Ratnagiri Gas & Power Pvt. Ltd. vs ICICI Lombard General Insurance Co. Ltd

The present Complaint is filed under Section 21(a)(1) of the Consumer Protection Act, 1986.

The Complainant in order to secure its properties from loss or damage floated a tender for insurance. Opposite Party, on the basis of tender and site inspection, sold an All Risk Policy for erection of LNG Storage and Regasification facility for a sum of Rs.2000 Crores known as Special Project Insurance Cover (Erection All Risk Policy), vide Policy Nos.5011/0000118, 5011/0000119 & 2002/0008354 for which a sum of Rs.5,60,07,760/- was charged as premium. The period of insurance was initially from 01.07.2006 to 31.08.2007. The Policy was extended by Opposite Party on the request of the Complainant for a further period of 9 months i.e. till May 2008, by issuing an endorsement to the above Policy, charging a further premium of Rs.3,40,64,101/-. Opposite Party had 80% share in the Insurance and the remaining 20% share was with the Reliance General Insurance Co. Ltd and United India Insurance Co. Ltd.

The case of the Complainant is that the Joint Venture of M/s Whessoe of UK and M/s Punj Lioyd Ltd, New Delhi, (hereinafter ‘Contractors’) were entrusted with the revival activity of the LNG storage and regasification plant of LNG block. At the revival stage, a health study was conducted by them with respect to the LNG block to assess the condition of the equipment, facilities, stored items etc. Opposite Party, after inspection and on the basis of the health study, having found no damage to the plant or any other abnormality, sold the Policy to the Complainant. In July 2006, the Contractors started working in the Plant. After working for 4 months in the Plant, the Contractors reported damage to the insulation of Tank T-200 on 01.12.2006. The Contractors also reported ingress of moisture in Tank 200 on 18.12.2006. The matter was, thereafter, taken up with the Contractors for repair of the damage in order to minimize the loss, as per terms of Policy but the Contractors did not own their negligence and insisted that the loss was pre-existing and not due to their fault. The estimates were submitted by them on 18.10.2007, after their refusal to repair the damage. After receiving the estimates from the Contractors, the Complainant informed Opposite Party about the loss and requested them to indemnify the loss accordingly, vide email dated 17.11.2007. Opposite Party appointed M/s Cunningham & Lindsey as Surveyor and Loss Assessor who visited the site on 19.11.2007. All queries were replied immediately and documents were made available by the Complainant. The Complainant also submitted the claim form as required by Opposite Party. In the first and second week of March 2008, the Surveyor informed the Complainant about the non-admissibility of the claim and called for further clarification. The Complainant appointed Sh. Milind Bhatwedeker, a registered Surveyor with IRDA on 18.06.2009, to give his opinion as Consultant to Complainant and to discuss the matter with the Surveyor of Opposite Party. The Surveyor requested him to submit a written note, which was duly submitted on 03.09.2009, but was rejected by the Surveyor. Opposite Party repudiated the claim of the Complainant on 25.01.2010 without attaching copy of the Survey Report. Aggrieved by the wrongful repudiation by Opposite Party, the Complainant filed Complaint with the following prayer:

“a) That this Hon’ble Commission, may be pleased to pass an award of Rs.12 Crores with interest @ 18% P.A. from 1.12.2006 i.e. the date of intimation of loss till the recovery of the amount.

b) That a cost of Rs.10.00 lakhs may please be also awarded.

c) Any other relief which this Hon’ble Commission may deem fit and proper under the circumstances of the case may please also awarded.”

