State Consumer Disputes Redressal Commission
Ms. Satya Power And Ispat Ltd. vs New India Assurance Co.Ltd. on 8 December, 2011
CHHATTISGARH STATE
CONSUMER DISPUTES REDRESSAL COMMISSION
PANDRI, RAIPUR
Complaint Case No. 01/2011
Instituted on 01.01.11
Ms Satya Power and Ispat Ltd.,
Through: Sri Ramawtar Agrawal, Director,
1st Floor, N.R.Plaza, Link Road,
BILASPUR (C.G.) ... Complainant.
Vs.
New India Assurance Company Ltd.,
Divisional Office,
2nd Floor, Rama Trade Center,
Opp. Rajiv Plaza,
BILASPUR (C.G.) ... Opposite Party.
PRESENT: -
HON'BLE JUSTICE SHRI S.C. VYAS, PRESIDENT
HON'BLE SHRI V.K. PATIL, MEMBER
COUNSEL FOR THE PARTIES: -
Shri Mukesh Sharma, for complainant.
Shri Manoj Agrawal, for OP.
ORDER
Dated: 08/12/2011 PER: - HON'BLE JUSTICE SHRI S. C. VYAS, PRESIDENT Feeling dissatisfied with the letter of repudiation dated 30.12.2009, issued by the OP Insurance Company in respect of claim of the complainant valued at Rs.66,57,344/-, this complaint has been filed under section 12, read with section 17 of Consumer Protection Act, 1987 for seeking relief of compensation of Rs.66,57,344/- along with interest @ 12% p.a. as compensation for the loss suffered by the complainant to the insured property in an incident of fire and explosion.
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2. Indisputably, the complainant is a Company registered under Companies Act and is manufacturer of sponge iron in its plant at Vill. Gatori, Tahsil and District Bilaspur. Plant of the complainant and assets of sponge iron manufacturing unit were got insured by the OP vide policy No.452000/11/08/11/00000023 for sum assured of Rs.9,50,00,000/- for the period 01.04.08 to 31.03.09 under Standard Fire and Special Perils Policy. It is also not in dispute that on 27.05.08, some incident in the sponge iron manufacturing unit happened, resulting in damages to the machinery of the plant, which was intimated by the complainant to the OP Insurance Company and then surveyor was appointed by the Insurance Company to assess the loss and to investigate the incident. The surveyor, so appointed, visited the spot and had meeting with the Officers of the complainant. Then surveyor Mr. Ashok Motiani was appointed for assessment of loss suffered by the complainant, who also submitted his report.
3. Case of the complainant before us is that the insurance policy, obtained by the complainant from the OP, was for fire and allied perils and there was an incident of fire in the plant on 27.05.08. Surveyor Mr. Ashok Motiani appointed by the Insurance Company has assessed the loss suffered by the complainant in its plant due to incident of fire. The complainant also had meeting with the firm by which consultation was provided in installation of the plant i.e. M/s. Thermax Ltd. and // 3 // the complainant was advised to replace the damaged components of electrostatic precipitator together with other damaged items in the incident of fire. Estimate of loss incurred in the plant was provided by the Consultant of the complainant, M/s. Thermax Ltd. for amount of Rs.66,57,344/- and the equipments were advised to be replaced, as such equipments became un-repairable. After replacement of such equipments, bills for the works carried out were submitted by the concerning party, which was forwarded to the OP for settlement of claim under the policy. Then the OP Insurance Company started adopting dilatory practice and ultimately has repudiated the claim of the complainant vide letter dated 30.12.09 by saying that the claim was not covered under the policy conditions. After receiving this letter of repudiation, cause of action for filing complaint arose in favour of the complainant and then this complaint was filed praying for direction to the OP to pay Rs.66,57,344/- along with interest @12% p.a. to the complainant.
