New India Assurance Co. Ltd vs Managing Director, M/S. A Power Himalaya Ltd

Dinesh Singh, Member

This Appeal has been filed under Section 19 of The Consumer Protection Act, 1986, hereinafter referred to as the 'Act', challenging the Order dated 05.12.2012 of The State Consumer Disputes Redressal Commission, U.T. Chandigarh, hereinafter referred to as the 'State Commission'.

The Respondent, M/s A Power Himalaya Limited (Aerial Ropeway Projects), hereinafter being referred to as the 'Complainant Firm', had taken a "Standard Fire and Special Perils Policy", hereinafter being referred to as the 'Policy', from The New India Assurance Co. Ltd., hereinafter being referred to as the 'Insurance Co.', in respect of its entire "Building", "Plant / Machinery And Accessories" and "Furniture, Fixtures and Fittings" of its "Aerial Ropeway including trolley stations".

The Policy was valid from 12.02.2010 to 11.02.2011.

A sum of Rs. 3,25,385/- was paid as premium on 15.02.2010. This premium was inclusive of the additional premium for "Earthquake (Fire and Shock)" as an "Add-On". The total sum assured was Rs. 29,50,00,000/-.

The Complainant Firm suffered loss due to avalanche following heavy snowfall on 03.03.2010 i.e. within the period the subject Policy was valid.

Its claim was repudiated by the Insurance Co. vide its letter dated 07.12.2011 inter alia stating that "the cause of loss has been heavy snow slide and avalanche following heavy snow fall on the hills" and "Snow slide / Avalanche is not an insured peril under SFSP Policy".

The State Commission vide its impugned Order dated 05.12.2012 partially allowed the Complaint and made the following Award:

For the reasons, recorded above, the complaint is partly accepted with costs, in the following manner;

(I) The Opposite Parties are directed to pay to the complainant the assessed amount of Rs.16,93,094.09

(II) The Opposite Parties shall pay interest @9% p.a. on the aforesaid amount of Rs. 16,93,094.09 from the date of repudiation of claim i.e. 7.12.2011 till realisation.

(III) The Opposite Parties shall also pay Rs.10,000/- towards cost of litigation.

The aforesaid payable amounts, shall be paid within 30 days, from the date of receipt of a certified copy of the order, failing which, the Opposite Parties shall be liable to pay interest @12% p.a. on the same, till realisation besides costs.

We heard learned Counsel for both sides, and perused the entire material on record including inter alia specifically the impugned Order dated 05.12.2012 of the State Commission, the terms and conditions of the subject Policy, the report dated 18.06.2011 of the Insurance Co.'s Surveyor & Loss Assessor, the Insurance Co.'s repudiation letter dated 07.12.2011 and the Memorandum of Appeal.

We note that the Insurance Co.'s Surveyor & Loss Assessor, after mentioning that "The insured have suffered a loss on account of heavy snow slide and avalanche following heavy snow fall on the hills. Snow Slide / Avalanche is not an insured peril under the SFSP Policy.", made a detailed "LOSS ASSESSMENT" for "academic purpose only to limit the maximum liability of the insurer subject to admissibility of the loss as per the terms and conditions of the policy".

The loss assessed by the Surveyor & Loss Assessor, albeit for "academic purpose", was Rs. 16,93,094/09p. ("Maximum liability of the insurer").

The State Commission has taken the loss assessed by the Surveyor & Loss Assessor i.e. Rs. 16,93,094/09p. as the basis for arriving at its Award.

The Surveyor & Loss Assessor in his report dated 18.06.2011 inter alia stated as below:

13.0 OBSERVATIONS DURING SURVEY & DETAILS OF AFFECTED PROPERTY

During the survey it was found that the entire area , where the return terminal is located , was filled with heavy snow and it was not possible to reach the site despite best efforts .

Even the helicopter could not land near the upper terminal due to heavy snow and high gradient which caused high danger because of impending threat of snow slide .

From Air it was visible that the entire upper terminal was filled with snow and the shed had collapsed .

The shed was seen fallen and the trusses were seen bent and damaged. The entire structure of the shed was found damaged .

During our second visit on 25.12.2010 the reinstatement of damaged property was verified and the salvage of the material / debris of the collapsed shed was verified and quantified .

