National Insurance Co. Ltd. vs PRABHAT RUBBER INDS.

IN this First Appeal No. 609 of 1993 filed by the National INsurance Company Ltd., the limited question for our consideration is in regard to the date from which interest should be paid to the insured for delay in payment of the claim. The State Commission, Punjab, after going through the facts of the case and taking the support from a judgment of the Haryana State Commission in case Girdhari Lal Bansal v. Oriental INsurance Company Ltd. & Ors., reported in I (1994) CPJ 118=1993 CPC 588, decided that the interest should be paid from the date on which the fire destroyed the stock of the insured. The State Commission, Haryana, in the cited judgment observed as follows : "both the general law of insurance and the specific language of the insurance contract provides that the insurer will indemnify the insured against loss or damage. IN the classic words of Lord Brett LJ, "the insured has to be indemnified fully''. Can it possibly be said that where the insured is reimbursed for his loss after years from the actual date of the loss and arising of the cause of action, that he is fully indemnified, therefor ? To our mind the answer to this core question has to be plainly in a categorie negative. Full indemnification means that the insured is to be reimbursed as if and on the very date of the loss, and certainly no t when the insured may choose to determine the same or to accept liability, therefor. IN our view, the entitlement to indemnify for the loss incurred begins from the date of the loss itself, and not on any other slippery date. Our aforesaid conclusion, however cannot obviously mean that the insured''s loss had in actual fact to be magically determined. We have held else where that this must be done with utmost expedition, but even such expedition would necessarily take a reasonable amount of time. The insurance Corporation formalities of lodging the claim, its verification, and the assessment through independent INvestigators and Surveyors and the final decision of the Company have inevitably to be gone through. However, once this had been done then on the well accepted legal premises the accepted liability must relate back to the very date of the loss. IN the eye of the law full indemnification would mean that the insured has been given and tendered his loss and reimbursed on the very date. This is the figurative legal situation, but in actual practical terms implies that the insured must be compensated for the period for which he remained deprived of the lawful compensation which was his due. This can be simply remedied by awarding the reasonable amount of commercial interest from the date of loss itself. IN essence the determination of the loss must be done in full, yet it must relate back to the date of the loss and the recompense, therefore is the interest due thereon."

THERE cannot be any exception to the principle that the determination of the loss must be done in full, yet it must relate back to the date of the loss and the recompense, therefore, is the interest due thereon. However, this Commission, on pragthatic considerations, has taken a view in a number of cases that a reasonable time may be allowed to the insurer, as in cases of the claims where the facts stated by the claimant are to be investigated to check their veracity, a certain time lag was inevitable between the date of occurrence and the settlement of the claim. Though no set period has been prescribed as a norm for this time lag, the Commission has allowed a period ranging from 3 to 6 months as a reasonable period depending upon the facts and circumstances of each case. The Haryana State Commission has accepted the amount determined by the Surveyor as regards the quantum of the assessed loss to be paid by the appellant. However, in the interest of justice, the State Commission has given liberty to the respondent herein to seek its redress for claiming the loss, if any, over and above Rs. 2,59,911/- from the Civil Court, if so advised or, it may choose the remedy of arbitration clause of the Fire Policy ''C issued by the National Insurance Company Ltd. Since there is no appeal by the respondent in regard to the quantum before us we have noted the decision of the Haryana State Commission in this regard. As regards the date from which the interest should be paid on the amount of Rs. 2,59,911/- we are of the view that a period of 4 months is reasonable for the settlement of the claim by the insurer in the circumstances of this case. The date of fire being 13.5.91, the interest at the rate of 18% per annum as determined by the Haryana State Commission, should be calculated from 13.9.91 till the date of payment. This appeal is allowed to this extent with no order as to costs. Ordered accordingly.