NATIONAL INSURANCE COMPANY LTD vs SKS Limited

THESE appeals arise from the two orders, both dated 5.12.2008, one passed in complaint case No. C-42/01 and the other in complaint case No. C-344/01. Complaints before the State Commission were filed by the complainant M/s. S K S Limited alleging deficiency in service on the part of the opposite party-Insurance Company by making unlawful deductions from the insurance claim payable by the Insurance Company in respect of the damage suffered to insured hovercrafts, i.e. ACV Morning Glory and Marigold which met with an accident and suffered damage at their scheduled trip from Vashi to Gateway of India and vice-versa near Trombay. M/s. Rohit Kumar and Co. Approved Surveyors, Investigators, Valuers and Consulting Engineers were deputed to conduct survey who assessed the loss of ACV Morning Glory at Rs. 31,20,009.00. However, Insurance Company by deducting a sum of Rs. 9,30,349.00 paid a sum of Rs. 21,89,660.00 to the complainant. As against the assessed loss of Rs. 24,27,683.49 in respect of the other hovercraft Marigold, the Insurance Company deducted a larger sum and paid a sum of Rs. 12,07,374.00 only to the complainant. According to the complainant, deductions of the huge amounts made by the Insurance Company were totally unjustified as a result of which they have suffered loss and set back in business. Claims were accordingly made for payment of the balance amount and also compensation. The complaints were resisted by the Insurance Company thereby trying to justify the deductions under the relevant heads "Ground, etc. deduction - Rs. 3,75,000 ( Incl. TL/CTL/P) and Rs. 7,50,000 towards hover deductible EL (Incl. TC/CLT/AT" and towards salvage. The State Commission going by the respective pleas and the terms and conditions of the insurance policy, however, partly allowed the complaints with identical order and granting same reliefs by observing as under: "The OP shall refund Rs. 7.50 lacs deducted towards excess clause and pay Rs. 50,000 as lumpsum compensation for mental agony and harassment, over and above Rs. 10,000 as cost of litigation to the complainant."

AGGRIEVED by the said orders, National Insurance Company have filed appeal No. 291/2009 which seeks to challenge the order passed in complaint No. C-344/01 and appeal No. 292/2009 which seeks to challenge the order in complaint case No. C-42/2001.

WE have heard Mr. R.C. Mishra, learned Counsel for the appellant-National Insurance Company and Mr. Rakesh Kapoor, learned Counsel representing the respondent and have given our thoughtful consideration to their respective submissions.

LEARNED Counsel for the Insurance Company would assail the impugned order on the ground that it is based on incorrect reading and interpretation of the terms and conditions of the policy. In this connection he has invited our attention to the schedule attached to the insurance document titled as "Air Cushion Vehicle Policy ( HULL)". Clauses 5 and 6 of the Schedule relating to certain deductions appearing in the schedule attached to the policy read as under:

GROUND etc. Deductible Rs. 3,75,000 E.E.L. (Incl. TL/CTL/P)

HOVER Deductible Rs. 7,50,000 E.E.L. (Incl. TL/CTL/AT) 5. Since the expansion key of the abbreviations used in the above clauses were not given in the policy, we called upon the appellant-Insurance Company to explain the said abbreviations. This has been done by filing the affidavit of Mr. A.K. Gupta, Manager of the appellant-Insurance Company by explaining the abbreviations appearing in the said clauses as under: "That pursuant to the order dated 11.2.2010 passed by this Hon''ble Commission, the expansion of the abbreviated forms used in Clause 5 and 6 of Schedule of Air Cushion Vehicle policy ( HULL) mentioned on page 43 of the Appeal paper-book is given here below. (i) E.E.L.=each and every loss (ii) T.L.=Total loss (iii) CTL=Constructive Total Loss (iv) P=Partial (v) A.T.=Actual Loss" We have also perused the Annexure A1 filed with the said deposition which provide the expansion key of the abbreviations used in the above clauses.

Mr. Mishra, learned Counsel for the Insurance Company would submit that Clause No. 6 (supra) authorizes the Insurance Company to make a deduction of Rs. 7,50,000 towards hover deductible in respect of each and every loss for which the insurance claim is lodged by the insured. On the other hand Counsel for the respondent-complainant submits that complainant was not explained these terms and was kept in dark as to the meaning of the said abbreviations and, therefore, Insurance Company is not authorized to make any deduction, much less a deduction of Rs. 7,50,000 towards hover deductible for each and every loss. In this regard we may simply notice that these abbreviations have been used in accordance with aviation risks in the international market and, therefore, it could not have been difficult for the complainant to verify the details of those abbreviated terms to seek expansion / clarification from the Insurance Company itself. The above clause is part and parcel of the terms and conditions of the insurance policy and must be given effect. We must, therefore, hold that the Insurance Company was justified in making a deduction of at least Rs. 7,50,000 in both the cases under the hover deductible clause.

HAVING held that the Insurance Company could deduct a sum of Rs. 7,50,000 in each case and going by the assessment of loss made by the Surveyor in the two cases, still we find that deductions made by the Insurance Company were more than Rs. 7,50,000 to which they were not legally entitled. As noticed above in case of ACV Morning Glory, Surveyor had assessed the loss at Rs. 31,20,009.00 after deducting a sum of Rs. 5,000 towards adhoc salvage value. However, the Insurance Company has deducted a sum of Rs. 7,50,000 towards hover deductible, a sum of Rs. 1,45,292 towards cost of propeller and Rs. 5,000 towards salvage. Learned Counsel for the Insurance Company could not explain as to how further deductions of Rs. 1,40,292 towards cost of propeller and Rs. 5,000 towards salvage could have been made, once the Surveyor had itself found the following damage to the propeller: Machinery 1.1 3 Nos. propeller blades stated bent, renewed. 2.2 Centaflex coupling between engine and propeller and lift fan belt stated both broken, renewed 2.3 Propeller elevator actuating unit and actuating lever stated broken, renewed.

IT is also pertinent to note that since there was damage to the propeller or its part, Insurance Company was not entitled to make any deduction on that count and in any case it was not recommended by the Surveyor. The Surveyor had already deducted a sum of Rs. 5,000 towards adhoc value of the salvage while computing a net loss of Rs. 31,20,009.00. It would, therefore, follow that deduction of Rs. 1,45,292 and Rs. 5,000 was not justified. The Insurance Company is, therefore, liable to pay this amount after deducting the amount of Rs. 7,50,000. Appeal No. 291/09 deserves to be partly allowed to the extent that Insurance Company is liable to pay a sum of Rs. 1,50,292 to the complainant with some reasonable interest which we put at 9% per annum with effect from the date when the payment of balance amount was made.

SO far as appeal No. 292/09 is concerned, it must be observed that after deducting a sum of Rs. 7,50,000, the Insurance Company was liable to pay a sum of Rs. 16,77,683 but as against that only an amount of Rs. 12,07,374.00 has been paid. The Insurance Company is, therefore, liable to pay the balance amount of Rs. 4,70,314 ( i.e. Rs. 16,77,683 - Rs. 12,07,374) with interest @ 9% p.a. with effect from the date when balance payment was made.

IN the result, both the appeals are partly allowed and the orders of the State Commission are hereby set aside. The appeals are disposed of in the manner that the appellant-Insurance Company shall pay to the complainant a sum of Rs. 1,50,292 in appeal No. 291/09 and a sum of Rs. 4,70,314 in appeal No. 292/09, both with interest @ 9% p.a. with effect from the respective date(s) when the initial payments were made. These payments shall be made within a period of six weeks from the date of this order, failing which the rate of interest shall stand increased to 12% p.a. Appeals partly allowed.