Satya International ... v. New India Assurance ..., National Consumer Disputes Redressal Commission, Judgment, Law, casemine.com

Citation Codes

Equivalent Citations

citation codes

Case Number

Consumer Case No. 75 of 2005

Advocates

Mr. Akrit Chaubey and Mr. Kunwar Aditya Singh, Advocate for the Complainant;
Mr. Rajesh K. Gupta, Advocate for the Opp. Party.

Judges

Prem Narain, Presiding Member

Acts

Section 14(1)(d) of the Consumer Protection Act, 1986,
Section 2 (1)(o) of the Consumer Protection Act, 1986
CONSUMER PROTECTION ACT 1986

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Smart Summary

Factual and Procedural Background

This original petition was filed by M/s. Satya International against New India Assurance Company Limited alleging deficiency in service. The complainant had taken a Floater Fire Insurance Policy for stocks and stock in trade with a total sum assured of Rs. 2.80 crores. The policy period was from 10.01.2003 to 09.01.2004. On 23.12.2003, fire broke out at the complainant’s factory premises at Plot No.435, G.I.D.C., Pandesara, Surat, damaging stock. An FIR was lodged and a police panchnama was drawn. The complainant informed the insurer, who appointed a surveyor but later asked him to abandon the survey, claiming the location was not covered under the policy. The complainant then privately engaged a surveyor who assessed the loss at Rs. 2,06,73,730/-. Despite multiple requests, the insurer refused the claim stating the location was not insured. The complainant filed the complaint seeking payment of loss, business loss, compensation for harassment, costs, and other reliefs. The insurer resisted the claim on the ground that the fire location was not covered under the policy. Both parties filed affidavits and were heard.

Legal Issues Presented

Whether the insurance policy issued by the opposite party covered the complainant’s factory premises at Plot No.435, G.I.D.C., Pandesara, Surat, where the fire occurred.
Whether the insurer’s refusal to indemnify the loss on the ground of non-coverage of the location amounts to deficiency in service under the Consumer Protection Act, 1986.
Whether the complainant is entitled to compensation for the loss sustained due to the fire and for alleged deficiency in service by the insurer.
The extent of the insurer’s liability in case the claim is found to be payable.

Arguments of the Parties

Complainant's Arguments

The insurance policy was taken for Rs. 2.80 crores covering stock at 13 different locations including the main factory premises at Plot No.435, as per the proposal form and letter dated 10.01.2003.
The insurer issued a policy covering only processing houses but omitted the main factory premises without communicating this exclusion to the complainant.
The complainant had no reason to know that the factory premises were excluded and was confident all locations were covered as per the proposal form.
The insurer’s refusal to consider the claim constitutes deficiency in service under Section 2(1)(o) and Section 14(1)(d) of the Consumer Protection Act, 1986.
The complaint is within the pecuniary and limitation jurisdiction of the Commission under Section 24A of the Consumer Protection Act, 1986.

Opposite Party's Arguments

The insurance policy issued is the final contract between the parties; the proposal form is only an offer and not binding.
The factory premises at Plot No.435 was not included in the policy and hence no indemnity is payable for loss at that location.
The terms of the insurance policy must be strictly construed as they are and cannot be interpreted differently by the court.
The complainant’s letter dated 31.12.2003 requesting inclusion of the premises was after the fire and cannot be acted upon.
The complainant accepted the exclusion of the factory premises by not objecting before the incident.
In any event, the sum insured is Rs. 2.80 crores against stock worth Rs. 10.79 crores, so the insurer’s maximum liability on underinsurance principles is Rs. 53,50,721/-.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
General Assurance Society Ltd. Vs. Chandmull Jain, [1966] 3 SCR 500	The court must interpret the insurance contract based on the words expressed by the parties and cannot make a new contract.	The court emphasized that the policy is the final contract and its terms must be strictly interpreted without modification.
Oriental Insurance Co. Ltd. Vs. Sony Cherian, II(1999) CPJ 13 (SC)	The insurance policy represents a contract; terms must be strictly construed to determine insurer's liability, and insured cannot claim beyond coverage.	The court reiterated that the insured must act strictly in accordance with policy terms and statutory limitations.
United India Insurance Co. Ltd. Vs. Harchand Rai Chandan Lal, (2004) 8 SCC 644	Terms of the policy must be construed as they are; courts cannot add or subtract terms. Definitions within the policy govern the contract.	The court held that the parties are bound by the contract terms agreed upon and no external definitions or liberal interpretations apply.
Deokar Exports Pvt. Ltd. Vs. New India Assurance Company Ltd., Civil Appeal No.5103 of 2002, decided on 23.09.2008 (SC)	The situation where omission in policy issuance is an inadvertent error and may be treated as a counter-proposal by the insurer.	The court noted the omission of the main factory in the policy was likely inadvertent and not an intended act, impacting the deficiency claim.

