National Consumer Disputes Redressal
Ratnagiri Gas Power Pvt. Ltd. vs National Insurance Co. Ltd. on 11 August, 2017
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 191 OF 2009 1. RATNAGIRI GAS POWER PVT. LTD. E-Wing, NFL Premises,
A-11, Sector 24,
Noida Gautam Budh Nagar Uttar Pradesh - 201 301 ...........Complainant(s) Versus 1. NATIONAL INSURANCE CO. LTD. Division XI,
Sterling Cinema Building,
3rd Floor,
65, Murzban Road,
Fort Mumbai - 400 001 ...........Opp.Party(s)
BEFORE: HON'BLE MR. JUSTICE AJIT BHARIHOKE,PRESIDING MEMBER HON'BLE MR. ANUP K THAKUR,MEMBER
For the Complainant : Mr. Sukumar Pattjoshi, Senior Advocate
assisted by Mr. Avinash Menon, Advocate For the Opp.Party : Mr. Joy Basu, Senior Advocate
assisted by Mr. Yogesh Malhotra, Advocate
Dated : 11 Aug 2017 ORDER
JUSTICE AJIT BHARIHOKE, PRESIDING MEMBER
The complainant Ratnagiri Gas & Power Pvt. Ltd. was registered under the Companies Act, 1956 on 8.7.2005. The company was established as a special purpose vehicle to take over the generating station and related assets owned by Dabhol Power Company Ltd., a private ltd. company promoted and established by the erstwhile Enron group.
2. The complainant company was desirous of taking industrial all risk policy including the insurance cover for the loss of profit (LOP) for power block II of the power plant of Ratnagiri project commencing from 20.5.2007. For the above-noted purpose, the complainant, vide request for quotation dated 21.3.2007, invited competitive quotations from the various insurance companies including the opposite party National Insurance Co. Ltd.
3. The above-noted request for quotation sent to the opposite party and the other insurance companies detailed the expectation of the complainant from the insurer. The relevant extract of the above-noted request for quotation dated 21st March, 2007 is reproduced as under: -
"Our Expectations from our insurers: -
We believe that our plant will operate as a Peaking Power Plant.Thus, the sum insured for the gross profit and computation of the lost GP following a loss, will not fit into any of the standard wordings of the Consequential Loss of Profits/Business interruption policies.
We hope that this does not pose any problem in issuing a standard IAR policy and you would be able to issue the same. We would thus request you to confirm this in writing.
In the event issuing of IAR policy is likely to pose problem, we would expect the insurer to exploit 'file and use' route to devise special policy addressing this issue (LOP cover for peaking power plant), with all the other covers for material damage remaining identical to the IAR policy.
During the policy period, our LNG facility is to be commissioned tentatively any time after September, 06 but efforts will be made to pre-pone the commissioning. Therefore, this block will change over to run on Re-gasified LNG (RLNG) immediately on commissioning of LNG facility. The cover to be provided will insure this change over also. In fact insurers may explore whether after the fuel is changed to gas, discount in premium can be granted.
3. Bidders shall submit their quote for the following:
a. IAR policy with extensions and deductible as indicated in the attached sheet for total value of Rs.2150 crores above for material damage and standing charges of Rs.470 crore for LOP as indicated above. (All other perils should be covered on all risk basis, including fire, machinery breakdown, impact, acts of god etc., but not restricted to above and business interruption following all perils. Indemnity period in case of LOP will be 6 months).
b. Quote for covering fuel on declaration basis. Please indicate declaration value while submitting quote. Kindly let us know the basis of declaration.
Coverage for 'Terrorism' as per All India Fire Tariff provisions.
4. In the event IAR policy can be issued we would request your written note, duly signed by the responsible and authorised signatory of your company as regards the methodology of claim settlement, for a hypothetical claim scenario, with an interruption period of 60 days.
5. Kindly note that standing charges cover proposed is only on estimate basis and the sum insured for same should be adjustable at the end of financial year ending based on actual without limit.
6. The values declared for insurance are duly evaluated amount on Reinstatement cost basis and in view of this the policy should not contain any clause for and towards underinsurance for the policy period of 1 year.
7. Insurers will have to suggest a panel of surveyors ( no limit for the claims) which will be vetted by us and will have authority to call any one of the surveyor in the event of a claim.
8. Lead insurer will have to enter into MOU for speedy claim settlement and release of on account payment within 15 days of claim.
9. Quotation should reach our office by 28th April, 2007 by 1500 hrs at our site.
10. Kindly confirm that BG for the quoted amount will be acceptable.
4. In the list of "add on deductible covers and deductibles" following were indicated:
DEDUCTIBLES
Section/Inbuilt Extensions
Deductibles
Section-1 All risk (AR)
5% of the claim amount sub to min Rs.25 lacs
Section-2 Machinery breakdown
5% of the claim amount sub to min Rs.25 lacs
Section-3 Business Interruption (FLOP & MLOP)
28 days sub to min 25 lacs with indemnity period of 6 months
5. Pursuant to the above-noted "request for quotation", the opposite party insurance company submitted its quotation vide letter dated 26.4.2007. By the said letter the opposite party insurance company gave quotation for the provision of the insurance coverage (for power block II with provision to cover block III on its completion of testing and commissioning) as under: -
"We refer to your tender ref: RGPPL: Ins: IAR:07-08 dated 21.03.2007 and give below our quote for insuring under IAR policy:
Premium Rs.6,63,48,125-00
S.tax @ 12.24% Rs.81,21,010-00
------------------------------------------------
Total payable Rs.7,44,69, 135-00
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We wish to inform you that all your condition given in your tender are covered subject to following:
Reinstatement of sum insured following a loss at pro-rata additional premium.
