Orion Commerx Pvt. Ltd. vs National Insurance Co. Ltd.

C. Viswanath, Member

The Complainant i.e. M/s Orion Conmerx Pvt. Ltd. is an ISO 9001 certified company in the business of export of leather bags, wallets, jackets etc. for reputed brands. The Complainant states that the Complainant has been continuously taking insurance cover for Stocks, Plant and Machinery and Building etc. Except for the fire incident, for which the present Consumer Complaint was filed, the Complainant had never lodged any claim whatsoever with the Opposite Party/insurance company. From the year 2001-02 to 2010-11, the Complainant paid approximately Rs.70 lakhs insurance premium to the Opposite Party. The Complainant took insurance cover by "Standard Fire and Special Perils Policy" for Stock, Plant & Machinery and Building from the Opposite Party, besides other cover including Burglary, Group Medi-claim, Group Personal Accident, Worker's Welfare Insurance -Group, Transit Insurance valid from 19.06.2010 to 18.06.2011 by paying a sum of Rs.12,53,545/-. The sum assured against peril of fire for stocks, vide policy No.360901/11/10/3400000095, for a premium (inclusive of tax) of Rs.4,69,547/- was Rs.24 Crores at three locations i.e. 90 Udyog Vihar, Gurgaon, 101 Udyog Vihar, Gurgaon and C-25 Khanpur, Delhi. An additional coverage of Rs.3 crores was taken by paying an additional premium (inclusive of tax) of Rs.42,732/-. The sum assured against peril of fire for Plant and Machinery, vide Policy No. 360901/11/10/3400000092, for a premium (inclusive of Tax) of Rs.41594/- was Rs.2.00 Crores at 90 Udyog Vihar and sum assured against peril of fire for Building, vide Policy No. 360901/11/10/3400000093 for a premium (inclusive of tax) of Rs. 59,562/- at 90 Udyog Vihar, Gurgaon was Rs.3 Crores.

Statutory stock audit was conducted by Canara Bank's panel auditor M/s Gupta & Bagaria between August 27, 2010 to August 30, 2010 who certified that a total stock of approximately Rs.26.46 crore was held by the Complainant, out of which raw materials and consumables accounted for Rs.14.65 crores, Work in Progress for Rs.6.35 crores and Finished Goods for Rs.6.35 Crores approximately.

On 25.09.2010, fire broke out at about 8:30 a.m. at 90 Udyog Vihar, Gurgaon unit of the Complainant. The same was immediately reported to the Police and Haryana Fire Bridage Service, Gurgaon. The Complainant informed its customers about the incident of fire in which their orders under production got destroyed and sought extension of time to fulfil its contractual obligations. However, many customers did not oblige and cancelled their orders. The total value of the damaged goods being produced as per the orders of the companies was Rs.1,72,88,452/- (at the exchange rate of 1 US $ = Rs.44), out of a total loss of Rs.2,65,75,647/-. On 15.10.2010, the Complainant submitted Fire Claim Form for an amount of Rs.3,51,52,412/-. Along with the Claim Form the Complainant also submitted a detailed report of M/s Aura, Architects & Designers, who estimated the loss on account of civil works to be Rs.19,98,853/- ; on account of Furniture and Fittings to be Rs.353,893/-; on account of Plant and Machinery to be Rs.21,12,069/-; on account of construction and interior design of Showroom to be Rs.25,00,000/- and Rs.16,11,950/- on account of Electrical Works amounting to a total of Rs.85,76,765/-. The Complainant had also submitted details of the orders cancelled by its customers on account of fire as stated above.

