Hari took a fire insurance cover on his stock of oil-seeds, oil-cakes, etc., while stored in a godown of Class-I construction, for a sum assured of ₹1,50,000 with Zenith General Insurance Co. Ltd. The risk was inspected
CS Professional · Insurance - Law and Practice · PYQS · June 2016
Hari took a fire insurance cover on his stock of oil-seeds, oil-cakes, etc., while stored in a godown of Class-I construction, for a sum assured of ₹1,50,000 with Zenith General Insurance Co. Ltd. The risk was inspected by the insurer's representative. After the inspection, he collected the premium due and issued a cover note. The official receipt for the premium was received after three days by Hari. The cover note issued by the insurer's representative indicated that "the stock of oil-seeds and oil-cakes, etc. are covered for a period of 12 months effective from 26th February, 2015, subject to terms, conditions, exceptions, etc. of the insurer's printed policy against the risk of fire whilst stored in a godown of Class-I construction." Despite several written requests and reminders by Hari, the policy document was not issued till the end of May, 2015. In the meantime, on 10th May, 2015, a major fire broke out in the godown damaging a large part of the insured's stock. The insurer appointed a licensed surveyor who assessed the loss of oil-seeds and oil-cakes to the tune of ₹1,15,000. He also held that the fire was on account of 'spontaneous combustion'. In the course, Hari filed a claim for loss with the insurer. Zenith Insurance Co. Ltd. informed him that the fire having occurred due to an excluded peril, viz., spontaneous combustion, no claim would be payable. How will you advise Hari to proceed to support his claim? Discuss in your answer, the sanctity of a cover note issued by an insurance company or its representative.
Answer & Explanation:
Since the claim lodged by Mr. Hari has been turned down by Zenith General Insurance Company on the ground that "Spontaneous Combustion" is not covered under a standard fire policy, he can take up the matter with insurance ombudsman of his state and file a complaint with that office. The ombudsman is an internal redressal machinery of insurer created by the industry with the backing of the central government. The decision of the ombudsman is binding on the Insurance Company but not the claimant. The ombudsman would look into the entire matter of issuance of cover note by the insurer without any stipulation and give the benefit to the claimant. The very fact that there was no warranty stipulated in the cover note strengthens the case of the claimant, and benefit of doubt must go in his favour. If Mr. Hari still does not get justice, then he can approach the District Forum and State Forum for redressal of his grievance. A Cover Note is a temporary risk document issued by the insurer till it is replaced by a stamped policy document. Insurers all over the world honour this document. The cover note describes the risk proposed for insurance and also stipulates conditions which are relevant and necessary. In the present case, since no warranty pertaining to "Spontaneous Combustion" being an excluded Peril was incorporated in the Cover note issued by the insurer, he cannot disown his liability under the claim at this stage. The claim will have to be honoured by the insurer.
Topics: Fire Insurance Claims
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