the complainant. It was further argued by the learned counsel that after settlement of the claim, the complainant has moved his complaint just to gain undue enrichment.

It was further pointed by the learned counsel that as per condition 6(ii), the insurance company is not liable to indemnify any claim after a period of 12 months from the happening of the loss or damage. The clause read as under:

(ii) In no case whatsoever shall the company be liable for any loss or damage after the expiration of 12 months from the happening of the loss or damage unless the claim is the subject of pending action or arbitration, it being expressly agreed and declared that if the company shall disclaim liability of any claim hereunder and such claim shall not within 12 calendar months from the date of the disclaimer have been made the subject matter of a suit in a court of law, then the claim shall for all purposes be deemed to have been abandoned and shall not thereafter be recoverable hereunder."

Learned counsel for the insurance company further stated that when the insurance company was not satisfied with the report of the first surveyor as there were various shortcomings, then the insurance company has the power to appoint the second surveyor to clarify the things. All the documents were not submitted by the complainant and therefore the report of the first surveyor was not considered by the insurance company as complete report and therefore, appointed second surveyor. Coming to the report of second surveyor, the learned counsel pointed out that the insurance claim is to be paid on the basis of the value of the stock and the surveyor was competent to take into consideration his assessment of the market value in respect of the shirt price. Thus, there is nothing wrong if the second surveyor has taken the value of Rs.120 per shirt for assessing the loss.

I have given a thoughtful consideration to the arguments advanced by learned counsel for both the parties and have examined the material on record.

First, coming to the question of limitation and pecuniary jurisdiction, it is seen from the complaint that there is a stamp of this Commission receiving the complaint on 28.9.2000. Even complaint has been signed by the complainant on 10.5.2000. On the left side of the first page of the complaint, it seems that the complainant has given undertaking to remove the defects. However, it seems that the defects were removed later on and then this complaint was registered as Complaint No.167 of 2006. Thus, the complainant may be also responsible for not removing the defects in time. But the fact remains that the complainant approached this Commission in the year 2000 itself and this Commission received it on 28.9.2000. As the voucher was signed on 30.11.1998, the complaint was filed within the period of two years. Hence, the complaint is not barred by limitation. At that time, this Commission also had the pecuniary jurisdiction to try this complaint. Thus, the complaint is maintainable before this Commission. Otherwise also, lot of time has lapsed since then and I do not see any ground to dismiss the complaint on the technical grounds of limitation or pecuniary jurisdiction.

So far as Condition No.6(ii) of the insurance policy is concerned, the Larger Bench of this Commission in Wilhelm Textiles India Pvt. Ltd. Vs. Oriental Insurance Company Ltd. (Review Application No.87 of 2017 in CC No.163 of 2016) decided on 5th September, 2018 has held that this condition is violative of Section 28 of the Indian Contract Act, 1872. Thus, in the light of the decision of the Larger Bench of this Commission in Wilhelm Tetiles India Pvt. Ltd. Vs. Oriental Insurance Company Ltd. supra), this condition cannot be read against the insured.

So far as the issue of discharge voucher is concerned, the Insurance Regulatory Development Authority of India (IRDA) vide its Circular No. IRDA/NL/CIR/Misc/173/09/2015 dated 24.09.2015 issued guidelines to all the General Insurance Companies, with regard to the use of discharge vouchers in settlement of claim, wherein the IRDA has directed all the insurance companies as under:

"The Insurance Companies are using 'discharge voucher' or "settlement intimation voucher" or in some other name, so that the claim is closed and does not remain outstanding in their books. However, of late, the Authority has been receiving complaints from aggrieved policyholders that the said instrument of discharge voucher is being used by the insurers in the judicial fora with the plea that the full and final discharge given by the policyholders extinguish their rights to contest the claim before the Courts.

While the Authority notes that the insurers need to keep their books of accounts in order, it is also necessary to note that insurer shall not use the instrument of discharge voucher as a means of estoppel against the aggrieved policy holders when such policy holder approaches judicial fora.

Accordingly insurers are hereby advised as under:

Where the liability and quantum of claim under a policy is established, the insurers shall not withhold claim amounts. However, it would be clearly understood that execution of such vouchers does not foreclose the rights of policy holder to seek higher compensation before any judicial fora or any other fora established by law.

All insurers are directed to comply with the above instructions."

From the above guidelines of IRDA, it is clear that signing of the discharge voucher would not debar the insured to seek remedy for additional insurance amount from the appropriate forum. Hence, the complaint has to be considered on merits for deciding the claim of the complainant.