4. Insurance Company, in the written version, refuted the allegations leveled by the complainant in the complaint and submitted that firstly surveyor Mr. Sudhir Joshi was appointed by it to ascertain the real causes of incident and to make an inquiry in this regard. He inquired the matter and then submitted his report to the insurance company. He found that the loss suffered by the insured, in the E.S.P. // 4 // installed in the plant, was not covered under the terms of the policy. Then the OP appointed another surveyor Mr. Ashok Motiani, who also submitted his report and ultimately Mr. Utkarsh Shingwekar was appointed by the insurance company. It has also been averred by the insurance company that neither the surveyor Mr. Utkarsh Shingwekar nor Mr. Sudhir Joshi had found that there was any incident of explosion in the E.S.P., which can be said to be covered under the terms of the policy. It was found to be a case of failure of machinery for which appropriate policy was not obtained by the complainant and the incident of failure of machinery was not covered under the policy, which was obtained by the complainant. So the claim was not payable and thus if the insurance company has repudiated the claim, then it committed no deficiency in service. Under the head special pleadings, it has further been averred by the insurance company that when surveyor Mr. Joshi did not find any incident covered under the terms of the policy, then surveyor Mr. Motiani was appointed, who assessed loss of Rs.7,95,000/- to the complainant, but he has also not reported that there was any incident of fire in the factory. As there was some contradiction between report of two Surveyors, the third surveyor Mr. Utkarsh Shingwekar was again consulted by the insurance company, who had talk with Mr. Kajal Dey, the Engineer of M/s. Thermax Ltd., who has gone through the report of the Surveyor and then opined that there was no incident of any explosion and so any of the covered perils // 5 // under the insurance policy had not happened. It was merely an electrical fault, which was not covered under the insurance policy. The equipment E.S.P. is of the size of a room and constructed of steel and aluminum and many electrodes inside the instruments, which are to cure the dust and smoke out from the factory. Had there been any incident of explosion in the E.S.P., then the damages would have been at a very large scale and the things around would have also been damaged, but no such incident of explosion was found there and so it was not a covered peril. On these pleadings, the claim of the complainant has been resisted by the insurance company.
5. In support of case of the complainant, the complainant has filed copy of the insurance policy issued by the OP in favour of the complainant, as Annexure A-1, intimation of incident to the OP, Annexure A-2, copy of minutes of meeting dated 30.05.08, Annexure A-3, estimate of repairs to be carried out, submitted with the OP, Annexure A-4, letter of intimation of appointed of surveyor, Annexure A-5, letter from surveyor of the OP to the complainant Annexure A-6, letter from the complainant to the OP, Annexure A-7, copy of the index of documents, submitted by the complainant with the OP, Annexure A-8 and letter of repudiation, Annexure A-9. Apart from it, affidavit of the complainant in support of the complaint has also been filed.
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6. To counter it, the insurance has brought on record the report of surveyor Mr. Sudhir Joshi, Annexure OP-1, report of surveyor Mr. Ashok Motiani, Annexure OP-2, report of surveyor Mr. Utkarsh Shingwekar, Annexure OP-3, minutes of meeting between complainant and the Officers of M/s. Thermax Ltd., Annexure OP-4, notice sent by counsel for the complainant dated 26.12.2009, Annexure OP-5, terms and conditions of Standard Fire and Special Perils Policy, Annexure OP-6 and photographs of E.S.P. of plant of the complainant, Annexure OP-7.
7. We have heard arguments advanced by both parties in detail and gone through the record of the case.
8. First question which arises for consideration is whether the incident, happened in the plant of the complainant, is covered under the terms of the insurance policy or not ?
9. Insurance policy Annexure A-1 shows that under this policy, sponge iron plant of the complainant Company was insured under Standard Fire and Special Perils policy and premium of Rs.1,15,284/- was paid for obtaining cover under the policy. The building as well as the stock and contents of the sponge iron plant were covered under the policy and the description of risk was factory building and shed, plant // 7 // machinery and stock of coal. Add on premium was also paid for earthquake and spontaneous combustion and cover was provided for these perils also. The policy has been said to be subject to warranty No.1. As per the complainant, merely two pages policy was provided by the Insurance Company and no other terms and conditions were provided, whereas OP has brought on record terms and conditions of the Standard Fire and Special Perils Policy. Photocopies of documents, which have been filed by the complainant has also mention that warranties & clauses (as per forms attached) & is extended to cover risks of (as per forms attached). Thus, there were certain warranties and clauses, as per forms attached, so forms were attached along with policy, but those forms have not been filed. The policy document, however, shows that it is page 1 of 3 pages and page 3 of 3 has also been filed by the complainant, but page second i.e. page 2 of 3, has not been brought on record by any of the parties.
