NCDRC: Surveyor’s Report Cannot Be Dismissed Without Cause

The National Consumer Disputes Redressal Commission, under the presidency of Justice Ram Surat Maurya, upheld an appeal by United India Insurance, stating that a surveyor’s report in an insurance claim cannot be dismissed unless proven to be arbitrary and unreasonable.

Case Background

A poultry feed producer had stored raw and finished materials in a building insured by United India Insurance Company Limited through Andhra Bank. The insurance policy covered risks including spontaneous combustion. On a particular day, workers noticed flames from the de-oiled rice bran stock, which were extinguished by the fire service. The insurer dispatched surveyors and an investigator to assess the damage and verify the purchase of raw materials. Despite the complainant submitting all necessary documents and segregating the damaged stock, the insurer delayed settling the claim. The salvage was eventually sold for Rs. 62,674. Frustrated by the delays, the complainant filed a complaint before the State Commission of Andhra Pradesh, which ruled in their favor, directing the insurer to pay Rs. 30,90,521 along with interest at 9% per annum as the insurance claim. Additionally, a compensation of Rs. 20,000 and litigation costs of Rs. 10,000 were awarded. In response, the insurer appealed to the National Commission.

Arguments Presented by the Insurer

The insurer contended that upon receiving notice of the fire from Andhra Bank, they dispatched an initial surveyor followed by a subsequent surveyor who inspected the site and requested documentation for assessing the loss. The insured filed a claim for various materials, but some required documents were not provided. An investigator identified discrepancies in the claimed storage capacity and found no physical evidence of fire damage. Both the investigator and surveyor encountered difficulties with uncooperative suppliers and were unable to verify the purchases claimed by the insured. Consequently, due to insufficient evidence and cooperation, the investigation concluded that the claimed loss was unsubstantiated. Furthermore, it was noted that the location mentioned in the policy did not correspond to the actual site affected by the fire. The insurer thus rejected the claim, asserting no deficiency in their service, and sought the dismissal of the complaint.

Findings of the National Commission

The National Commission noted that the State Commission overlooked the surveyor’s findings, which the Supreme Court upheld in Khatema Fibre Limited Vs. New India Insurance Company Limited (2021 SCC OnLine SC 818) as compliant with regulatory norms unless arbitrary. It emphasized that the insurer asserted purchasing de-oiled bran prior to the fire incident, yet lacked evidence of payment. Discrepancies between claimed and physically verified weights of damaged stock prompted the insurer to invoke Condition-8 of the policy, which voids benefits in cases of fraudulent claims or false declarations. Referring to New India Assurance Company Limited Vs. Pradeep Kumar (2009) 7 SCC 787, the commission reiterated that a surveyor’s report is not infallible. However, the insurer argued that the claim was overstated and could be repudiated under Clause 8 of the policy due to insufficient evidence of payment. The commission emphasized that the State Commission should have impartially assessed the evidence, including the surveyor’s report, which it failed to do. Consequently, the commission ruled that the insurer’s denial of the claim under Clause 8 of the policy was justified given the lack of substantiated payments and discrepancies.

The National Commission upheld the appeal and overturned the State Commission’s ruling.

Case Title: United India Insurance Co. Ltd. vs. Shree Sai Laxmi Poultry Feeds & Anr

Case Number: F.A. No. 246/2009

Posted and reproduced in Public Interest by

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