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Judgment
Subhash Chandra, Member
This is a complaint under Section 21 (a) (1) of the Consumer Protection Act, 1986 (in short, ‘the Act’) filed by the complainant alleging deficiency in service in repudiation of its insurance claim on the ground of “exclusion” by the opposite party.
In brief, the facts of the case are that the complainant (which was previously “M/s Sodhi Brothers LLC”) was allotted 4 MW (2X2 MW) Hydro Electric Project with financing from the State Bank of India through a term loan of Rs.22.60 crores and had entered into a Power Purchase Agreement (PPA) on 11.04.2007 with the Himachal Pradesh State Electricity Board (HPSEB). The project is located across River Bharal in Village Boh, Shahpur, District Kangra, Himachal Pradesh. The project was commissioned on 07.12.2010 and was notified by HPSEB as “commercially operative” w.e.f. the same date. The project was covered for the period from 04.10.2007 to 03.10.2008 and 24.08.2009 to 23.08.2010 under a Standard Fire & Special Peril insurance policy availed from Oriental Insurance Company. For the period from 01.07.2010 to 30.06.2011 it was covered under policy No. 110801/11/10/11/00000169 of the United India Insurance Company in favour of the complainant. The policy was renewed on payment of premium of Rs.4,28,240/- for the period 25.08.2011 to 24.08.2012 for a sum of Rs.31,60,00,000/-. The policy covers two components – Building superstructure for Rs.8,80,00,000/- and Plant and Machinery for Rs.22,80,00,000/-.
On account of heavy rainfall in September 2011, on 27.09.2011 there was a landslide during the day on the hill on which the concrete saddle of the penstock had been constructed. Due to damage to the saddle, the penstock pipe broke which resulted in the gushing of water from the penstock at high pressure which damaged the power house and many sensitive equipments due to slush and debris in the power house. The incident was reported to the opposite party on the same day at 3.00 p.m. and followed up by a written communication on 28.09.2011. The respondent appointed one Shri Rajeev Razdan to conduct a preliminary survey who visited the site and submitted a report dated 03.10.2011 stating that due to continuous heavy rains in the area, the penstock pipe slid along with concrete saddle due to pressure of water and this resulted in the power house structure getting damaged by water at high pressure and debris from the hill side. Thereafter the opposite party appointed Consolidated Surveyors Pvt. Ltd. as surveyors who visited the site on 12.10.2011 and submitted report stating that the proximate cause of loss was due to landslide which is covered under the insured perils and recommended that the underwriters may indemnify the loss of the insured. Based upon the subsequent visit of surveyor on 15.12.2012 and inspection of the repairs and re-enforcement undertaken by the insured and the cost of salvage of Rs.3,23,400/-, it was concluded that the estimate submitted by the insured/complainant was exaggerated and recommended payment of Rs.38,46,549.76/-. It is submitted by the complainant that the loss was wrongly assessed by M/s Consolidated Surveyors at Rs.38,46,549.76/- as against the repair cost submitted by the complainant of Rs.1,33,57,421/- since the surveyors did not consider payments in cash even in cases where tax had been deducted at source and proof had been provided. It was averred that cash payments to contractors in civil projects was the norm in remote locations due to non-availability of the banking system in such locations. It is averred that there is no dispute as regards the incident of heavy rains which is also confirmed by the Revenue Authorities such as the Patwari, Boh on 15.12.2012 and the Tehsildar, Shahpur vide letter dated 29.10.2013. Newspaper reports have also been annexed in support of the incident.
Despite various meetings with the surveyors and the opposite party to finalize the insurance claim, the opposite party repudiated the claim on 29.05.2013 relying on the report of M/s Consolidated Surveyors dated 15.12.2012 which was referred to as the “final report”. It is submitted by the opposite party that the claim could not be considered in view of the “exclusion” clause relating to peril “subsidence and land slide” which states that “Loss, destruction or damage directly caused by subsidence of the part of the site on which the property stands or land slide / rockslide excluding : (a) the normal cracking, settlement or bedding down of new structure.” . It was stated that the pedestals were newly constructed and since 2011-12 was the first monsoon after the commissioning of the plant, the foundation of the pedestal bedded down and the loose sand under it had settled. It was stated that this was due to improper compression of the sand at the time of construction of the pedestal which was a normal phenomenon due to carelessness of the contractor. It was accordingly concluded that the peril was excluded as per the policy.
The complainant has contended that the report of M/s Consolidated Surveyors was arbitrary as the bills for repairs submitted by the complainant were highly exaggerated and that the repudiation itself was at complete variance to the report dated 15.12.2012 of the Surveyors themselves. It was also contended that there was no material on record to show that M/s Consolidated Surveyors had actually inspected the pedestal of the penstock pipe before arriving at its conclusion. The complainants are before this Commission with the following prayer:
i) Allow the present complaint of the complainant and direct the Respondent to pay a sum of Rs.1,33,57,421/- (Rupees One Crore Thirty Three Lacs Fifty Seven Thousand Four Hundred and Twenty One only) to the Complainant towards their insurance claim;
ii) Direct the Respondent to pay interest on the claim amount at the rate of 18 per cent from the date of filing of the insurance claim till the date of payment;
iii) Direct the Respondent to pay a sum of Rs.10,00,000/- (Rupees Ten Lacs only) on account of mental agony and harassment caused to the Complainant;
iv) Direct the Respondent to pay a sum of Rs.1,00,000/- (Rupees One Lac only) towards cost of litigation the Complainant was made to incur;
v) Pass any other/further order (s) as deem fit and necessary in the interest of justice.