On 07.10.2010, Preliminary Survey Report was submitted by M/s Rakesh Kapoor & Co. Final Survey Report was submitted on 30.03.2011. The Opposite Party repudiated the claim of the Complainant, vide letter dated June 14, 2011. The Complainant commissioned Tarun Gandhi & Co. Chartered Accountants to independently certify and verify loss to stock suffered by the Complainant on account of fire based on records submitted to the insurance company and other public documents like VAT return, Audited Balance Sheet, Stock Statements submitted and acknowledged by Banks, ROC Return etc. On 05.01.2012, Tarun Gandhi & Co. Chartered Accountants, submitted their report stating that the average stock held by the Complainant at any point of time during 12 months prior to the month of fire i.e. September 2010 was Rs.19,39,61,846/- and that the Complainant on account of fire suffered loss of Rs.2,45,16,913/-, subject to a marginal variation of 1% to 2% on account of fire pertaining to stock.

The preliminary surveyor, Mr. Rakesh Kapoor of M/s Rakesh Kapoor & Co., vide e-mail dated 26.09.2010, directed the Complainant as follows: -

"Start cleaning of the premises, remove water spread on first and ground floor etc. and to place damaged stocks at secured place, may be at terrace floor for our further inspection."

In view of the aforesaid direction the entire analysis in para 11 (cause of loss) of the Final Survey Report becomes faulty. In fact the final surveyor sent an entirely contradictory e-mail on October 10, 2010 after the preliminary surveyor had already directed the Complainant to clear the debris. The final surveyor wrote in para 1.8 of his report that "during the first examination of the premises, substantial restrictions were imposed by the representative of the insured at the spot". Preliminary Surveyor, however, in his report had not mentioned about any restriction, whatsoever placed. When preliminary surveyor had full access why would access be denied to the final surveyor during his very first visit is a relevant question. After conducting the spot survey on the date of fire the preliminary surveyor, Mr. Rakesh Kapoor of M/s Rakesh Kapoor & Co. opined in his report that "fire originated from this section alone only and circumstantial evidence indicated electrical short circuiting as the most probable cause". Through a process of specious reasoning for malafide reasons the final surveyor, who was not even present on the site on the date of fire, had given findings that were not only contrary to the report of the preliminary surveyor, but also perverse. While in para 11.3 of the Report, the final surveyor stated that "it is agreed with them (i.e. the preliminary surveyor) that the occurrence had its origin in the areas stated in their report" yet in para 11.19.42 he stated that "the three marks in the ceiling lead to the conclusion that there have been at least three sources of fire". This was a flawed conclusion, as the final surveyor failed to take into account ventilation in his analysis. Ventilation is a critical factor for determination of fire origin and its behavior, although the final surveyor stated in his reply to interrogatories no. 2(b), that it had been taken into consideration, but there was no mention of it in the survey report, showing falsity of his reply. His report was therefore fundamentally flawed.

In conclusion Wikipedia sums up that:

"What these results also show is that fire investigators and the people who employ them need to be prepared to accept the reality that sometimes the best answer that can be obtained is 'undetermined' if either an accidental or an incendiary call is not supported by conclusive evidence".

Unfortunately the final surveyor had not incorporated the aforesaid advice in his practice. Hence, the Complaint was filed.

Alleging deficiency in service on the part of Opposite Party, Complaint was filed before this Commission under Section 21 of the Consumer Protection Act, 1986, praying relief as under: -

Award a sum of Rs.3,30,93,678/- (Rs.2,45,16,913 towards loss of stock; Rs.85,76,765/- towards loss of Building (Civil Work, Showroom, Electrical Works), Furniture and Fittings and Plant& Machinery alongwith interest @ 18% p.a. from the date of fire to the date of payment, being the amount payable under policy Nos.360901/11/10/3400000092/93/95.

Direct the Opposite Party to pay a sum of Rs.25 Lakhs by way of compensation for hardships and suffering caused to the Complainant.

Direct the Opposite Party to pay cost of Rs.7,00,000/- being Advocates fees and other for pocket expenses.

Pass such other and further orders as this Hon'ble Commission deems fit and proper under the facts and circumstances of the case.

The Complaint was contested by the Opposite Party by filing Written Statement in which it was contended that the Complainant had taken Standard Fire and Perils Policy in respect of stocks, plant and machinery and building which was subject to certain terms and conditions.

