Dear (S)
Another judgment of significance
pronounced by Markandey Katju & HL Dattu in a Civil Appeal. The facts of
the case do make very interesting reading.
As stated the assessment of loss,
claim settlement and relevance of survey report depends on various factors.
Whenever a loss is reported by the insured, a loss adjuster, popularly known as
loss surveyor, is deputed who assess the loss and issues report known as
surveyor report which forms the basis for consideration or otherwise of the
claim. Surveyors are appointed under the statutory provisions and they are the
link between the insurer and the insured when the question of settlement of
loss or damage arises. The Insurance Act with specific reference to Sec 64 UM
does allow appointment of more than one surveyor especially when the report of
the First surveyor is not acceptable due to inherent defects.
Here are some more facts on the
impugned case. This was an appeal directed against the order passed by National
Consumer Disputes Redressal Commission, New Delhi in Original Petition No.135
of 2001 dated 19th day of January, 2003. The appeal was preferred by Sri
Venkateswara Syndicate against Oriental Insurance Co in respect of claim
arising out of accidental fire during Aug 1999, that occurred in the godown of
M/s Jai Bharat Traders, leased by the appellant firm, where its cotton stocks
were stored. The loss was estimated to be around Rs.1.90 crores.
Upon intimation of loss, the
Insurers appointed K Sivaprasad, a licensed surveyor who submitted a preliminary
report, estimating the loss of stock at Rs.1,73,92,310/-, which was without
verification of the actual quantity of lint damaged by fire. The insurer organized Joint Survey through M/s
Mehta and Padamsey and Kaypsens. They onducted a joint survey and in that,
estimated the loss of stock Rs.1,67,80,925/- The Insurer felt the report to be
perfunctory and appointed Dinesh Gopal and Co. who, in turn appointed Mr. Panchal, former DIG (Fire)
CISF and Fire Adviser to the Government of India to investigate and submit a
report. This report confirmed the quantification made already. As the Insurers
were not satisfied with this report also, they appointed R. Srinivasan and Co.,
Chartered Accountant to give a fresh report by estimating the loss of stock
insured due to accidental fire by verifying the book of accounts. This report
put the loss at Rs.105,00,817/- Insurers placed this report before the Joint
Surveyors and sought clarifications. They responded that the verification of
books of accounts was for the period 1.10.98 to 31.3.99 and not till the date
of the fire accident.
There was another query also : ‘ 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.’
The claimants preferred original
complaint before the National Consumer Forum alleging, inter-alia that there
has been inordinate delay, deficiency of service and sought Rs.1.67 crores
together with 18% interest from the date of loss. The NCDRC passed order
directing Insurer to pay Rs.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.
The issues before the Apex court were :
1) whether the Insurers can repeatedly appoint Surveyor after surveyor for
assessment and
2) whether the Commission was justified in awarding 6% p.a.
The Insurer relied upon the
provisions of Sec 64 UM of Insurance Act which does authorizes independent
report from any other approved surveyor. The Apex Court concluded that 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. We hasten
to add, 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. The Court added that citing the
Act, the Insurance Company cannot go on appointing surveyors one after another
so as to get a tailor made report to their satisfaction.
Finally, the Apex Court directed the
Insurers to pay Rs.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.
As usual there are many learnings
from this judgment for all of us.
With regards
S Sampathkumar
Circulated to my group through email on Wed, Aug 26, 2009 at 9:22 PM
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