Court's Reasoning and Analysis

The court carefully examined the proposal form, the policy issued, and the communications between the parties. The proposal clearly included 13 locations including the main factory premises, but the insurer issued a policy excluding the main factory premises at Plot No.435. The court recognized that the insurance policy is the concluded contract binding the parties, and the terms must be strictly interpreted as per established Supreme Court precedents. The court cited authoritative judgments emphasizing that courts cannot rewrite or add terms to the insurance contract. However, the court also acknowledged that the insurer’s omission of the main factory premises in the policy appeared to be an inadvertent error rather than an intentional exclusion communicated to the complainant. This inadvertent omission raised the question of deficiency in service by the insurer under the Consumer Protection Act. The court analyzed the correspondence and noted the complainant's reliance on the proposal form and the insurer’s failure to clarify the exclusion. The insurer’s refusal to indemnify based on non-coverage was therefore scrutinized in light of these facts and legal principles.

Holding and Implications

The court held that the insurance policy, being the final contract, must be strictly construed and that the insurer is bound by the terms of the policy it issued. The omission of the main factory premises in the policy, although likely inadvertent, does not alter the fact that the premises were excluded from coverage as per the policy document.

The direct consequence of this decision is that the insurer is not liable to indemnify the loss sustained at the factory premises not covered under the policy. The court's analysis underscores the importance of clear communication and accurate issuance of insurance policies. No new precedent was set beyond reaffirming established principles of contract interpretation in insurance law. The complainant’s claim for deficiency in service on the ground of omission remains a factual and contractual issue governed by the policy terms.

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Satya International Through Its Partner Harishbhai Fatandas Savlani Complainant(S) v. New India Assurance Company Limited And Others Opp. Party(S).

This original petition has been filed by M/s. Satya International against the opposite party New India Assurance Company Limited alleging deficiency in service on the part of the opposite party. The complainant has taken an insurance policy for the stocks, stock in trade etc. known as2. Floater Fire Insurance Policy from the respondents for the total sum assured of Rs.2.80 crores. The opposite party No.3 issued a policy schedule dated 15.09.2003 which contained the particulars as to the address of the insured, sum assured, period of insurance etc. The policy -1- period is stated as 10.01.2003 (15:44 hrs) to 09.01.2004 (midnight). On 23.12.2003 a fire broke out in the complainants factory premises by which the stock of goods therein got damaged and on the same day an FIR was lodged by the complainant and a police panchnama was drawn in the presence of the independent panch. The complainant also informed the opposite party No.3 about the fire incident. Later on, Sunil J. Vora & Associates had been appointed as the surveyor by the opposite party. However, the surveyor was asked by the Insurance Company to abandon the survey work as the surveyor informed the Insurance Company as well as the complainant that the place of accident was not covered under the policy. The complainant then took the services of the surveyor privately and the said surveyor submitted the final survey report on 08.11.2004 to the complainant whereby the total amount of the loss assessed was Rs.2,06,73,730/-. The complainant, however, several times tried to get the response of the Insurance Company w.r.t. the claim particularly vide letters dated 31.12.2003, 12.1.2004, and 9.02.2004. Vide letter dated 07.05.2004, the New India Assurance Co. Ltd. assured that they were looking into the matter of the complainant and would send the reply very soon. Vide letter dated 28.5.2004, the New India Assurance Co. Ltd. refused to look into the matter mentioning that the claim for the stock damaged in the fire accident was not payable as the place was not covered in the said policy. Aggrieved by the repudiation of the claim, the complainant has filed this complaint with the following prayers:-