On 25.09.2010, fire broke out in the insured premises and the matter was reported to the police on the same day, who entered the report in DD No.26. In the report the insured stated that the fire was extinguished completely in about 3 hours. On 29.10.2010, the fire service submitted their report clearly stating that the reasons for the fire could not be detected. On the matter being reported, the insurance company appointed Rakesh Kapoor & Company for preliminary survey and they submitted a preliminary survey report on 07.10.2010. The surveyor also took photographs of the site and compiled them in a CD. The Respondent Company at the same time appointed Mr. P.S. Ramanathan, Surveyor to assess the loss, who visited the premises on 01.10.2010. During the first visit of the premises, substantial restrictions were imposed on the surveyor by the representative of the insured present at the spot and information available in their computer system was not allowed to be accessed. The surveyor was permitted a cursory examination of the premises and an examination of the entire block was permitted only on 05.10.2010. The other two locations covered under the stock policy floating across these were not allowed to be inspected. On 15.10.2010, the Complainant submitted the claim form for Rs.3,51,52,412/-. The surveyor submitted his report on 30.03.2011. Although the surveyor had assessed the loss of stocks at Rs.26,93,850/-, building at Rs.13,89,187/-, plant and machinery at Rs.5,60,068/- and Rs.24,500/- towards electrical fittings, but was of the opinion that no accidental fire had occurred and the available evidence showed the manifestation of multiple sources. On receipt of the report of the surveyor, the claim was repudiated by the Respondent Company, vide letter dated 14.06.2011. The claim of the Complainant had been rightly repudiated under Condition No. 6 of the Policy, which provided that the insured shall produce and give the insurance company all particulars, proof, information etc. in respect of the claim and the origin of cause of loss and the circumstances under which the loss or damage occurred. The said condition clearly stated that no claim under this policy shall be payable, unless the terms of these conditions had been complied with. The surveyor contended in his report that he was not permitted to carry out inspection and verification at the time of his first visit. This fact was brought to the notice of the Complainant, vide e-mail dated 02.10.2010 and there was no rebuttal from the Complainant to the said facts. Further, no suggestion was put to the surveyor, in the interrogatories served on him, that the said observations were not correct. With regard to the fact that the quantities of assets claimed to have been lost, the surveyor reported that the same were not supported by any documents as was required under Condition No. 6 of the policy. It was further stated that under Condition No. 6 of the policy it was for the insured to give the cause of loss and also substantiate the same by documentary evidence. As stated above, in the claim form submitted by the Complainant, the cause of fire was stated to be "unknown". In the report of Fire Brigade Services also the cause of fire was not mentioned and rather it was stated that the "reasons for the fire could not be detected at the site". It was further submitted that the Complainant at no point of time ever disclosed either to the surveyor or to the respondent insurance company the cause of fire. As a matter of fact the complainant was only relying upon observations made by the preliminary surveyor in para 5.5 of his report that fire originated from this section only and circumstantial evidence indicate electric short circuit as the most probable cause. The preliminary surveyor had only made preliminary observations and had not investigated into the matter as to the cause of fire as the same was to be done by the final surveyor. Mr. Rakesh Kapoor in his affidavit filed before this Hon'ble Commission had deposed that he had not arrived at any conclusion as he had not investigated the matter in depth and had no opportunity to examine the premises at close quarters after removal of debris and therefore, had given the probable cause as a generic possibility. On the contrary, the final surveyor had dealt in detail in regard to the cause of loss in the survey report and concluded that the loss was not accidental. The observation of Mr. Ramnathan, Surveyor was supported by his affidavit filed before this Commission. From the above findings and observations of the surveyor it was amply clear that the Complainant could not substantiate the cause of fire as also the quantum of loss and, therefore, had not complied with Condition No. 6 of the Policy. It was submitted that the final surveyor before releasing his report, sent a letter to the Complainant on 04.03.2011 to explain his point of view to the observations of the surveyor, both with regard to the cause of fire as well as the extent of loss and the same was not replied by the Complainant. As such adverse inference had to be taken against the Complainant. It was further submitted that the surveyor, on the basis of the records provided by the Complainant, had assessed the gross loss at Rs.61,39,539/- but clearly stated in his report that the claim was not admissible and recommended "No loss having been suffered within the terms of terms, condition, exceptions of the insurance policy disclosed by the insured, no liability will accrue upon the insured in any manner whatsoever on account of the reported occurrence." That the Complainant had not filed on record any documentary evidence to support the quantum of loss. The Complainant had filed the affidavit of Rakesh Ahuja, Proprietor of M/s Aura Architects & Designer to prove the estimate of loss of building, plant & machinery, furniture and fittings etc. The estimate of repair cannot be treated as assessment of loss and further the deponent being an architect was not competent to give estimate for plant & machinery. No bill of repairs has been filed. As regards the loss of stocks, the Complainant had filed the affidavit of Mr. Tarun Gandhi, Chartered Accountant who proved his valuation report, which again cannot be said to be an assessment report and the perusal of the same would show that it was self-serving report to favour the Complainant. It was, therefore, prayed that the Complaint be dismissed with costs. The Insurance claim was repudiated, vide repudiation letter dated 14.06.2011, for the following reasons: -