10. In the intimation given by the complainant to the Insurance Company, Annexure A-2, it has been mentioned that this information was given by the complainant to the Insurance Company that the E.S.P. installed in the sponge iron factory suffered an incident of fire because of some electric shock and therefore request was made to send a surveyor to assess the loss. On receiving this intimation, surveyor Mr. Sudhir Joshi was sent. Annexure A-3 is the minutes of meeting // 8 // between Director of the complainant Company and Mr. Sudhir Joshi, Surveyor & Loss Assessor, Mr. Sreekumar S. Pillai, Surveyor & Loss Assessor, Mr. R.K. Kishore, Divisional Manager, The New India Assurance Co. Ltd. This meeting was held on 30.05.08. It was observed by these persons that inspection by Surveyor Mr. Sudhir Joshi was done, at the plant on that very day, in presence of Mr. S.K. Das and it was observed that the E.S.P. was damaged because the electrodes were damaged and the duct connecting the E.S.P. & ABC (After Burning Chamber) torn and insulation damaged. It was also observed that foundation of the motor driving the fan to drive out the clean gas to the chimney got uprooted, the fan and the motor assembly got pushed outwards. The conveyor belts connecting the cooler product bunker to carry the sponge iron damaged due to excess heat. It has been specifically mentioned that "as reported the hot sponge iron at about 5000C (beyond normal temp of 1500C) fell in the bunker on the top of the normal sponge iron which caused the carbon contents in the material burning causing deterioration to quality. This has happened due to the belt running for few minutes. However the quality has to be tested in the lab. The insured are advised to preserve the materials till the final inspection is done".
11. Thus, we found that this report of preliminary inspection shows that there were substantial damages to the E.S.P. because of fall of // 9 // sponge iron having temperature of 5000C in the bunker on the top of the normal sponge iron, which ultimately caused burning of carbon contents and deterioration of quality. Burning of carbon contents is the fire and on account of this fire and explosion, the E.S.P. was very badly damaged. The foundation of the motor was uprooted and fan and motor assembly got pushed outwards. The conveyor belt was also damaged due to excess heat. This preliminary inspection report of Mr. Sudhir Joshi, prima facie shows that there was a case of excessive heat due to burning of carbon, which amounts fire and probably it was on account of some explosion causing damages to parts of the E.S.P. Then Mr. Ashok Motiani, Proprietor of Ashok & Co., Surveyors, Assessors and Valuers, inspected the premises for final survey.
12. Prior to that Mr. Sudhir Joshi, Preliminary Surveyor has separately filed his report to the insurer, apart from minutes of the meeting with Director of the complainant, Divisional Manager of the Insurance Company and another Surveyor. In that report, Annexure OP-1, Mr. Joshi under the head 'Cause of Damage' has stated that "As explained in the intimation and the occurrence report the proximate cause of loss is some electrical fault which led to tripping of the ESP transformer and ID fan. The same further caused increase of pressure and temperature of the flue gas beyond the withstanding capacity of the affected equipments/finished goods. There was virtually no fire, // 10 // rather the loss took place due to the abnormal rise of process parameters (temperature & pressure) which otherwise could have been controlled by the safety operation like opening of ABC cap. In view of above the loss is falling under the following exclusions of fire policy and hence not admissible as per the terms and conditions of the policy held by the insured.
Though the proximate cause is electrical fault the same has not generated any fire which could have damaged the equipments and stock. The damages took place due to the abnormal increase of process parameters.
The process itself involves temperature and pressure and any abnormal increase of such parameters due to non- operation of safety equipments and the subsequent losses to the equipments and stock involved in the process can not be indemnified as the same is falling under the exclusion of fire peril".
13. Contrary to it, surveyor Mr. Ashok Motiani in his report, Annexure OP-2, under the head 'Cause' has clearly mentioned that "It was reported that the ESP Transformer & ID Fan installed in Kiln II got tripped at about 7.30 P.M. resulting in stoppage of gas flow through the ESP chimney. The gas got jammed, causing increase of pressure & temperature in ESP & resulting in fire & explosion in ESP. In our // 11 // opinion, the fire & explosion would be treated as sudden, unforeseen & accidental". It was reported that ESP Transformer & ID Fan installed in Kiln II got tripped at about 7:30 p.m. resulting in stoppage of gas flow through the ESP chimney. The gas got jammed, causing increase of pressure and temperature in ESP, resulting in fire and explosion and in his opinion the fire and explosion would be treated as sudden, unforeseen and accidental. Again under the head 'Occurrence', it has been reported by Mr. Motiani that "It was reported that the fire was noticed by a plant operator. The explosion occurred within next couple of minutes i.e. almost simultaneously. The insured's engineers on duty quickly stopped the plant in order to avoid any further damage. The operators present near the affected equipments initially moved out to safer areas. The plant workers used fire extinguishers. The fire was put out quickly. The matter was reported to higher authorities. They visited the site late in the night & made inquiries. The insured explained that the fire being minor, their plant workers were able to put out the fire without requiring any outside help. The insured further clarified that the matter was not reported to the police as the fire/explosion had occurred accidentally & nobody had got injured."
