New India Assurance Co. Ltd vs M/S. Jamia Hamdard

This revision petition has been filed by the petitioner New India Assurance Company Limited against the order dated 28.04.2015 passed by the State Consumer Disputes Redressal Commission, Delhi (in short 'the State Commission') in FA No. 720/2008.

Brief facts of the case are that on 12.8.2004, EPABX system (Alcatel) 4400 installed at the office of respondent was insured under Fire & Special Perils Insurance Policy No.310701/11/04/00357 for the period 12.8.2004 to 11.8.2005 for a sum insured of Rs.15,00,000/-. On 02.10.2004, it was reported that the said EPABX went out of order since 2.10.2004 and was claimed to be total loss. The surveyors, M/s. Insurance Technical Services inspected the affected machine on 28.10.2004. A claim for Rs.9,24,000/- was submitted by respondent to the surveyors. After applying under-insurance of 18.83% and the applicable excess clause the surveyor assessed the net amount of loss at Rs.7,40,011/- and submitted their report dated 24.1.2005. The Service Engineers of the insured machine had confirmed that the damage has taken place to the system cards due to very high voltage due to lightning and the surveyor agreed with the views of the Service Engineers.

In view of the exclusion being applicable, the claim was not within the scope of the policy and was repudiated by letter dated 10.2.2005. The respondent then filed a complaint before the District Forum-6, New Delhi in August, 2005. The petitioner made their submissions before the District Forum stating that the damage to cards as reported was clearly excluded by policy conditions. The claim was beyond the scope of the policy and was not admissible. The District Forum however vide dated 13.5.2008 allowed the complaint and directed the petitioner to pay to the respondent Rs.15 lacs with compensation of Rs.5,00,000/- for mental agony, harassment and deficiency of service and Rs.20,000/- costs. Aggrieved by the order dated 13.5.2008 of the District Forum, the petitioner Insurance Company preferred an appeal bearing No.720 of 2008 before the State Commission. However, the State Commission has dismissed the appeal vide its order dated 28.4.2015 and upheld the order of the District Forum.

Hence, the present revision petition.

Heard the learned counsel for the parties and perused record.

Learned counsel for the petitioner stated that the original claim was for Rs.9,24,000/- that was submitted by the complainant for loss of damaged cards. However, the District Forum has allowed the claim for the total sum assured of Rupees 15 lacs and the State Commission has also confirmed the same. Under any insurance policy, no claim can be allowed for more amount than the claim filed with the insurance company. it was further argued by the counsel for the petitioner that exclusion clause number 7 of the general exclusions of the policy is attracted in the present case as the cards were damaged due to direct impact of electricity high voltage caused by lightning. It is clear that under this exclusion clause the component where the fire sets in is excluded under the policy and loss in respect of that component is not payable. In the present case, no other component has been damaged which could have been paid for. Both the Fora below have erred in not appreciating the General Exclusion Clause No. 7.

It was further argued that both the Fora below have not given any weight to the report of the surveyor, though there are numerous judgements of the Hon'ble Supreme Court that the report of the server cannot be brushed aside without any cogent reasons. No reasoning has been given for not accepting the report of the surveyor. Learned counsel referred to the judgement of the Hon'ble Supreme Court in Sikka Papers Limited Vs. National Insurance Company Ltd. & Ors., III (2009) CPJ 90 (SC) to support his assertion that report of the surveyor forms the basis for settlement of the claim until there are cogent reasons for not accepting the same. The surveyor has considered the claim lodged by the complainant and has only deducted the under insurance and the policy excess from that amount and has assessed the net loss as rupees 7,40,011/-. It was argued by the learned counsel that first of all the claim is not payable as the claim is hit by exclusion clause number 7, however if this Commission comes to the conclusion that claim is permissible then the amount has to be limited to the amount assessed by the surveyor.

In respect of the compensation awarded by the District Forum and confirmed by the State Commission, learned counsel for the insurance company argued that no compensation for mental agony and harassment is payable to any institution as held by the Hon'ble Supreme Court in the case of Sikka Papers Limited Vs. National Insurance Company Ltd. & Ors. (supra). The learned counsel referred to the following portion of this judgement:-

"19. By way of footnote, we may observe that claim of Rs.10,00,000/- made by the complainant for mental harassment is wholly misconceived and untenable. The complainant is a company and, therefore, claim for mental harassment is not legally permissible. It is only the natural person who can claim damages for mental harassment and not the corporate entity."

On the other hand, learned counsel for the respondent complainant stated that the perils of Fire and lightning are two distinct perils covered under the policy. It is clear that even the surveyor has admitted that the high voltage was induced by lightning which damaged the cards and thereby the whole system. It was further argued by the learned counsel that as the whole system became ineffective and non-working, it was a total loss and therefore, the total insurance amount was claimed in the complaint and the same has been awarded by the Fora below. It was further mentioned that if there is any confusion in the policy, then the interpretation that is favourable to the consumer has to be taken into account against the opposite party Insurance Company. In this regard, the counsel mentioned the judgement of the Hon'ble Supreme Court in New India Assurance Company Limited vs. Zuari Industries Limited & Ors., (2009) 9 SCC 70, wherein the following has been observed:-

"22. In the present case, it is evident from the chain of events that the fire was the efficient and active cause of the damage. Had the fire not occurred, the damage was also would not have occurred and there was no intervening agency which was an independent source of the damage. Hence we cannot agree with the conclusion of the surveyors that the fire was not the cause of the damage to the machinery of the claimant. Moreover, in General Assurance Society Ltd. Vs. Chandmul Jain it was observed by a Constitution Bench of this Court that in case of ambiguity in a contract of insurance the ambiguity should be resolved in favour of the claimant and against the insurance company."