Opposite Party resisted the Complaint by filing Reply whereby it was contended that Opposite Party had issued the said Policy and undertaken to assume the risk under the Policy only on the basis of Health Study conducted by M/s Punj Lloyd, who was responsible for maintaining the project. The Contractors, vide letter dated 01.12.2006, reported to the Complainant that they noticed the damage in the base insulation HB-800 of tank T-200, after removing the bitumen felt covering the foam glass. The Contractors also reported, vide letter dated 18.12.2006, that there was moisture ingress in the tank T-200. The Complainant, vide e-mail dated 17.11.2007, informed Opposite Party that LNG tank T-200 was found in damaged condition during the erection stage at the time of inspection of base and requested Opposite Party to depute Surveyor for assessment of loss. The Surveyor after extensive investigation submitted Final Report, dated 14.12.2010, whereby it was opined that the damage to the installed base insulation of tank T-200 and moisture ingress inside the tank, existed prior to the commencement of the Insurance Policy and the insurance interest under the Policy did not attach. The Surveyors after detailed investigation and discussions with the Complainant noticed the following important aspects:

“i) No preservation record for tank T - 200 was available for the period of June 2001 i.e. when the project work stopped to 02/04/2002.

ii) The health check assessment was done on the basis of documentary evidence available from the previous project.

iii) The Contractors did not remove the bituminous felt that covered the base insulation of tank T - 200 for actual physical inspection.”

It was stated that the Complainant had not been able to establish the date of occurrence and specific event which caused the damage to the installed base insulation of tank T-200 and ingress of moisture inside the tank. The damage in the tank was noticed by the Contractors in December 2006 and the Complainant was under an obligation to intimate Opposite Party immediately. They, however, informed the Opposite Party after 11 months from the receipt of information. The Complainant had breached the Policy and infringed the right of Opposite Party/ Insurance Company to inspect the damage by not informing about the same to the Opposite Party for 11 months. It was also stated that the damage to the insulation of tank T-200 and the ingress of moisture in the tank T-200 could be attributed to faulty design, defective material or casting or bad workmanship as there had not been any incident which could have caused damaged to partially insulated tank T-200. Sub Clause 3 of Special Exclusion Clause specifically provided that Opposite Party shall not be liable in the event of damage or loss due to faulty design, defective material or casting, bad workmanship. In the fact and circumstances of the present case, the Opposite Party stated that it had rightly repudiated the claim of the Complainant.

Heard the Learned Counsel for the Complainant and Opposite Party and carefully perused the record. Learned Counsel for Complainant submitted that the Opposite Party had illegally and arbitrarily repudiated the claim of the Complainant. It was submitted that the loss took place during the period of the Policy as the work started in July 2006 and the loss was reported on 01.12.2006 and 08.12.2006. The Opposite Party inspected the site before undertaking the risk and had gone through the health study conducted by the Contractors. There was no moisture reported at the time of the Health Study, but was noticed for the first time in December 2006 after the start of the work. The Complainant tried to minimize the loss by pressuring the contractors to repair at their cost but having failed to get the same done, approached the Opposite Party. It was stated that the claim was lodged on 17.11.2007, and the same was repudiated on 25.01.2010, i.e. after a period of more than two years, despite all the documents being made available immediately. As per Circular dated 20.09.2011 of IRDA, delayed claims should not be rejected if they are payable and the wording of the Policy should be suitably amended by incorporating the additional wordings suitably enunciating insurers' stand to condone the delay on merits. It was stated that the delay had taken place due to the efforts of the Complainant to minimize the claim. The Opposite Party also erred in not assessing the loss as required under the Section 13(2) of The Insurance Surveyors and Assessors (Licensing, Professional Requirements and Code of Conduct) Regulations, 2000.

Learned Counsel for the Opposite Party submitted that the Complainant was not a Consumer under the Act, as the services availed by the Complainant were to secure industrial activities and a commercial transaction executed with a third party. It was stated that it is sine qua non for a valid claim to be immediately notified to the Insurance Company by the insured. Condition No.5 of the Policy also puts an obligation on the Complainant to immediately notify the insurer of the event giving rise to the claim under the Policy, not later than 14 days. The Complainant, in this case, informed Opposite Party after 11 months from the date of intimation by the Contractors limiting the investigation to interactions and documentary evidence to assess the damage to the installed insulated tank T-200. The Contractors, during the investigation justified that the damage did not occur during the period they commenced the work, and the damage to base insulation might have occurred prior to the commencement of the Policy. The Complainant, however, had failed to discharge his burden of proof that the damage had occurred during the Policy period.