Coming to the merits of the case, it is seen that the report of the first surveyor was very extensive and specific and the loss was assessed on the basis of three methods adopted by the surveyor and it was open to the insurance company to accept any of the methods according to their analysis and wisdom. However, the same was not accepted and another surveyor was appointed . No specific reason has been given for appointing the second surveyor. Even during the course of arguments, learned counsel for the insurance company only stated that the second surveyor was appointed due to the fact that the first surveyor was not able to get all the documents from the complainant and therefore, his report was based on incomplete documents. Learned counsel for the complainant has contended that no surveyor has mentioned the fact that documents were not supplied by the complainant. In fact, whatever documents were demanded by the surveyor, they were supplied by the complainant. I do not find any force in the arguments of the learned counsel for the insurance company that second surveyor was appointed due to the fact that first surveyor could not get the complete documents. The surveyor could have finalized the report on the basis of whatever documents were available or could have rejected the claim. I do not find any genuine reason for appointment of the second surveyor.

There are many judgments of the Hon'ble Supreme Court that the report of the surveyor appointed under the Insurance Act, 1938 is important document which cannot be brushed aside without any cogent reasons and which is to be taken into consideration while deciding the claim. Obviously, insurance companies have been discouraged to appoint any second or third surveyor to get their tailor-made report. This observation has been made by the Hon'ble Supreme Court in Sri Venkateswara Syndicate Vs. oriental Insurance Company Ltd. and another, Civil Appela No.3387 of 2004, decided on 24.8.2009 as mentioned below:

"(22) The assessment of loss, claim settlement and relevance of survey report depends on various factors. Whenever a loss is reported by the insured, a loss adjuster, popularly known as loss surveyor, is deputed who assess the loss and issues report known as surveyor report which forms the basis for consideration or otherwise of the claim. Surveyors are appointed under the statutory provisions and they are the link between the insurer and the insured when the question of settlement of loss or 17damage arises. The report of the surveyor could become the basis for settlement of a claim by the insurer in respect of the loss suffered by the insured. There is no disputing the fact that the Surveyor/Surveyors are appointed by the insurance company under the provisions of Insurance Act and their reports are to be given due importance and one should have sufficient grounds not to agree with the assessment made by them. We also add, that, under this Section the insurance company cannot go on appointing Surveyors one after another so as to get a tailor made report to the satisfaction of the concerned officer of the insurance company, if for any reason, the report of the Surveyors is not acceptable, the insurer has to give valid reason for not accepting the report. Scheme of Section 64-UM particularly, of sub-sections (2), (3) and (4) would show that the insurer cannot appoint a second surveyor just as a matter of course. If for any valid reason the report of the Surveyor is not acceptable to the insurer may be for the reason if there are inherent defects, if it is found to be arbitrary, excessive, exaggerated etc., it must specify cogent reasons, without which it is not free to appoint second Surveyor or Surveyors till it gets a report which would satisfy its interest. Alternatively, it can be stated that there must be sufficient ground to disagree with the findings of Surveyor/Surveyors. There is no prohibition in the Insurance Act for 18 appointment of second Surveyor by the Insurance Company, but while doing so, the insurance company has to give satisfactory reasons for not accepting the report of the first Surveyor and the need to appoint second Surveyor."

On the basis of the above judgment of Hon'ble Supreme Court, insurance company cannot appoint second surveyor without any cogent reason and in the present case no such cogent reason seems to exist. Now, the claim of the complainant is required to be settled as per the report of the first surveyor. The first surveyor has assessed the loss on three methods, out of which, the first method seems to be quite practical and reasonable as it is based on the certified profit and loss account and balance-sheet, whereas the other two methods relate to the total production since inception and on the basis of uncertified account statement which cannot be considered as it would be difficult to correctly verify the production and sale figures of a long period. Accordingly, in my view the claim of the complainant should have been settled on the basis of the loss assessed by the first method adopted by the first surveyor which is Rs.11,68,690/- . This is after excluding the salvage and policy excess. Thus, this is net loss assessed.

Based on the above discussion, the complaint is partly allowed and it is held that complainant is entitled to have insurance claim settled at Rs.11,68,690/- whereas the amount of Rs.10,31,659/- was already given on 30.11.1998. Accordingly, the complainant is entitled to get additional amount of Rs.1,37,031/- which be paid by the insurance company alongwith interest @ 7% p.a. from 1.12.1998. This order be complied within 45 days from the receipt/service of the order, failing which additional interest @ 3% p.a. shall be payable by the insurance company from the date of this order till actual payment.

No order as to cost.