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Insurance companies try not to make good the loss fully even as consumer courts have directed them to do so, writes Pushpa Girimaji Whether it is a natural calamity like floods or an earthquake or an accidental fire, when an insured makes a claim for indemnification of loss suffered, it is the responsibility of the insurer to correctly assess the damage and make good the loss. Consumer courts have told insurance companies repeatedly that they have to indemnify the loss fully; after all that is the purpose of an insurance policy. Yet, if one sees the large number of cases that come up before the consumer courts, insurance companies try not to indemnify the loss fully and in this task, they are often abetted by surveyors. Here is a case where the apex consumer court has set aside not only the repudiation of the claim by the insurance companies as totally unjustified, but also the quantum of loss assessed by the surveyors. And it has made its own calculations on the basis of evidence produced by the insured and asked the insurance companies to pay. The apex consumer court’s detailed assessment of the loss suffered by the consumer and its order in this regard should help many a consumer get justice vis-a-vis insurance companies. The case pertains to the loss suffered by an edible oil mill on account of a fire that destroyed plant, machinery and the oil stocks on August 6, 1993. The insured, who had set up the mill with financial assistance from the Andhra Pradesh State Finance Corporation and had also availed finance towards the working capital, immediately informed the two insurance companies that had issued policies-National Insurance and United India Insurance. According to the complaint filed before the apex consumer court, the senior staff of the insurance companies visited the oil mill, inspected the stock books, ledgers, etc and even signed on them. They subsequently sent their surveyors for loss assessment and that’s when the problem began, according to the complainant. Even though the police, the fire brigade and the engineers from the Andhra Pradesh State Electricity Board had concluded that the fire was caused on account of an electrical short-circuit, both the insurance companies rejected the claim of the insured on the basis of their surveyors’ reports, which said that (a) the cause of the fire may not be electrical short-circuit and could be due to the "complicity of the insured"; (b) that the reports of the police, the fire brigade and the sate electricity departments were not to be relied upon and that (c) there were no stocks on the premises at the time of the fire and (d) the claims were exaggerated. However, on examining the evidence before it, the apex consumer court held that there was no justification for the reports of the surveyors. They had not come across any specific evidence to prove the reports of the police, the fire brigade and the Electricity Department’s conclusion of the cause of the fire to be wrong. Saying that it was actually the surveyors’ reports that could not be relied upon, the apex consumer court pointed out that one of the surveyors, for example, had not submitted any report after visiting the premises for 14 months and then had submitted an undated report to National Insurance, even though the surveyor had been appointed by United India Insurance. The apex court also pointed out that even though National Insurance had appointed an investigator, his reports were never divulged, presumably because they went against the interest of the insurance company. "In our view, therefore, there was no justifiable ground for holding that the fire was not accidental but an engineered one," the court said. In the end, it directed National Insurance to pay to the complainant Rs 4,10,000 instead of Rs 67,555 for the damages to the plant and machinery. As for the loss suffered by the insured on account of damage to the stocks, it directed National Insurance to pay Rs 11,50,520 and the United India Insurance to pay Rs 5,75,260. And the insurance companies should also pay an interest of 9 per cent on the amount, calculated from six months after the fire, that is February 7, 1994, till the date of payment, the apex consumer court said. (Sudhakar Traders vs National Insurance and Another, original petition no 118 of 1997) The consumer courts have intervened in a number of cases such as these, where insurance companies have denied indemnification of loss to the insured. But this is a case where the court has gone into detail in assessing the loss, and set aside the meagre amounts recommended by the surveyors. There is a lesson in this for insurance companies: be honest and fair in your assessment of loss. Or else, the consumer courts will force you to be so. |