CAUSE OF LOSS:

As explained above and as evident from the photographs, the cause of loss has been heavy snow slide and avalanche following heavy snow fall on the hills

(emphasis supplied)

The Insurance Co., in its repudiation letter dated 07.12.2011, inter alia stated as below:

We refer to your above said claim for Damage to the trusses due to Avalanche/snow slide at the site after heavy snow fall at the return terminal of the ropeway .

As explained and evident from the photographs and survey, the cause of loss has been heavy snow slide and avalanche following heavy snow fall on the hills . We wish to inform you that the Snow slide/Avalanche is not an insured peril under SFSP Policy. The SFSP Policy is a named peril policy and the loss is covered only if it can be attributed to have been caused by one of the insured perils.

Since the cause of loss is not an Insured Perils, the claim does not falls within the Preview of the Policy. We therefore, express our inability to entertain the claim.

(emphasis supplied)

It is, therefore, admitted by the Insurance Co. that "the cause of loss has been heavy snow slide and avalanche following heavy snow fall on the hills".

Accordingly the short point in issue is whether loss due to "heavy snow slide and avalanche following heavy snow fall on the hills" is covered by the terms and conditions of the subject Policy.

We may first say that a mere reading of the subject Policy shows that it is nebulously articulated, with 'n' number of grammatical mistakes. It is required and expected of an Insurance Company to ensure the due diligence to make sure that the articulation of its Policy is unequivocal, unambiguous and impeccable, without (a plethora of) grammatical mistakes.

Clause VI. of the terms and conditions of the subject Policy reads as below:

Clause VI.:

VI. Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation

Loss, destruction or damage directly caused by Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood or Inundation excluding those resulting from earthquake , Volcanic eruption or other convulsions of nature . ( Wherever earthquake cover is given as an "add on cover" the words " excluding those resulting from earthquake volcanic eruption or other convulsions of nature" shall stand deleted )

(emphasis supplied)

In the instant case "earthquake cover" was taken as an "add on cover", additional premium was paid therefor.

Hence, as per the articulation itself of the said Clause, the words "excluding those resulting from earthquake volcanic eruption or other convulsions of nature" "shall stand deleted".

This connotes and implies that the words "those resulting from earthquake volcanic eruption or other convulsions of nature" will stand included therein.

Therefore, logically, in the instant case, as a natural consequence of the 'add on cover', the said clause VI. will, in effect, read as below:

VI. Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation and Earthquake , Volcanic Eruption or other convulsions of nature

Loss, destruction or damage directly caused by Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood or Inundation including those resulting from earthquake , Volcanic eruption or other convulsions of nature .

(emphasis supplied)

Clause VIII. of the terms and conditions of the subject Policy reads as below:

Clause VIII.:

VIII. Subsidence and Landslide including Rock slide

Loss, destruction or damage directly caused by Subsidence of part of the site on which the property stands or Land slide / Rock slide excluding:

We note that Clause VI . , as applicable in this case, i.e. VI. Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation and Earthquake, Volcanic Eruption or other convulsions of nature , and Clause VIII. Subsidence and Landslide including Rock slide , do not specifically preclude "Avalanche" therein.

Nor is "Avalanche" specifically precluded anywhere in the exclusion clause(s) of the subject Policy.

'Avalanche', which the Oxford Dictionary of Earth Sciences defines as 'a rapid and often destructive flow of rock or snow', is of the same class as the weather and geological perils listed in Clause VI. and Clause VIII.

Additional premium was paid to obtain coverage for the 'add-on' peril of 'earthquake, volcanic eruption or other convulsions of nature'.

To our mind, the proposition intended to be conveyed and expected to be understood, by a reasonable man, in reading the Clause VI. Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation and Earthquake, Volcanic Eruption or other convulsions of nature (as applicable in this case) together with the Clause VIII. Subsidence and Landslide including Rock slide , is that the entire gamut of weather and geological perils, of the same class, including 'Avalanche', whether or not specifically listed per se , would be covered (such proposition is in no way repugnant to the context).

That is to say, a reasonable man would reasonably understand that "Avalanche" would also be covered in the Policy, moreso when [a] coverage for the "add-on" perils of "earthquake, volcanic eruption or other convulsions of nature" had also been consciously taken and [b] "Avalanche" is of the same class as listed in the wide-ranging gamut of weather and geological perils covered under Clause VI . and Clause VIII.

