M/s. XX is a registered partnership firm. Their line of activity is trading in cotton. For the purpose of their business, they had taken M/s JJ Traders Cotton Ginning Mill on lease. The claim of M/s XX firm is that, an a

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M/s. XX is a registered partnership firm. Their line of activity is trading in cotton. For the purpose of their business, they had taken M/s JJ Traders Cotton Ginning Mill on lease. The claim of M/s XX firm is that, an accidental fire took place in the godown of M/s JJ Traders, leased by them where its cotton stocks were stored and insured, at about 2.10 a.m. in the morning hours of 24.08.1999 and according to the Firm, the estimated loss was of ₹ 1.90 crore. The cotton stocks in question were covered by seven insurance policies issued by M/s. OPQ Insurance Company Ltd. for a total sum of ₹ 1.98 Crore during the period when the fire accident took place. The firm made a claim of ₹ 1.90 crore towards loss of stock due to accidental fire in its business premises, with the insurer. Pursuant to the claim so made, the insurance company appointed Mr. K a licensed surveyor for preliminary investigation and for submitting a preliminary report, about the cause of fire and the probable loss said to have been suffered by the insured. The surveyor having examined the place of fire accident gave preliminary report dated 09.09.1999 to the insurance company estimating the loss of stock at ₹ 1,73,92,310/- however, had noticed in his report that the number of bales and borahs lying in the Godown and the actual quantity of lint damaged by fire has to be got confirmed from the accounts of the insured and also by physical verification of bale hoops. The insurer after receipt of the preliminary report of Mr. K, had appointed Joint Surveyors M/s. M & K in terms of Section 64 UM (2) of the Insurance Act to give a joint report. Section '64- UM(2)' specifically states that - No claim in respect of a loss which has occurred in India and requiring to be paid or settled in India equal to or exceeding twenty thousand rupees in value on any policy of insurance, arising or intimated to an insurer at any time after the expiry of a period of one year from the commencement of the Insurance (Amendment) Act, 1968, shall unless otherwise directed by the Authority, be admitted for payment or settled by the insurer unless he has obtained a report, on the loss that has occurred, from a person who holds a licence issued under this section to act as a surveyor or loss assessor (hereafter referred to as 'approved surveyor or loss assessors'): Provided that nothing in this sub-section shall be deemed to take away or abridge the right of the insurer to pay or settle any claim at any amount different from the amount assessed by the approved surveyor or loss assessor. Sub-section (2) mandates that no claim in respect of a loss which has occurred in India and requiring to be paid in India equal to or exceeding twenty thousand rupees in value on any policy of insurance be admitted for payment, unless insurer obtains a report on the loss that has occurred from a person who holds a license issued under sub-section (1) of Section 64 UM of the Act as a Surveyor or loss assessor. As entrusted, the Joint Surveyors conducted a joint survey and in that, had estimated the loss of stock insured at ₹ 1,67,80,925/- and gave a report to that effect to the insurer. The insurer being of the view that the report is perfunctory had appointed yet another Surveyor viz. M/s. DG & Co. who, in turn appointed one Mr. P, former DIG (Fire) to investigate and submit a report, who in turn after investigation and survey submitted his report dated 07.05 2000, confirming the quantification made by the Joint Surveyor. Since the insurer was not satisfied with the aforesaid report also, again appointed M/s. RS & Co., Chartered Accountant to give a fresh report by estimating the loss of stock insured due to accidental fire incident. After inspection of the godown and verifying the books of accounts, he estimated the loss of stock at ₹ 1,05,00,817/-. The insurance company had placed the aforesaid report before the Joint Surveyor viz. M/s. M & K for their opinion. The joint surveyors in their clarificatory report dated 06.01.2000 did not agree with the findings of the Chartered Accountant, on the ground that the chartered accountant had based his report only after verifying the books of accounts for the period 01.10.1998 to 31.03.1999 and not till the date of fire accident. Since there was inordinate delay in settling the lawful claim