- Bookmark
- Share
- CaseIQ
NATIONAL INSURANCE CO. LTD. v. NOLI RAM & SONS
Written Summary of the Opinion
Factual and Procedural Background
The revision petition was filed by the petitioner, National Insurance Company Ltd., against the State Consumer Disputes Redressal Commission, Rajasthan, Jaipur (State Commission) order dated 27.4.2016 in FA No.49 of 2016. The respondent (complainant) had insured his petrol pump under Policy No.371101/11/10/3100001134 valid from 20.3.2011 to 19.3.2012. The complainant alleged that on 23.7.2011 a heavy goods train of 50–60 bogeys passed on a nearby track, produced a sudden jerk and screeching halt, and as a result tank no.2 of the underground diesel tanks (located about 100 metres from the railway track) got damaged causing leakage of 15,529 litres of diesel into the soil.
The complainant's claim was repudiated by the insurer by letter dated 9.5.2012. The complainant filed Consumer Complaint No.188/2013 before the District Forum, Churu. The District Forum allowed the complaint and ordered respondent (insurer) to pay Rs.6,33,562 (estimated by the surveyor) with 9% simple interest from 14.2.2012 and Rs.5,000 towards costs. The insurer appealed to the State Commission (First Appeal No.49/2016), which dismissed the appeal on 27.4.2016. The insurer then filed the present revision petition challenging those orders.
Legal Issues Presented
- Whether the repudiation of the insurance claim by the National Insurance Company Ltd. was justified in view of the surveyor's report attributing the loss to rusting of a 20-year-old underground diesel tank rather than to impact caused by a sudden stoppage of a goods train.
- Whether the impact-damage peril under the policy (which requires damage by direct contact with a rail/road vehicle or animal) applies to the alleged facts where the diesel tank was about 100 metres away from the railway track and no direct contact or accident was shown.
- Whether the orders of the District Forum and State Commission erred in disregarding the surveyor's report and in directing payment to the complainant.
Arguments of the Parties
Petitioner's (Insurer's) Arguments
- As soon as information was received, the insurer appointed a surveyor whose report concluded that the tank (about 20 years old) had rusted and punctured, causing leakage; this loss is not covered under the policy.
- No evidence was produced to show that a goods train had passed and suddenly stopped on the relevant date; in particular, no letter or certificate from Railway Authorities was produced despite a specific request.
- The insurer repudiated the claim because the required railway impact certificate was not submitted and the surveyor attributed the loss to rusting.
- The impact-damage clause in the Fire and Special Peril policy requires direct contact; there was no direct contact between the train and the diesel tank, which is situated about 100 metres from the track, so the peril does not apply.
- Both fora below erred in appreciating the evidence and the binding terms and conditions of the insurance policy.
Respondent's (Complainant's) Arguments
- The insurance policy covers stocks and risks (the respondent referenced coverage including earthquake, fire and shock in his submissions as relevant to claim coverage).
- The tank was damaged due to the sudden stoppage of the heavy goods train carrying 50–60 bogeys; the complainant argued the volume of diesel lost in a single day (15,529 litres) was inconsistent with gradual loss due to rusting.
- The State Commission and District Forum gave findings in favour of the complainant and allowed the insurance claim.
- The complainant did not produce a railway certificate though the insurer had sought it before repudiation (the court notes this as a fact; respondent argued on the basis of observed loss and forum findings).