14. Thus, from the report of these two surveyors it is clear that Mr. Sudhir Joshi in his report has based his opinion on the observations // 12 // made in minutes recorded by him in document Annexure A-3 and tried to twist the facts in order to save the Insurance Company from its liability to pay compensation on account of happening of incident of fire and explosion. But the surveyor Mr. Ashok Motiani in his report, in very clear words, has stated that there was definitely an incident of fire and explosion, which was unforeseen and accidental and the officers of the complainant Company and operators on duty quickly stopped the plant, used fire extinguishers to put out the fire and controlled it immediately to avoid further damages to the complainant. We are satisfied with the opinion expressed by Mr. Motiani and are of the view that opinion of Mr. Ashok Motiani is more reliable in comparison with opinion of Mr. Sudhi Joshi.
15. It is also worth mentioning that, report of Mr. Sudhir Joshi, dated 24.06.08 has been read by Mr. Ashok Motiani, he has referred it and has stated in his report that he has gone through preliminary survey report dated 24.06.08 of Mr. Sudhir Joshi and after taking into consideration this report, he ultimately opined that there was an incident of fire and explosion.
16. Insurance Company for the purpose of avoiding its liability had also appointed third surveyor Mr. Utkarsh Shingwekar, who filed his report also. Report of Mr. Utkarsh Shingwekar is not of much // 13 // importance in the eyes of law, because Mr. Shingwekar was not a Surveyor and Loss Assessor who inspected the spot. He has not even gone to the spot and has only played role of a judge. He has simply gone through report of Mr. Joshi as well as Mr. Motiani and then expressed his opinion. He was probably playing role of Umpire, as he was not an appointed surveyor, who inspected the spot, in presence of complainant so his report carries no weight. Otherwise also, when earlier duly licenced and qualified two surveyors were appointed by the Insurance Company and their opinion were on record, then there was no occasion for the Insurance Company to appoint third surveyor. In fact he was the fourth person, in turn, because at the time of preliminary survey by Surveyor Mr. Sudhir Joshi, Mr. Sreekumar S. Pillai was also there, who inspected the spot, as Surveyor & Loss Assessor, out of which report of Mr. Sudhir Joshi, has been brought on record, and then Mr. Ashok Motiani was appointed for conducting final survey and he has taken into consideration the report of Mr. Joshi also and ultimately came to the conclusion that it was a case of fire and explosion and it is fully covered under the terms of the policy.
17. In the report of Mr. Ashok Motiani, it has been described in detail as to how the plant works and how the process is being conducted in the plant. Which reads as under : -
"THE PROCESS :
// 14 // The main raw materials required for manufacture of sponge iron are iron ore and coal. The manufacturing process is basically a chemical process occurring at high temperature in which oxygen is removed from the iron ore converting the ore to metallic iron. The manufacturing process consists of reducing iron ore lumps with solid carbonaceous material such as coal in a rotary kiln heated to a temperature of about 11000C. After reduction, the product is cooled in a drum type rotary cooler and then separated by screening and magnetic separation into their components - Sponge Iron Lumps, Sponge Iron Fines, Coal charred, Ash etc. High degrees of reduction and thermal efficiency can be obtained by controlling process parameters such as reduction temperature, rate of feed, size of feed, grade of feed etc. In this process, the raw material viz. iron ore, coal and limestone are charged into the Rotary Kiln from the inlet end by means of a feed pipe. The Rotary Kiln, lined with refractories, is slightly inclined. It is driven by a variable speed controlled AC drive. During the rotation of the kiln, due to its inclination, the raw materials (viz. iron ore, coal and limestone) gradually move down towards the discharge end counter to the flow of the gases. As a result, iron ore is preheated in the preheating zone and reduced to sponge iron in the reduction zone. The material discharged from the Rotary Kiln is a mixture of sponge iron, char and dolochar.
Since the material is at a fairly high temperature, this requires to be cooled down to such temperature where it could be conveniently handled. This is accomplished in a Rotary Cooler by means of indirect water sprays. The cooled product is subsequently screened to the required size fractions and magnetically separated for recovery of sponge iron, while the non- magnetic items like char and dolochar are dumped as by
- products.
The operating temperature in kiln varies between 950 C and 11000C depending upon actual process 0 requirement. The temperature is controlled by adjusting the combustion air volume injected into the kiln by means of blowers, mounted on the kiln shell. For initial heating of the kiln during start-up, Light Diesel Oil is used. During normal operation, no fuel oil is used to make up the short fall. In addition, fine coal is injected // 15 // into the kiln from the discharge end for effective control of temperature in the region of discharge end and also as substitute for oil."