"a. The nature of damages does not support the manifestation of an occurrence which can be reasonably and otherwise sustainably concluded as an occurrence within the terms, conditions and exceptions of the polices.

b. No insured peril has manifested in a manner causing an admissible loss within the terms, conditions and exceptions of the policy.

c. The quantity of assets that have been claimed as 'lost' does not stand supported by the physical evidence and documents.

d. No documents of any sort could be provided by you in support of the existence of the quantities claimed at the affected location, either collectively as a class of assets or individually in relation to the claim submitted by the insured.

e. No evidence in support of accidental fire has been found by the surveyor."

Heard the learned Counsel for the Complainant as well as the Opposite Party and also carefully perused the record. On the basis of report of the Surveyor the Opposite Party/Insurance Company repudiated the claim that the occurrence of fire was not accidental and supporting documents could be provided for the quantity claimed and no admissible loss had been suffered within the terms, conditions and exceptions of the Insurance Policy. The Complainant took insurance cover by standard fire and special perils policy for building, plant & machinery and stocks from the Opposite Party valid from 19.06.2010 to 18.06.2011. Fire broke out at one of the units located at 90, Udyog Vihar, Gurgaon of the Complainant at about 8.30 am on 25.09.2010. The same was immediately reported to the police and fire services and fire was controlled in about three hours. The Opposite Party/Insurance Company appointed M/s Rakesh Kapoor & Co., who submitted their preliminary survey report dated 07.10.2010. The Complainant submitted the claim for an amount of Rs.3,51,52,412/- on 15th October, 2010. The Final Surveyor, Mr. R.S. Ramanathan submitted his report on 30.03.2011.

Preliminary surveyor opined that fire originated from a particular section and circumstantial evidence indicated that electrical short circuit was the most probable cause of fire. He advised the Complainant to start cleaning the premises, remove water on the ground and first floor and place the damaged stock at a secure place for further inspection. The final surveyor agreed with the occurrence of the fire as also the place where it originated, as mentioned by the preliminary surveyor. The only difference being that three marks in the ceiling led him to conclude that there have been at least three sources of fire. The Complainant states that final surveyor did not take into consideration the ventilation aspect. Based on the final report of the surveyor, the Opposite Party repudiated the claim of the Complainant, vide letter dated 14.06.2011, as violating condition 6 of the policy which provides that the insured shall produce and give to the insurance company all particulars in respect of the claim and origin of cause of loss and circumstances under which the loss or damaged occurred.