Further, a reasonable man would also reasonably understand that, even if not specifically listed, 'Avalanche' would, in any case, be covered under "or other convulsions of nature" when read in continuity to and in conjunction with the words "Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation and Earthquake , Volcanic Eruption " mentioned immediately preceding.

(emphasis supplied)

Reason dictates that 'Avalanche':

[a] would be covered in the gamut of weather and geological perils intended to be conveyed and expected to be understood by Clause VI. Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood and Inundation and Earthquake, Volcanic Eruption or other convulsions of nature read together with Clause VIII. Subsidence and Landslide including Rock slide , and

[b] would, in any case, fall within "other convulsions of nature", i.e. sudden, violent, irregular disturbances caused by nature, explicitly provided for in Clause VI.

It is self-evident that the Complainant Firm would have taken the subject "Standard Fire and Special Perils Policy" along with the 'add-on' in order to be doubly sure that the entire gamut of weather and geological perils, including 'Avalanche', is duly covered.

To put it in converse, the question is that, in the contingency that if it had been categorically mentioned in the subject Policy that "Avalanche" was not included in the coverage of weather and geological perils, whether the Complainant Firm would at all have gone in for the subject Policy. The reasonable and logical answer to this question would be in the negative.

This is a classic example of an Insurance Company anyhow repudiating a claim by overlooking its own wide-ranging coverage of weather and geological perils, ignoring that 'Avalanche' is of the same class of weather and geological perils as are specifically listed, disregarding that 'Avalanche' falls within 'or other convulsions of nature' explicitly listed, discounting that coverage for 'add-on' peril at additional premium was taken by the Complainant Firm, abandoning reason, adopting subjectivity and arbitrariness.

This is decidedly an unfair and deceptive act.

We find both, 'deficiency in service' within the meaning of Section 2(1)(g) and (o) and 'unfair trade practice' within the meaning of Section 2(1)(r) of the Act, to be well and truly evident on the part of the Insurance Co.

As already stated earlier, the State Commission has based its Award on the loss assessed by the Insurance Co.'s own Surveyor & Loss Assessor.

["As Sh. Sanjay Gupta, Surveyor and loss assessor, appointed by the Opposite Parties, has after taking all the aspects into consideration assessed the loss to the tune of Rs.16,93,094.09, we are of the considered opinion that the complainant is entitled to the same amount and not as claimed by it in para No. 9 of the complaint. Even otherwise, the complainant did not specifically challenge the assessment made in the report. Hence, it is an important document and the same cannot be brushed aside lightly. Apart from this, the complainant is also entitled to interest on account of financial loss caused to it, as also litigation costs. However, the complainant is not entitled to any compensation because the complaint has been filed by the company a juristic person. Hence no compensation is granted on account of mental agony and physical harassment." (para 10 of the State Commission's impugned Order)].

We find the Award made by the State Commission, quoted verbatim in para 3 above, to be just and equitable.

In the light of the above discussion, we find no reason visible to interfere with the Award made by the State Commission vide its impugned Order dated 05.12.2012. The same is confirmed.

The Award shall be complied with within four weeks of the pronouncement of this Order, failing which the State Commission shall proceed for execution as per the law.

In addition, for 'unfair trade practice' per se :

(i) The Insurance Co. through its Chief Executive is put to stern advice of caution with imposition of cost of Rs. 2.50 lakh to be deposited by the Insurance Co. in the Consumer Legal Aid Account of the State Commission within four weeks of the pronouncement of this Order.

(ii) The Insurance Co. through its Chief Executive is ordered under Section 14(1)(f) of the Act to forthwith discontinue its unfair trade practice and to fairly re-articulate its subject "Standard Fire and Special Perils Policy", without deception, by either categorically precluding or categorically including "Avalanche" in its terms and conditions, so that there is no ambiguity or subjectivity or arbitrariness or deception or unfairness in this respect in future, and to furnish a report-in-compliance to the State Commission within eight weeks of the pronouncement of this Order.

The Registry is directed to send a copy each of this Order to [a] the State Commission and [b] the Chief Executive of the Insurance Co., with specific reference to paras 20 and 21 above, within three days of its pronouncement.