under the fire insurance policy, the appellant Firm preferred original complaint before the National Consumer Forum against the insurer, inter-alia, alleging that there was deficiency in service and, therefore, they are entitled for a sum of ₹ 1,67,80,925/- being the value of loss assessed by the Joint Surveyors and, therefore, sought a direction to the insurer for payment of the aforesaid amount with interest at 18% from the date of fire accident till its realization and for payment of a sum of ₹ 6,91,155/- being the value of the salvage as assessed by the Surveyors and also to award damages in causing unnecessary and unwarranted delay in settling the claim under the insurance policy. The National Consumer Disputes Redressal Commission, on the concession made by the insurance company based on the report of Chartered Accountant has passed the impugned order, directing the insurer to pay a sum of ₹ 1,05,00,817/- with interest at 6% per annum from 01.03.2001 till the date of payment within two months from the date of receipt of the order. As regards the quantum of loss, it was observed that due weightage is to be given to the estimates made by various Investigators appointed by the Insurance Co. The first three Investigators assessed the loss at about the same figures i.e. the loss is of 1350 fully pressed bales of cotton and 88 boras of lint valued that about ₹ 1.73 to ₹ 1.74 crores. However, the Insurance Co. having noticed that these Investigators had not gone into the details of transactions and stocks in a thorough manner, asked another Chartered Accountant, M/s R & Co. to specially ascertain the quantum of loss caused by the fire. M/s R & Co. submitted a 'Accounts Verification Report' on 22.11.2000 and assessed the loss at ₹ 1,05,00,817/-. They also furnished subsequent clarification on 22.12.2000, 22.01.2001 and 09.09.2002 pointing out the lacunae in the reports of the previous Investigators'. Finally, the opposite party themselves, while disputing their liability to pay, have however agreed that the loss is only ₹ 1,05,00,817/- and not ₹ 1.90 crore, as claimed by the appellant. It was also observed by the Senior counsel for the appellant that, despite the surveyors having consistently given a specific finding that the claim was bonafide and the fire was accidental had assessed the loss at ₹ 1.70 crore, the insurance company has repudiated the claim on frivolous ground, that too after a period of three years from the date of fire incident. It is further contended that the company had appointed several surveyors, which they could not have done in terms of Section 64-UM of the Insurance Act, 1938. To justify the rejection of the claim, the insurance company in their letter to the Joint Surveyors made the following observations: The cause of the accident is mentioned as electrical short circuit because of voltage fluctuations. When the stocks were kept in a locked godown and when there was no kind of activity for months together, we wonder as to why the lights in the godown were kept switched on round the clock. Had the lights been switched off the short circuit causing the fire accident could not have occurred. Please let us have your comments. From the balance sheet of insured as on 31st March, 1999 nearly 50% of the purchases i.e. ₹ 1.07 crore out of ₹ 2.27 crore were from individual village ryots on credit basis. We felt in a claim of such a magnitude some random investigation is required on the credit purchases to confirm their genuinity. As per the preliminary survey report there were two varieties of bales/borahs viz. MCU-5 @ ₹ 7,140/- per quintal in bales and ₹ 7,040/- per quintal in borahs and LK variety @ ₹ 5,650/- per quintal in bales and ₹ 5,550/- in borahs. But in your assessment you have taken the entire quantity as a single variety i.e. MCU-5 @ ₹ 7,193/- per quintal in FP bales and ₹ 7,084-19 per quintal in borahs and assessed the loss @ ₹ 1,74,82,080/-. Whereas, when we have applied the different rating the assessment is ₹ 1,72,57,305/-. Please clarify. Finally, the Supreme Court, in view of the above discussion, directed the Insurance Company, to pay ₹ 1,05,00,817/- with interest at the rate of 9% as compensation from the date of assessment done by the Chartered Accountant, within two months from the date of this order i.e. from 01.03.2001 as against the claim of the appellant at 18% from the date of the fire accident, viz. 24.08.1999. Was there a 'deficiency in service' as alleged by the appellant and is his claim for interest at 18% justified? Enumerate the procedure to be followed in a fire claim.