Brief fact of the case is that Complainant purchased a Special Contingency Project Insurance Cover, vide Policy Nos. 5011/0000118, 50110000119 & 2002/0008354, against risk with regard to Erection of LNG Storage and Regasification facility. Opposite Party assumed the risk for loss that may occur in the intervening period of 01.07.2006 to 31.08.2007 with an insured sum of Rs.2000 crores. The Policy was extended for nine months, w.e.f. 01.09.2007 on 08.10.2007. The contract work for revival of LNG Storage & re-gasification facility was awarded to joint venture of Whessoe Oil & Gas Ltd. & Punj Lloyd Ltd. by the Complainant, who commenced their work in July 2006. On 01.12.2006, the Contractors reported to the Complainant regarding damage to the installed base insulator of tank T-200. The Contractors reported moisture ingress in the tank- 200 on 18.12.2006 to the Complainant. The Complainant informed Opposite Party on 17.11.2007 that the installed base insulator tank T-200 was found damaged by the Contractor, and requested to depute a Surveyor. The intimation was given to the Opposite Party after 11 months from the date on which the damage was reported to the Complainant. The Opposite Party, on the basis of the Survey Report, repudiated the claim, vide letter dated 25.01.2010.

So far as maintainability of the Complaint is concerned, this Commission in Harsolia Motors v National Insurance Company Ltd. [I (2005) CPJ 26 (NC)] held that a contract of insurance is a contract of indemnity and, therefore, there is no question of commercial purpose in obtaining insurance coverage. In view of law laid down by Hon’ble Supreme Court, the Complainant is a “Consumer” and the Complaint is maintainable.

Another contention of Opposite Party is that the Complaint contained complicated facts and it cannot be adjudicated in a summary proceeding under Consumer Protection Act, 1986. Hon’ble Supreme Court in CCI Chambers Coop. HSG. Society Ltd. v. Development Credit Bank Ltd., Appeal (Civil)  7228 of 2001 observed as follows:

“It cannot be denied that Fora at the national level, the State level and at the district level have been constituted under the Act with the avowed object of providing summary and speedy remedy in conformity with the principles of natural justice, taking care of such grievances as are amenable to the jurisdiction of the Fora established under the Act. These Fora have been established and conferred with the jurisdiction in addition to the conventional Courts. The principal object sought to be achieved by establishing such Fora is to relieve the conventional Courts of their burden which is ever-increasing with the mounting arrears and whereat the disposal is delayed because of the technicalities. Merely because recording of evidence is required, or some questions of fact and law arise which would need to be investigated and determined, cannot be a ground for shutting the doors of any Forum under the Act to the person aggrieved.”

From the above, it is clear that this Commission is competent to adjudicate the instant Consumer Complaints.

On merits, the Complainant alleged that the Opposite Party repudiated the claim arbitrarily. On receiving the intimation of loss, the Opposite Party appointed M/s Cunningham & Lindsey as the Surveyor. The Surveyor, after the investigation observed as follows:-

“1.0 Damages to installed base insulation of tank T-200

1.1 Insured has not been able to establish the date of occurrence and specific event which caused the damages to installed base insulation of tank T-200. However from the above facts and findings as mentioned under item AA, it can be seen that that said damages was in all probability pre existing i.e. prior to commencement of policy period, effective from 1st July 2006.

1.2 We do not agree with the arguments made by insured and their consultant as are described in detail under item CC.

2.0 Moisture ingress problem inside the tank T-200.

2.1 Insured has not been able to establish the date of occurrence and specific event which caused the ingress of moisture inside the tank T-200 However, from the above facts and findings as mentioned under item BB, it can be seen that that said moisture ingress inside the tank T-200 was pre existing prior to commencement of policy period, effective date from 1st July 2006.