(a) The opponent Insurance Company may be directed to pay Rs.2,06,73,730/- being the amount of loss sustained by the complainant due to fire along with interest at the rate of 18% p.a. from 23.12.2003 till date of realization, thereof. (b) The opponent may be directed to pay to the complainant Rs.3,00,000/- being the amount of business loss sustained by the complainant with interest at the rate of 18% p.a. from date of fire of complaint till actual realization thereof. (c) The opponents may be directed to pay Rs.3,00,000/- to the complainant as a compensation for the agony, hardship, harassment suffered by the complainant due to the negligence, in addition, deficiency in services made and rendered by the opponent. (d) The costs of this complaint may be awarded from the opponent to the complainant. (e) Such other and further relief as may be deemed fit and proper, in the interest at justice may be granted. The complaint has been resisted by the opposite party/Insurance Company by filing written3. statement stating that the place of occurrence of the fire accident is not covered under the policy. Hence, the claim is not payable. Both the parties filed the evidence by way of affidavit and the same has been taken on4. record. Heard the learned counsel for the parties and perused the record. Learned counsel for the5. complainant stated that the policy was taken on 10.01.2003 for Rs.2.80 crore for stock kept at different locations. In fact, the proposal form was sent to the Insurance Company vide letter dated 10.1.2003 where a cheque of Rs.63,063/- was enclosed and it was requested for insuring the stock of Rs.2.80 crore at factory Plot No.435, Opp. Pratibha Dyg. & Ptg., G.I.D.C., Pandesara, Surat -2- and process houses at different locations and then 13 such locations are mentioned. In the proposal form against the column of situation various list attached is mentioned. Thus, all the locations mentioned in the letter dated 10.1.2003 were proposed for insurance in the proposal form, however, the Insurance company issued a policy only for the process house locations and omitted the main factory Plot No.435, Opp. Pratibha Dyg. & Ptg., G.I.D.C., Pandesara, Surat. As the proposal was very clear and no communication was received from the Insurance Company that any location cannot be accepted for insurance, the complainant was confident that all the locations were covered in the policy. However, the fire broke out in the premises at Plot No.435, Opp. Pratibha Dyg. & Ptg., G.I.D.C., Pandesara, Surat and when the surveyor pointed out that this location was not covered under the policy, complainant contacted the Insurance Company and requested to see the proposal form, but the officers of the company refused to co-relate the policy with the proposal form. A letter was sent to the Insurance Company for inclusion of this premises also in the policy, but the same was refused. The learned counsel argued that there was no cause of action for the complainant to have known that a particular location was not covered though the same was mentioned in the proposal form. Had, the Insurance Company had any reservation for a particular site, they should have either clarified the matter from the proposer or may have written to the complainant. Without doing anything like this, they issued the policy which was taken to be as per the proposal form by the complainant. The service of insurance is covered under Section 2 (1)(o) of the Consumer Protection Act, 1986 and this service starts from the proposal form. In the normal course, when the premium has been paid as per the proposal, the Insurance Company is supposed to issue the policy as per the proposal form. If the same has not been issued as per the proposal form and no communication has been made to the proposer, clearly the service is deficient on the part of the Insurance Company. As per Section 14(1)(d) of the Consumer Protection Act, 1986, the complainant is entitled to get compensation for the loss suffered by the complainant due to negligence of the opposite party. In the present case, there is a clear negligence on the part of the opposite party and therefore, the Insurance Company is liable to pay the loss assessed by the surveyor. Learned counsel for the complainant further stated that this Commission has pecuniary6. jurisdiction to entertain this complaint as the claim of the complainant as mentioned in the prayer is above rupees one crore. It was stated that the cause of action arose on 23.12.2003 when the fire broke out in the factory premises. Further it arose on 28.5.2005 when the opposite party company refused to consider the claim of the complainant and also on 08.11.2004 when the loss assessment report of the survey was submitted. Hence, the complaint is filed within the limitation as per Section 24A of the Consumer Protection Act, 1986. On the other hand, learned counsel for the opposite party Insurance Company stated that7. when a policy is issued that becomes the contract between the parties. Proposal form is only proposal and actual policy is the final contract between the parties. Both parties are bound by the contract of insurance. As the particular location Plot No.435, Opp. Pratibha Dyg. & Ptg., G.I.D.C., Pandesara, Surat is not included in the policy, there is no question of indemnifying loss suffered by the complainant at this location. Learned counsel has emphasised that this is an accepted principle of law that the policy and its terms and conditions are to be construed as they are, and they cannot be interpreted differently by any court. It was further stated that vide letter dated 31.12.2003 (i.e. after the fire incident) the complainant had requested the Insurance Company to include its said premises in the policy schedule. As this letter was written after the incident, so it was not possible to act upon this letter because the policy is to be seen as on the date of accident. The complainant did not even object to the non-inclusion of its factory plot no.435 in the said policy and that was accepted by the complainant. -3- It was further argued by the learned counsel for the opposite party that the total stock in the8. main factory Plot No.435, Opp. Pratibha Dyg. & Ptg., G.I.D.C., Pandesara, Surat and in the processing houses was for Rs.10,79,82,572/- and the sum insured was Rs.2,80,00,000/-. Thus, applying under insurance, maximum liability on the opposite party can be only for Rs.53,50,721/- Hence, in the alternative, it was argued by the learned counsel that if by any means the liability. of the Insurance Company is found on any count, the liability cannot be more than Rs.53,50,721/-. I have carefully considered the arguments advanced by both the learned counsel for the9. parties and have examined the record. Clearly the proposal was given for 13 processing houses and the factory premises at Plot No.435, Opp. Pratibha Dyg. & Ptg., G.I.D.C., Pandesara, Surat. The Insurance Company had admittedly issued the policy excluding the Plot No.435, Opp. Pratibha Dyg. & Ptg., G.I.D.C., Pandesara, Surat. Policy is the actual concluded contract and parties are bound by this contract. Courts are not empowered to add, subtract or interpret differently any clause or terms and conditions of the policy. Honble Supreme Court in General has held as under Assurance Society Ltd. Vs.Chandmull Jain, [1966 ] 3 SCR 500, :-