Answer & Explanation:

As observed from the facts of the case, although the appellant firm had argued that there is deficiency of service on the part of the Insurance Company with regards to delay in settlement of the claims, and interest payments, we can clearly understand from the following observations that there is no deficiency in service. The Insurance company gave the following reasons and justifications: In view of certain discrepancies in the joint report of the Joint Surveyors, the insurer was constrained to appoint a Chartered Accountant for verification of the books of accounts of the insured to ascertain the actual quantum of loss caused by fire accident in the business place of the appellant. The Chartered Accountant, after detailed verification of the books of accounts and other relevant material had assessed the loss at ₹ 1,05,00,817.00. In his report, he has stated that the Joint Surveyors without verifying the books of account and other relevant records of the appellant firm had assessed the loss which does not reflect the loss sustained by the insured. They had also pointed out various other omissions in the joint report of the Joint Surveyors. The insurer for the purpose of ascertaining the actual loss sustained by the insured had sought clarifications from the Joint Surveyors in view of the findings by the Chartered Accountant. The Parties have not given any evidence in support of their claim. In fact, National Consumer Commission has proceeded to decide the dispute between the parties based on certain documents filed by the parties along with their pleadings. The Court in the current stage, carefully perused the joint survey report submitted by the surveyors who were appointed by the insurer and the report of the Chartered Accountant. The perusal of the joint survey report reveals that the Joint Surveyors without going into the records of the appellant firm had assessed the loss said to have been sustained by the insured in the fire accident. The Joint Surveyors had arrived at the cost of own Ginned lint at ₹ 7084.00 as against the records of the insured which itself shows the cost of Ginned lint at ₹ 6,229.35 and ₹ 6,181.57 per quintal. Secondly, the Joint Surveyors had taken into account 88 borahs while assessing the loss, whereas as per the records of the insured submitted to the bank, there were 551 borahs as on 31.07.1999. Out of which 548 borahs were sold from 01.08.1999 to 24.08.1999, (the date of the fire incident) thus leaving only 3 borahs in the stock. The Supreme Court also observed that the Insurance Act only mandates that while settling a claim, assistance of surveyor should be taken but it does not go further and say that the insurer would be bound whatever the surveyor has assessed or quantified, if for any reason, the insurer is of the view that certain material facts ought to have been taken into consideration while framing a report by the surveyor and if it is not done, it can certainly depute another surveyor for the purpose of conducting a fresh survey to estimate the loss suffered by the insured. In the present case, the insurer has stated in the counter affidavit filed before the National Commission and even before us, why the appointment of second Surveyor was necessitated and also has given valid reasons for appointing second Surveyor and also has assigned valid reason for not accepting the report of Joint Surveyor. The correspondence between the insurer and the Surveyors would indicate the particulars differed by the insurer for differing with the assessment of loss made by the Surveyors. The option to accept or not to accept the report is with the insurer. However, if the rejection of the report is arbitrary and based on no acceptable reasons, the courts or other forums can definitely step in and correct the error committed by the insurer while repudiating the claim of the insured. The Court also mentioned that if the reports are prepared in good faith, due application of mind and in the absence of any error or ill motive, the insurance company is not expected to reject the report of the Surveyors. With regard to the question of awarding rate or interest as compensation in cases where loss is caused due to deficiency/delay in services, this court in various judgments has held that the award of compensation must depend on facts and circumstances of each case and has to be worked out after determining the amount of loss suffered by the consumer. The Court opined that a person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. Therefore, in this case it has been made clear that if the insurer is not satisfied with the assessment of the surveyor, he retains the right to settle the claim for a different amount. The insurer after rejecting the assessments of the surveyor and the joint surveyor has accepted the assessment made by the Chartered Accountant. Therefore, it would not be correct to say that insurer while settling the claim has caused an unnecessary delay of three years. But once the insurer has reached a settlement he should make the payment at the earliest. And if further delay is caused by the insurer in making the payment then he should be made liable to pay the interest on the amount settled, as compensation at the current rate of interest till the payment is made, as it has deprived the appellant from using his money for which he is legitimately entitled. Thus, in view of the above discussion, we direct the respondent Insurance Company to pay ₹ 1,05,00,817.00 with interest at the rate of 9% as compensation from the date of assessment done by the Chartered Accountant, within two months from the date of this order is justified.

Topics: Consumer Protection

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