1. Introduction

The case of BAJAJ ALLIANZ GENERAL INSURANCE CO. LTD. v. SONAM UDEN BHUTIA adjudicated by the National Consumer Disputes Redressal Commission (NCDRC) on November 26, 2021, serves as a pivotal reference in the realm of insurance claim disputes in India. This case revolves around a dispute between an insurance company, Bajaj Allianz General Insurance Co. Ltd., and a consumer, Sonam Uden Bhutia, regarding the settlement of an insurance claim for damages caused to a liquefied petroleum gas (LPG) godown.

2. Summary of the Judgment

The complainant, Sonam Uden Bhutia, owner of "M/s Ess Ell Pee Gee," held a Standard Fire and Special Perils Policy with Bajaj Allianz, insuring her LPG godown against hazards like fire, earthquake, and other natural disasters. Following a massive earthquake and subsequent landslides in Sikkim in September and June 2011 respectively, the godown sustained significant structural damages. Bhutia filed a claim for ₹47,26,000, aligning with her policy's sum assured. However, Bajaj Allianz offered a meager settlement of ₹2,10,475, which was rejected by Bhutia, leading to the filing of the complaint. The State Commission partially ruled in favor of Bhutia, directing the insurer to pay ₹18,26,000 along with interest. Bajaj Allianz appealed this decision, challenging the validity of damage assessments conducted by non-IRDA approved engineers and the characterization of certain damages as pre-existing. The NCDRC upheld the State Commission's order, emphasizing the legitimacy of the assessment by the Government of Sikkim's engineers and rejecting the insurer's contention regarding pre-existing damages.

3. Analysis

3.1 Precedents Cited

The judgment extensively references the Supreme Court's decision in New India Assurance Company Limited v. Pradeep Kumar [(2009) 7 SCC 787]. In this case, the Court elucidated the applicability of Section 64UM of the Insurance Act, 1938, emphasizing that while assessments by IRDA-approved surveyors are standard, they are not irrevocable and can be deviated from based on reasonable grounds. Additionally, the judgment cites United India Insurance Co. Ltd. Vs. M/s. Kiran Combers and Spinners [(2007) 1 SCC 373], reinforcing the principle that insurers cannot solely rely on their assessments if they are aware of pre-existing damages at the time of issuing the policy.

3.2 Legal Reasoning

The crux of the legal reasoning lies in interpreting Section 64UM of the Insurance Act, 1938. The State Commission, supported by the NCDRC, interpreted this section to mean that while insurers are required to obtain assessments from approved surveyors for claims exceeding ₹20,000, these estimates are not absolute and can be contested or supplemented with additional evidence. In this case, the assessments provided by the Government of Sikkim's engineers were deemed competent and valid, despite not being IRDA-approved surveyors. The Commission underscored that the policyholder's estimate, backed by government engineers, should hold substantial weight, especially in the absence of counter-evidence from the insurer. Furthermore, regarding the allegation of pre-existing damage, the court held that the mere absence of immediate evidence to the contrary does not suffice to invalidate the claim. The insurer's prior knowledge of the retaining wall's condition, yet choosing to insure the property, indicated acceptance of the associated risks, thereby undermining their claim of non-liability.

3.3 Impact

This judgment has significant implications for the insurance sector in India. It reinforces the notion that insurers cannot unilaterally defend against claims based solely on their assessments, especially when policyholders provide credible and competent evidence from reputable sources. It also broadens the understanding of acceptable assessors, potentially allowing governmental or other recognized experts to contribute valid assessments to support claim settlements. This promotes a more balanced and fair approach to claim resolutions, ensuring that policyholders are not unduly disadvantaged by the stringent reliance on IRDA-labeled surveyors.

4. Complex Concepts Simplified

4.1 Section 64UM of the Insurance Act, 1938

This section mandates that for any insurance claim in India amounting to ₹20,000 or more, an assessment must be conducted by a licensed surveyor approved by the Insurance Regulatory and Development Authority (IRDA). However, the provision includes a proviso allowing insurers to settle claims based on their discretion, even if it deviates from the surveyor's estimate.

4.2 Pre-existing Damage

Pre-existing damage refers to any harm or defect in the insured property that existed before the commencement of the insurance policy. If such damages are known to the insurer at the time of policy issuance, they should be communicated and not be a basis for denying future claims related to those damages.

5. Conclusion

The NCDRC's decision in BAJAJ ALLIANZ GENERAL INSURANCE CO. LTD. v. SONAM UDEN BHUTIA underscores the judiciary's role in ensuring fairness in insurance claim settlements. By validating the assessments from competent governmental engineers and emphasizing the insurer's awareness of pre-existing damages, the judgment protects policyholders from potential malpractices by insurers. It sets a precedent that while regulatory frameworks like the Insurance Act provide guidelines, the ultimate adjudication of claims rests on factual evidence and equitable considerations, thereby fostering trust and reliability in the insurance ecosystem.