The complaint was resisted by way of reply by the opposite party. It has been contended by the opposite party that the repudiation of the claim is based on the basis of final report dated 15.12.2012 of the surveyor appointed and that the claim of the complainant was exaggerated as per the report of the surveyor. Accordingly, the repudiation of claim and settlement for an amount of Rs.38,46,550/- was a fair settlement of the insurance claim. It is also contended that there is no deficiency of service in view of the above and that the complaint should be dismissed.
Parties led their evidences way of affidavit and filed their written statements and synopsis. We have heard learned counsels for both the parties and given thoughtful consideration to the documents on record.
From the documents on record it is apparent that the incident of damage to the mini power plant being operated by the complainant was on account of the damage caused to the saddle and penstock pipe by which the water was drawn from the river on account of torrential rains in September, 2011 culminating in the landslide on 27.09.2011. It is also apparent that the complainant was diligent in informing the opposite party of the incident immediately and the opposite party also deputed its surveyors for a preliminary assessment and thereafter for a detailed assessment. Both the surveyors have clearly concluded that the cause of loss was due to landslide caused by heavy rainfall leading to damage to the saddle and penstock pipe culminating in the rain water along with slush and debris into the power plant. The report of Shri Rajeev Razdan, Surveyor / Loss Assessor deputed immediately after the incident regarding the cause of loss reads as follows:
As per the preliminary enquiry and confirmed by the eye witness engineers of the power house on Sept 27, 2011 at 2:30 PM due to continuous heavy rains in the area suddenly the Pen stock pipe from anchor No. 8 & No. 9 slide as the concrete sadals with land slided / gave away due to rains and the penstock pipe due to pressure of water flowing through it and its own weight broke and water with high pressure fell towards the power house structure damaged its structure and the debries of land/hill entered to the floor of the power house and fell on the machines / equipments.
(Emphasis added)
The report dated 15.12.2012 of M/s Consolidated Surveyors Pvt. Ltd. who were deputed to survey and assess the loss has also stated on similar lines as below:
CAUSE OF LOSS:
It has been reported to us by the insured’s representative and also confirmed by the preliminary surveyor that on 27.09.2011, the area experienced heavy rain fall and it resulted in landslide at many places. In one such incident, the soil under one of the Concrete saddle of the Pen stock slid away and as a result of that, the pen stock was damaged. The power plant was operational at that time and the water gushed out with very high velocity from the damaged penstock and carried with it, lot of mud and silt. The high velocity water damaged the building structure of the power house and the entire machinery and equipments installed therein were buried under the mud and silt. As such the proximate cause of loss, being landslide, is covered under the insured perils and the underwriters may indemnify the loss of the insured.
(Emphasis added)
In view of the clear findings of both the surveyors that the cause of damage was landslide triggered by abnormally heavy rain, the repudiation of the claim vide letter dated 29.05.2013 on the basis of final report of the M/s Consolidated Surveyors appointed by it is not found to be consistent with the cause of damage to the power plant. The report of the surveyor has clearly indicated that the proximate cost of the loss was due to landslide which was a covered peril under the standard fire and peril policy in force. The surveyor specifically recommended and that the insured should be indemnified for the same. The reasons for not accepting this report have not been set out by the opposite party. It has, instead, chosen to rely upon the report in which there is mention of the quality of construction being improper as has been set out in the letter of repudiation. The reason mentioned that since it was the first monsoon after the commissioning of the project, is not a valid argument, as it is based on a surmise that the construction was liable to be impacted. Lastly, the repudiation is based on the presumption that contractors do not do proper compaction of sand which has resulted in the bedding down of the pedestal leading to collapse of the saddle and the damage to the penstock pipe. In view of the above, it is difficult to sustain the repudiation of the claim on the grounds that have been set out by the opposite party. The complaint is liable to succeed on these grounds.
As regards the quantum of insurance claim that has been allowed, the complainant has submitted that the construction of civil works in remote locations required payment to contractor in the form of cash. He has also submitted that such payments are supported by requisite deduction of TDS and remittance of the same to the concerned authorities. In view of this submission, it would only be fair to consider allowing such expenses as legitimate. The disallowing of such expenses on the other hand would put the complainant to disadvantage considering that he had taken action to repair and restore the power plant following the damage to the plant on account of the landslide. The opposite party has in our view erred in not considering the same.
In light of the above, we are of the view that there is merit in the complaint that the insurance claim has been erroneously repudiated. The complaint is, therefore, allowed. The opposite party is directed to settle the claim of the complainant for Rs.1,29,64,854/- as determined by its own surveyor’s final report dated 15.12.2012 subject to admitting the cash payment for purchases being supported by deductions for GST payments. The order be complied within eight weeks.
The consumer complaint is disposed off with these directions.