18. Thus we are convinced that Mr. Ashok Motiani has taken into consideration all aspects of the matter and has very minutely and thoroughly gone through the report of Mr. Sudhir Joshi as well as inspected the spot to ascertain the real cause of loss. His opinion is fully dependable, therefore agreeing with him we are concluding that the case happened in the premises of the complainant was that of fire and explosion, on account of sudden, unforeseen and accidental causes and so is covered under the terms of the insurance policy and it does not come in the category of any exclusion.
19. In the policy document, under the head 'Fire', it has been stated that : -
"Fire Excluding destruction or damage caused to the property insured by
a) i) its own fermentation, natural heating or spontaneous combustion.
ii) its undergoing any heating or drying process.
b) burning of property insured by order of
any Public Authority."
So far as spontaneous combustion is concerned, cover has been obtained by the complainant by paying add-on premium and other // 16 // exclusions do not apply in the facts of the present case. Similarly, under the head 'Explosion/Implosion' it has been stated that : -
"Explosion / Implosion Excluding loss, destruction of or damage
a) to boilers (other than domestic boilers), economizers or other vessels, machinery or apparatus (in which steam is generated) or their contents resulting from their own explosion/implosion.
b) caused by centrifugal forces."
It is clear that these exclusions are also not applicable in the facts of the present case, as the explosion resulted due to fire set on account of some external reasons.
20. Learned counsel for the OP has also drawn our attention towards clause of 'GENERAL EXCLUSIONS', in which it has been stated that : -
"This Policy does not cover (not applicable to policies covering dwellings) ...............
...............
...............
Loss, destruction or damage to any electrical machine, apparatus, fixture or fitting arising from or occasioned by over-running, excessive pressure, short circuiting, arcing, self heating or leakage of electricity from whatever cause (lightening included) provided that this exclusion shall apply only to the particular electrical machine, apparatus, fixture or fitting so affected and not to other machines, apparatus, fixtures or fittings which may be destroyed or damaged by fire so set up.
...............
...............
... ... ... ... ..."
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21. The plant used to work for all the 24 hours, so it cannot be said to be a case of overrunning. There was also not a case of excessive pressure or short circuiting or arcing or self heating or leakage of electricity. In the facts of the present case, highly heated sponge iron was being processed and iron ores, containing carbon also, were there, which started burning. So, on account of overheating and burning of carbon inside, the incident happened. Thus, this exclusion is also not applicable in the facts of the present case.
22. In view of the aforesaid, this question is decided in favour of the complainant and against the Insurance Company.
23. The next question for consideration is that, how much amount is payable by the Insurance Company as compensation for the damages to the complainant, on account of explosion and fire in the insured plant ?
24. Mr. Ashok Motiani in his report has assessed loss of Rs.7,95,000/-. He has also taken into consideration the value of salvage, i.e. scrap, and deducted it. Depreciation @ 2.5 % has also been deducted and insured's share of loss & damage due to underinsurance has also been taken into consideration and deducted. Then policy excess has also been taken care of. Thus, as per this report, total // 18 // amount of Rs.7,95,000/-, is payable by the Insurance Company to the complainant. At the time of final arguments, learned counsel for the complainant has very graciously argued that though the complainant has claimed an amount of Rs.66,57,344/-, but as no other report of any Surveyor has been filed by the complainant in support of its claim, so the complainant would be satisfied, if the amount of loss, as assessed by the surveyor Mr. Ashok Motiani, is paid to the complainant. In view of this submission of learned counsel for the complainant and after going through the report of Surveyor Mr. Ashok Motiani, we are satisfied that amount of Rs.7,95,000/- would be just and proper compensation to the complainant on account of loss suffered by the insured plant, in the incident of fire and explosion. This amount was payable by the Insurance Company, when the report of Mr. Ashok Motiani was submitted to it, but the Insurance Company has failed to pay the same. Even when the complaint was filed by the complainant, then also the amount was not paid, which comes in the category of deficiency in service. So, the Insurance Company is liable to pay interest on this amount @ 6% p.a. from the date of filing of the complaint, till the date of payment. Thus, this question is decided in favour of the complainant.
25. In view of the aforesaid, we allow the complaint and direct the OP / Insurance Company to pay an amount of Rs.7,95,000/- to the // 19 // complainant along with interest @ 6% p.a., w.e.f. the date of filing of the complaint, till the date of payment. Cost of litigation is quantified as Rs.10,000/- and this amount would also be payable by the Insurance Company to the complainant.
(Justice S.C.Vyas) (V.K. Patil)
President Member
/12/2011 /12/2011