Oriental Insurance Contractors All Risk Insurance Case Study

July 13, 2024

The National Consumer Disputes Redressal Commission, under the chairmanship of Dr. Sadhna Shanker, ruled that an insured party cannot file two separate claim forms for the same incident, as it does not alter the fundamental nature of the occurrence and the resultant loss.

Case Background

The complainant, a company engaged in bridge construction, had procured a “Contractors All Risk Insurance Policy” from Oriental Insurance. In September 2011, severe floods in the river Sone caused extensive damage, including the destruction of two temporary steel bridges and plain cement concrete. The complainant promptly notified the insurer but initially received no response. Following repeated reminders, the insurer conducted a loss assessment survey. The surveyor’s report acknowledged the validity of the claim but applied significant deductions due to under-insurance and invoked two excess clauses, ultimately denying the claim in full. Dissatisfied with this decision, the complainant filed a complaint with the State Commission of Punjab, which ruled in their favor. The State Commission directed the insurer to pay Rs.72,83,400 as the claim amount after deductions, with an additional 12% interest on the claim amount for deficiency, along with Rs.11,000 for litigation expenses. Subsequently, the insurer appealed this decision to the National Commission.

Arguments Presented by the Insurer

The insurer challenged the complaint by asserting that the complainant, being a commercial entity, did not meet the criteria of a ‘consumer’ under the Act, thus making the complaint legally unsustainable. They further argued that their appointed surveyor assessed the liability as ‘nil’ in accordance with the terms and conditions of the policy, thereby absolving them of any obligation to compensate the complainant. Additionally, the insurer maintained that there were no shortcomings on their part in handling the claim.

Findings of the National Commission

The National Commission examined whether there were distinct occurrences resulting in separate losses. After reviewing various evidence including the surveyor’s report, River Water Level Data, and Newspaper Reports, it became clear that the river Sone encountered a sudden flood, causing elevated water levels during specific dates. The complainant company assessed its damages only after the water receded, noting the destruction of two bridges. The Commission determined from these facts that there was a singular occurrence leading to the loss of both bridges. Consequently, the Commission upheld the State Commission’s decision that filing two separate claim forms did not alter the fundamental occurrence or loss nature.

The Commission also found the application of the excess clause twice to be unsustainable since there was only one occurrence. Regarding under-insurance, the surveyor reviewed the insured’s contractual terms and escalation clause but did not provide sufficient justification for disregarding the escalation clause in calculating the under-insurance rate. The Commission agreed with the State Commission’s assessment that the under-insurance should be calculated at 9% rather than 21.07%.

Emphasizing that a surveyor’s report is not conclusive and can be challenged with adequate reasoning, the Commission referenced the Supreme Court’s ruling in New India Assurance Co. Ltd. v. Pradeep Kumar. Considering the losses suffered by the complainant company, the Commission deemed an interest rate of 9% per annum appropriate for compensating the loss and harm endured.

The National Commission amended the State Commission’s ruling, directing the insurer to pay Rs. 72,83,400 along with 9% per annum interest until the amount was fully settled, in addition to Rs. 11,000 for litigation expenses.

Posted and reproduced in Public Interest by

Adv. Sulaiman Bhimani Legal Consultant

Expert in RERA & Consumer Matters, Co-operative Scty Matters,

Deem Conveyance, Family Matters, and Property Disputes.

Human and Civil Rights Campaigner

President Citizens Justice Forum https://citizensjusticeforum.in