It was pointed out that the insurance company on the one side is saying that there was no fire and the claim was not payable, however on the other side, in respect of the lightning, the insurance company has nowhere stated as to why the claim was not payable. The insurance company is taking shelter under the general exclusion clause number 7 which is not apparently applicable in the present case as per their own admission that there was no fire, as this clause is only applicable when fire sets-in.

I have carefully considered the arguments advanced by the learned counsel for the parties and have examined the material on record. It is admitted by both the parties that the damage has occurred due to high voltage generated by the lightning that affected the cards by damaging the same. Clearly the surveyor has stated that there was no fire actually generated in the system and therefore the claim was not payable under the fire insurance policy. The Exclusion Clause No. 7 clearly states that the component where the fire actually sets in cannot be covered under the policy though the remaining components damaged by the Fire may be covered. General exclusion Clause No. 7 reads as under:-

"7. Loss, destruction or damage to any electrical machine, apparatus, fixture or fitting arising from or occasioned by overrunning, excessive pressure, short circuiting, arcing, self-heating, leakage of electricity, from whatever cause (lightning included) provided that this exclusion shall apply only to the particular electrical machine, apparatus, fixture or fittings so affected and not to other machines, apparatus, fixtures or fittings which may be destroyed or damaged by fire so set up."

From the above, it is clear that Exclusion Clause 7 is applicable when the component is damaged by the Fire that sets in that component. In the present case, it is an admitted case of the insurance company that the expert and the surveyor have found that there was no fire and therefore prima facie this clause is not attracted in the present case. Clearly, peril of lightning is covered under the policy without any qualifications attached to this peril. In the General Exclusion Clause No. 7, though the component damaged with fire on account of lightening is also excluded, however, in the present case, there was no fire on account of lightning and therefore the component damaged from lightning is not excluded due to this clause. The peril of lightning is included in the policy without any strings attached to it and therefore the damage to the cards due to high voltage created by the lightning is fully covered under the policy.

From the above analysis, it is clear that the damage to the cards is covered under the policy. Now the question to be decided remains as to what should be the compensation for this loss. As per the report of the surveyor, claim was for rupees 9,24,000 and the surveyor has assessed the net loss of rupees 7,40,011/-. In this assessment the surveyor has deducted under insurance and the policy excess from the amount claimed by the complainant. On the first page of the survey report it has been stated that excess under the policy is Nil. It seems that surveyor has wrongly deducted rupees 10,000/- as policy excess. If one leaves this policy excess, then the net loss assessed by the surveyor becomes rupees 7,50,011/- which can be approximated to rupees 7,50,000/- only.

District Forum and the State Commission have not given any cogent reasons for not accepting the report of the surveyor. Even during the arguments, no specific reason was mentioned by the learned counsel for the complainant for not accepting the report of the surveyor. Hon'ble Supreme Court in the matter of ["Sri Venkateswara Syndicate vs. Oriental Insurance Company Limited & Anr", (2009) 8 SCC 507] has held the following:-

"31. The assessment of loss, claim settlement and relevance of survey report depends on various factors. Whenever a loss is reported by insured, a loss adjuster, popularly known as loss surveyor, is deputed who assesses 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 damage 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 the 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 officer concerned 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."

Hon'ble Supreme Court in Sikka Papers Limited Vs. National Insurance Company Limited and Ors., (2009) 7 SCC 777, has held that:-

A. " Insurance- Terms and conditions specified in insurance policy- Binding effect- Insurance policy not covering parts of machinery which were required to be replaced due to normal wear and tear-Held, Insurance Company while assessing claim, rightly excluded those parts-

B. Insurance Act, 1938,- S. 64-UM- Surveyor/Loss assessor's report- Weightage to be given- Held, Though not the last word, yet there must be legitimate reason for departing from report- No infirmity found in surveyor's report and therefore held, Insurance Company rightly admitted claim as per the report."

From the above authoritative judgements of the Hon'ble Supreme Court, it is clear that the report of the surveyor forms the basis for settlement of the Insurance claim unless there are cogent reasons for not accepting the same. Moreover, when the claim submitted before the surveyor was only for rupees 9,24,000/-, there is no basis for granting a compensation of Rupees 15 lakhs under the insurance policy. Thus, I am of the view that the claim of the complainant should be settled on the basis of the net loss assessed by the surveyor plus the policy excess as explained above.

Now coming to the question of rupees 5 lacs as compensation awarded by the District Forum and confirmed by the State Commission for harassment and mental agony, I would agree with the assertion of the Insurance Company that an institution is not entitled to get any compensation for harassment and mental agony as laid down by the Hon'ble Supreme Court in Sikka papers Limited (supra).

On the basis of the above discussion, the revision petition is partly allowed and the orders of the fora below stand modified to the extent that the Insurance claim should be settled for rupees 7,50,000 /- instead of rupees 15 lacs. Further the orders of the Fora below in respect of compensation of rupees 5 lacs are set aside, however, the cost of litigation of rupees 20,000/- as awarded by the District Forum is maintained. The amount of rupees 7,50,000/- shall be paid by the Insurance Company to the complainant along with interest at the rate of 6% p.a. from the date of order of the District Forum till payment. This order be complied within a period of 45 days from the date of this order, failing which an additional interest of 3%p.a. shall be payable by the insurance company from the date of this order till actual payment.