2.2 We do not agree with the arguments made by insured and their consultant as are described in detail under item CC.

2.3 It is also important to note that there is no physical damage to the property due to moisture ingress inside the tank T-200 since moisture can not damage sand and insulation material HLB 1600 does not absorb moisture.”

The Surveyor, however, did not carry out assessment of loss as liability under the Policy did not attach. Following the observation in the Survey Report, Opposite Party repudiated the claim of the Complainant, vide its letter dated 25.01.2010. Opposite Party in the repudiation letter stated that the Complainant had failed to mention any accidental event or incident which could have led to either breakage of insulation or entry of moisture. It was also stated in the letter that the Policy stipulated that the insurer shall not in any case be liable for loss, damage or liability, of which no notice has been received by the Company within 14 days of its occurrence.

The Surveyor carried out investigation 11 months after the damage was noticed by the Contractors, only because of the delayed intimation by the Complainant. It was noted by the Surveyor that there was no record of preservation during the period from 01.06.2001 to 02.04.2002, i.e. after the construction was stopped in June by Dhabol Power Company and before the responsibility was taken over by M/s Punj Lloyd. Health check assessment was carried out based on the documentary evidence of the previous project as per the contract scope of work awarded to the Contractors, however, physical health verification of installed base insulation type HLB 800 in tank T-200 was not carried out by the Contractors. They did not remove the bituminous felt which covered the installed base insulation of tank T-200 for physical inspection. Insulation supplier engaged by the Complainant in March 2006 did not inspect the installed insulation material in the Tank. After the Contract was awarded to Contractors WPJV in June 2006, for installation of balance base insulation, the Contractors were to expose the base insulation one step back to have fresh contact surface. During the process, some cracks were observed on the foam glass blocks of first layer at various places. To know the further extent of damage, first layer blocks were removed. Once the second layer was exposed, damage was observed in the second layer foam glass blocks also. The procedure was repeated for third and fourth layer also. Damage to the installed base was reported by the Contractors to the Complainant on 01.12.2006. The Contractors denied that the damage to the insulation was due to movement of material and construction equipment during the ongoing construction activities as alleged by the Complainant. It was stated that the damage must have been during 2001 to 2002, when Dhabol Power Company left the project. It was also opined that no physical health assessment was carried out for base insulation of LNG tank T-200. The Insured was, however, not able to establish the date of occurrence as well as event which caused the damage to base insulation of tank T-200 during the Policy period. With respect to the ingress of moisture, the Surveyors observed that detection of moisture ingress inside the tank T-200 was not carried out during health assessment because it was noninvasive and wet area concealed by planting until it was removed, and cutting of secondary bottom plate not carried out. The Contractors stated that no work was carried out in the Tank T-200 since January 2006 till 10th August 2006 and moisture ingress was not possible during that period. There was no evidence of water entering the tank during the period of work by the Contractors. Therefore, the Surveyor opined that the ingress had occurred prior to the work of revival project. The Complainant failed to adduce any evidence suggesting that ingress of moisture was during the subsistence of the Policy.

It is clear from the evidences produced before us that the damage existed prior to the commencement of the Policy and Opposite Party/Insurer did not assume the risk of pre-existing damage in Tank T-200 through the purchase of its Policy. It is a settled law that disclosure of material information is important to make an assessment of the risk being undertaken by the Insurer and if any information given at the time of purchase of insurance was untrue, incorrect or undisclosed, the Insurer had every right to cancel the contract. Eligibility of the Complainant to receive the amount under the Policy depends upon the contract based on the principle of uberrima fides i.e. utmost good faith and subject to terms and conditions of the Policy.

In view of the above, we are of the view that the Opposite Party had rightly repudiated the claim of the Complainant. The Surveyor had discussed each and every aspect of the matter and on the basis of the Survey Report the Opposite Party repudiated the claim. The Complainant failed to point out any illegality or arbitrariness in the repudiation of the claim. The Complaint is, thus, dismissed with no order as to costs.