- The complainant relied on the findings of the fora below that the loss resulted from the incident of 23.7.2011 rather than wear and tear or rusting.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Sri Venkateswara Syndicate vs. Oriental Insurance Company Limited & Anr., (2009) 8 SCC 507 | The importance and relevance of a surveyor's report: surveyors are statutory appointees under the Insurance Act; their reports form the basis for claim consideration and cannot be rejected without sufficient grounds. An insurer cannot keep appointing surveyors to obtain a tailor-made report and must give valid reasons if it departs from the surveyor's findings. | The court relied on this authority to hold that the insurer's appointed surveyor's report, which attributed the loss to rusting, deserved due weight and could not be disregarded by the District Forum or State Commission without forceful reasons. The absence of railway evidence meant no valid ground existed to reject the surveyor's report. |
| Sikka Papers Limited vs. National Insurance Company Limited and Ors., (2009) 7 SCC 777 | Surveyor/loss assessor reports should be given weight; though not necessarily the final word, there must be legitimate reason for departing from such reports. Insurance policy terms are binding; exclusions for normal wear and tear apply where appropriate. | The court used this precedent to support the proposition that the surveyor's findings (that the loss resulted from rusting/wear and tear) carry weight and that the fora below did not provide legitimate reasons to depart from that report. Thus, the court found no infirmity in giving effect to the surveyor's conclusion. |
Court's Reasoning and Analysis
The court reviewed the record, the repudiation letter (dated 9.5.2012), the surveyor's report and the orders of the District Forum and State Commission. The repudiation letter records that the insurer requested a railway impact-certificate and other clarifications from the complainant, which were not provided.
The independent surveyor, appointed under the Insurance Act, inspected the underground diesel tank and concluded that: (a) there was no impact by any rail/road vehicle or animal because the tank was intact and embedded underground; and (b) the tank, fitted about 20 years earlier, had rusted and consequently become punctured, causing the diesel leakage. The surveyor opined the cause of loss was rusting and not impact damage, and that rust-related leakage is not covered under the policy.
The court applied binding guidance from the cited Supreme Court authorities emphasizing that surveyor reports merit due importance and cannot be disbelieved or brushed aside without cogent reasons. The court observed that the District Forum and State Commission did not give forceful reasons to reject the surveyor's findings.
The court then examined the impact-damage clause of the policy (Clause VII) which covers "loss of or visible physical damage or destruction caused to the property insured due to impact by any Rail/Road vehicle or animal by direct contact." The court concluded this clause applies only where there is direct contact.
Given that: - the diesel tank was about 100 metres from the railway track; - no railway certificate or other proof was produced to show that a goods train passed and suddenly stopped or made direct contact; and - the surveyor attributed the loss to rusting and puncture of a 20-year-old tank, the court deemed it improbable that a train passing or stopping 100 metres away could cause impact damage to the underground tank.
On that basis, and in view of the lack of railway evidence and the weight accorded to the surveyor's report under the cited precedents, the court concluded that both reasons given in the insurer's repudiation letter (absence of railway certificate and surveyor's finding of rusting) were justified and supported repudiation.
Holding and Implications
Core Ruling: The revision petition is allowed; the orders dated 27.4.2016 passed by the State Commission and 7.12.2015 passed by the District Forum are set aside and the complaint is dismissed.
Implications and immediate consequences:
- The District Forum's order directing payment of Rs.6,33,562 with interest and Rs.5,000 costs has been vacated; the complainant's consumer complaint is dismissed on the record before this court.
- No order as to costs was made by this court.
- The court's decision rests on the absence of railway evidence, the surveyor's report attributing the loss to rusting/wear and tear, the policy's impact-damage clause requiring direct contact, and precedents that mandate weight to surveyor reports; the opinion does not purport to set any new legal precedent beyond applying those principles to the facts of this case.
Signed by: PREM NARAIN, Presiding Member (as indicated in the opinion).