17. In interpreting documents relating to a contract of insurance, the duty of the court is to interpret the words in which the contract is expressed by the parties, because it is not for the court to make a new contract, however reasonable, if the parties have not made it themselves.

In it has been 10. Vs. II(1999 )CPJ 13 (SC ), Oriental Insurance Co. Ltd. Sony Cherian observed as follows:-

16. The insurance policy between the insurer and the insured represents a contract between the parties. Since the insurer undertakes to compensate the loss suffered by the insured on account of risks covered by the insurance policy, the terms of the agreement have to be strictly construed to determine the extent of liability of the insurer. The insured cannot claim anything more than what is covered by the insurance policy. That being so, the insured has also to act strictly in accordance with the statutory limitations or terms of the policy expressly set out therein.

the11. United India Insurance Co. Ltd. Vs. Harchand Rai Chandan Lal, (2004) 8 SCC 644, Honble Apex Court held as follows:-

6. .The terms of the policy have to be construed as it is and we cannot add or subtract something: Howsoever liberally we may construe the policy but we cannot take liberalism to the extent of substituting the words which are not intended.

9. It is settled law that terms of the policy shall govern the contract between the parties, they have to abide by the definition given therein and all those expressions appearing in the policy should be interpreted with reference to the terms of policy and not with reference to the definition given in other laws. It is a matter of contract and in terms of the contract the relation of the parties shall abide and it is presumed that when the parties have entered into a contract of insurance with their eyes wide open, they cannot rely on definition given in other enactment. -4-

14. Therefore, it is settled law that the terms of the contract has to be strictly read and natural meaning be given to it. No outside aid should be sought unless the meaning is ambiguous.

It is further observed that the format of the letter dated 10.1.2003 which was sent alongwith12. the proposal form is also somewhat confusing as it lists all the processing houses numbered from

1 to 13 and this letter gives an impression as if these 13 locations were to be insured as the name of the main factory is written in the first paragraph without any serial number. Therefore, the omission seems to be only an inadvertent error and not an intended act which could be treated as deficiency in service. Moreover, this type of situation has been observed as a counter-proposal by the Honble13. Supreme Court in Deokar Exports Pvt. Ltd. Vs. New India Assurance Company Ltd., Civil wherein the following has beenAppeal No.5103 of 2002, decided on 23.09.2008 (SC), observed:-

Satya International ... v. New India Assurance ...