The final surveyor report starts on a negative note that during his first visit to the premises substantial restrictions were imposed on the surveyor by the representative of the insured present at the spot and information available in their computer was not allowed to be accessed. He stated that five days later, on 05.10.2010 also he was only permitted cursory examination of the premises. This again does not appear to be convincing, as any party who has suffered loss and filed a claim would welcome the surveyor to their premises rather than not cooperate. On the other hand, the preliminary surveyor does not mention about any restrictions imposed during his visit. When the preliminary surveyor had access to the premises, there is no reason why a party who has filed a claim for loss would deny access to the final surveyor, whose report is very important in deciding the claim by the Insurance Company.

The final surveyor did not establish the cause of fire. Simply denying that electric short circuit is not the cause of the fire is not sufficient. The final surveyor has also not conclusively established that it is not an accidental fire. No evidence has been placed on record to show that the Complainant or his staff have resorted to any mischief or caused fire with some ulterior motive. Merely based on observation of three marks on the ceiling, the final surveyor straight away jumped to the conclusion that there were at least three sources of fire. He did not give satisfactory reasoning for the same nor elaborate on three sources mentioned by him. On the other hand, the preliminary surveyor who had visited the scene of fire accident immediately, stated in his report that "fire originated from this section alone only and circumstantial evidence indicated electrical short circuiting as the most probable cause." It is also to be seen that fire broke out in the morning hours when the staff had already reached the premises. If there was any mischief/malpractice on the part of the Complainant or on his behalf, it could have been done at unearthly hours, rather than in broad-day light in the presence of the staff. It is, therefore, not proved that the fire was not accidental in nature.

The claim was repudiated also on the ground that documentary evidence had not been provided in support of the loss suffered by the Complainant. As seen from the report of the Surveyor about 4500 pages of documentary evidence had been submitted by the Complainant, which included the stock statement for the last six months, stock movement detail, cost sheets, trial balance dated 24.09.2010, profit and loss account dated 24.09.2010, balance sheet for the last three years-31.03.2008, 31.03.2009 & 31.03.2010, tax audit report for the last three years, auditor's report for the last three years, outward and inward registers, police report, fire report, total loss detail, eye witness statements and purchase bills. Photographs have also been placed on record, which show the extensive damage to the premises with stocks.

The Complainant also placed on record statutory stock audit conducted by Auditor M/s Gupta & Bagaria between 27th 30th August, 2010, who certified that the total stock held was approximately worth Rs.26.46 crores. Alongwith the claim form, the Complainant submitted report of M/s AURA, Architects & Designers, who estimated loss on account of Furniture and Fittings as Rs.353,893/-, Plant & Machinery at Rs.21,12,069/- and construction and interior design of showroom as Rs.25 lakhs, electrical works worth Rs.16,11,950/-, totaling to Rs.85,76,765/-. Tarun Gandhi & Co., Chartered Accountants, reported that the average stock held by the Complainant at any point of time during 12 months prior to the fire was Rs.19,39,61,846/- and the Complainant suffered loss of stock amounting to Rs.2,45,16,913/-, subject to a marginal variation of 1% to 2 %. From perusal of these documentary evidence submitted, it is not understood how the Surveyor came to the conclusion that no admissible loss has been suffered within the terms, conditions and exceptions of the insurance policies.

Fire broke out in the premises of the Complainant and caused damage to the property. The Surveyor could not establish that the fire was not accidental and we consider the documentary evidence produced by the Complainant, supported by reports of the Bank Auditor, Architect and Chartered Accountant, adequate to assess the loss caused. In fact, upon physical examination of the stocks and estimates furnished, the Surveyor did assess the loss at Rs.61,39,539/-.The assessment for furniture and fittings has been rightly excluded from the above assessment by the Surveyor, as no premium had been paid for the same. We see no grounds for repudiating the claim of the Complainant.

The Complaint stands partly allowed and the Opposite Party is directed to pay a sum of Rs.61,39,539/- towards claim of the Complainant alongwith compensation in the form of simple interest @ 9% p.a. with effect from the date of repudiation of the claim till realization, within eight weeks from the date of pronouncement of this order. There shall be no order as to costs.