This revision petition has been filed by the petitioner, National Insurance Company Ltd. against the impugned order dated 27.4.2016 passed by the State Consumer Disputes Redressal Commission, Rajasthan, Jaipur (for short, State Commission) in FA No.49 of 2016. Brief facts of the case are that respondent/complainant had insured his petrol pump under2. the Policy No.371101/11/10/3100001134 issued by the petitioner/OP-National Insurance Company Ltd. and the insurance was valid from 20.3.2011 to 19.3.2012. The complainants case is that on 23.7.2011 at around 11-12 p.m., the goods train of 50-60 bogeys passed from the nearby track and he felt a sudden heavy jerk and heard a loud sound due to sudden and screeching halting of goods train. The petrol pump has underground tanks and is about 100 mtrs. away from the railway track. Particularly tank no.2 got damaged due to sudden impact of the stopping of the train. This was found when readings for the two days were compared that 15,529 litres of diesel has leaked inside the soil due to this heavy yank resulting in cracks and holes in the tank. The complainant filed an insurance claim before the petitioner insurance company which was repudiated vide letter dated 9.5.2012. Aggrieved with the repudiation, the complainant filed Consumer Complaint No.188/2013 before the District Forum, Churu. The complaint was resisted by the petitioner/OP on the ground that the loss of diesel is due to holes due to rusting of the tank as confirmed by the surveyors report. The District Forum, however, allowed the complaint and passed the following order:
a. The respondent is ordered to pay the amount of Rs.6,33,562/- which was estimated by the surveyor, to the complainant towards the loss of diesel which was caused due to the incident dated 23.7.2011 and in addition to this, respondent should pay simple interest on that amount at the rate of 9 percent annually after exact three months from the survey report dated 15.11.2011 i.e. date 14.2.2012 to the actual payment. (b) The respondent is also ordered to pay Rs.5,000/- to the complainant towards the cost of complaint.Aggrieved with the aforesaid order, the petitioner /OP preferred First Appeal No.49/20163. before the State Commission which was dismissed vide its order dated 27.4.2016. Hence, the revision petition.4. Heard the learned counsel for both the parties and perused the record. The learned counsel5. for the petitioner stated that both the fora below have not gone into the details of the policy as the terms and conditions of the policy are binding on both the parties. As soon as the information was received by the insurance company, a surveyor was appointed in the matter. The surveyor has clearly submitted in his report that the damage in the diesel tank is due to rusting as the tank is about 20 years old and this damage/loss is not covered under the policy. The learned counsel further emphasized that no proof was ever filed by the complainant to prove that the damage was due to impact of the sudden stoppage of the train. First of all, it is not clear whether any goods train passed on that day or not and whether it had suddenly stopped or not. No letter or report of the Railway Authorities has been filed. In fact, before repudiation, the complainant was asked to submit certificate from the Railways in respect of the impact due to sudden stoppage of the goods train. However, the complainant never submitted the same. Accordingly, the matter was repudiated stating clearly that the certificate of Railways has not been filed and the surveyor has reported damage/loss due to rusting of the diesel tank. Moreover, the impact damage clause of the Fire snd Special Peril Policy clearly states that the damage should be due to direct contact and in this case there was no direct contact of the train with the diesel tank of the complainant. Hence, the case is not covered under the impact damage clause of the policy. Thus, the claim was repudiated and there is no deficiency on the part of the insurance company. Thus, both the fora below have erred in appreciating the evidence on record as well as the terms and conditions of the policy. The learned counsel for the respondent stated that the insurance policy clearly covers stocks6. and the risk of earthquake, fire and shock. The fact is that the tank got damaged due to sudden stoppage of the heavy goods train carrying 50-60 bogeys. Had this been due to rusting of the tank, so much diesel could not have disappeared in one day. The leakage might have been observed on earlier days as well. The State Commission has also observed this while dismissing the appeal filed by the OP/petitioner. Both the fora below have given finding in favour of the respondent/complainant and have allowed the insurance claim. The powers under Section 21(b) of the Consumer Protection Act, 1986 are very limited. I have given thoughtful consideration to the arguments advanced by both the parties and7. have examined the record. The repudiation letter dated 9.5.2012 reads as under: Thereafter we also sought your cooperation requesting you to clarify the points raised by the surveyor, most importantly to provide us the impact damage certificate from the railways to substantiate your claim as to the actual cause of loss. But you failed to make the same available to us. After thorough physical inspection of the concerned diesel tank, papers, documents and information provided by you to the surveyor as also your failure to provide him the required railway certificate, the independent, learned and experienced surveyor is of the firm opinion that- The Diesel Tank is fitted under the ground & there was no impact of any Rail/Road vehicle or animal as the tank is in intact condition. The tank was fitted about 20 years back & during the duration there became rusting in iron made tank resulting it got punctured at some place consequently the diesel got leaked from the punctured spot. As the cause of loss is leakage of tank from rusting and there was no impact damage therefore and said cause (due to rusting) is not covered under the policy of insurance. In view of the above, we regret to convey to you that the competent authority denying the liability of the company has repudiated your claim which please note. From the above, it is clear that no certificate from the Railways has been filed. In these8. circumstances, the whole basis of the complaint which is based on the impact of the sudden stoppage of train on the imbedded tank which was about 100 mtrs. away from the railway track, collapses. Moreover, the independent surveyor appointed by the insurance company has clearly denied the version of the complainant and has given a finding that hole in the tank has occurred due to rusting of the iron tank which was about 20 years old at that time. The surveyors are appointed under the provision of the Insurance Act, 1938 and their report cannot be brushed aside without any cogent reason. Honble Supreme Court in the case of Sri Venkateswara Syndicate , has observed thevs. Oriental Insurance Company Limited &Anr., (2009) 8 SCC 507 following:-
31. The assessment of loss, claim settlement and relevance of survey report depends on various factors. Whenever a loss is reported by insured, a loss adjuster, popularly known as loss surveyor, is deputed who assesses 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 report of the surveyor could become the basis for settlement of a claim by the insurer in respect of the loss suffered by the insured.Honble Supreme Court in 9. Sikka Papers Limited Vs. National Insurance Company , has observed that:-Limited and Ors., (2009) 7 SCC 77732. There is no disputing the fact that the surveyor/surveyors are appointed by the insurance company under the provisions of the insurance act and their reports are to be given due importance and one should have sufficient grounds not to agree with the assessment made by them. We also add, that, under this Section the insurance company cannot go on appointing surveyors one after another so as to get a tailor-made report to the satisfaction of the officer concerned of the insurance company; if for any reason, the report of the surveyors is not acceptable, the insurer has to give valid reason for not accepting the report.
Insurance- Terms and conditions specified in insurance policy- Binding effect- Insurance policy not covering parts of machinery which were required to be replaced due to normal wear and tear-Held, Insurance Company while assessing claim, rightly excluded those parts- Insurance Act, 1938,- S. 64-UM- Surveyor/Loss assessors report- Weightage to be given- Held, Though not the last word, yet there must be legitimate reason for departing from report- No infirmity found in surveyors report and therefore held, Insurance Company rightly admitted claim as per the report.The District Forum or the State Commission did not give any forceful reason to disregard10. the report of the surveyor and therefore, as observed by the Honble Supreme Court in the aforesaid cases, the surveyors report cannot be disbelieved and cannot be rejected without any forceful evidence on the part of the complainant. The certificate of Railways may have worked as a strong evidence against the surveyors report but the same has not been produced by the complainant. So there is no reason to disregard the surveyors report. Moreover, the impact damage clause of the policy reads as follows: 11. VII Impact Damage Loss of or visible physical damage or destruction caused to the property Insured due to impact by any Rail/Road vehicle or animal by direct contact not belonging to or owned by. The insured or any occupier of the premises or Their employees while acting in the course of their employment. From the above clause, it is evident that this would be attracted only if the damage is due to12. direct contact. Clearly in the present case, there cannot be any direct contact of the railway train with the diesel tank as the diesel tank is about 100 mtrs. away from the railway track and no accident has been reported. Thus, clearly this peril is not applicable in the present case. Based on the above examination, I find that both the reasons given in the repudiation letter13. are justified. It also seeems improbable that a train passing or stopping at a distance of 100 mtrs. away from the underground tank can impact in any manner the iron tank so as to cause any damage to the tank. As no proof from the railways has been filed and the surveyors report confirmed that the damage/loss is caused due to rusting, clearly the loss is not covered under the policy in question. Based on the above discussion, the revision petition is allowed and the order dated14. 27.4.2016 passed by the State Commission and order dated 7.12.2015 passed by the District Forum are set aside and the complaint is also dismissed. There shall be no order as to costs.15. ...................... PREM NARAIN PRESIDING MEMBER
Alert