Average clause (upto 15% under insurance ignored).
Claims co-operation clause.
War & civil war exclusion clause.
Terrorism and sabotage exclusion clause.
Electronic data endorsement-NMA 2915.
Electronic date recognition clause-NMA 2801.
Seepage & pollution clause-NMA 2560.
Computer virus exclusion.
Cyber risk exclusion.
Components along the hot-age path of GT (Munich Re Endrs 1367).
Overhauling of electric motors and generators above 1000 MW other than turbo generators (Munich Re 1371).
Excluding: -
Ex-gratia payments.
Marine perils & Marine liabilities to all property Special Condition Once the power block III becomes operational after successful testing and commissioning, the same will be covered under this policy at additional pro-rata premium with prior intimation to insurer.
10% of total premium on pro-rata basis from date of conversion to date of expiry of policy will be refunded on successful conversion of facility from Naphtha to RLNG subject to no losses reported till the date of conversion and prior intimation to the insurer.
We wish to reply to the points raised in your tender as under:
Claim Settlement In the event of loss, a senior and technically competent surveyor with expertise in finance will be appointed promptly and on determination of minimum liability and admissibility of the claim, on account payment will be made within 15 days of such assessment. Standard industrial practice will be adopted to determine the liability and loss."
Panel of Surveyors We will provide the list at the time of signing the MOU.
Signing of MOU We are agreeable for signing MOU."
6. According to the complainants in terms of the offer made by the opposite party, the opposite party had agreed to all the terms & conditions as contained in the request for quotation and had stipulated to extend all risk insurance policy sought by the complainant on payment of total premium of Rs.7,44,69,135/-. The opposite party did not make any exception to the scope of loss due to business interruption. The opposite party specifically stated in the quotation that "all your conditions given in your tender are covered subject to following."
"1. Reinstatement of sum insured following a loss at pro-rata additional premium.
2. Average clause (upto 15% under insurance ignored)
3. Claims co-operation clause.
4. War & Civil war exclusion clause.
5. Terrorism and sabotage exclusion clause.
6. Electronic data endorsement-NMA 2915
7. Electronic Date recognition clause-NMA 2801
8. Seepage & pollution clause-NMA 2560.
9. Computer virus exclusion
10. Cyber risk exclusion
11. Components along the hot-gas of GT (Munich Re endors- 1367).
12. Overhauling of electric motors and generators above 1000 MW
13. Excluding:-
a) Ex-gratia payments. b) Marine perils & Marine liabilities to all property Special Condition
Once the power block III becomes operational after successful testing and commissioning, the same will be covered under this policy at additional pro-rata premium with prior intimation to insurer.
10% of total premium on pro-rata basis from date of conversion to date of expiry of policy will be refunded on successful conversion of facility from Naptha to RLNG subject to no losses reported till the date of conversion and prior intimation to the insurer.
We wish to reply to the points raised in your tender as under:
Claim Settlement In the event of a loss, a senior and technically competent surveyor with expertise in Finance will be appointed promptly and on determination of minimum liability and admissibility of the claim, an on account payment will be made within 15 days of such assessment. Standard Industrial Practice will be adopted to determine the liability and loss Panel of Surveyors We will provide the list at the time of signing the MOU.
Signing of MOU We are agreeable for signing MOU.
BG for the quoted amount We confirm that we will accept the BG for the quoted amount.
Hope the quote is competitive and look forward to your favourable response.
Thanking you, Yours faithfully, Sd/-
N.C. Ray Dy. General Manager"
7. It is alleged that there was no stipulation in regard to non-coverage of loss of profit as a result of machinery breakdown or any such similar aspects under the coverage of business interruption from all perils.
8. By letter No.RGPPL/IAR/Power Block#2/07-08 dated 17th May, 2007 the complainant accepted the offer made by the opposite party vide letter dated 26.4.2007 stating as under: -
"With reference to the above, it is to inform you that we have decided to obtain the above policy form you as per the offer submitted by you at a premium of Rs.6,63,48,125/- for IAR+Rs.51,80,000/- for terrorism with service tax extra as applicable. We are arranging fund transfer of Rs.8,03,70,125/- (Rupees Eight Crore Three Lac Seventy Thousand One Hundred Twenty Five only) inclusive of revised rate of service tax i.e. 12.36%.
xxxxxxxxxxxxxxxxxxxxxx 5.0 All other terms of RFQ, if not included above, shall be part of the policy."
9. The opposite party by mail dated 18.5.2007 confirmed the receipt/payment of the amount of premium for insurance coverage stating as under: -
"Re: Remittance of premium for various insurance policies.
We are pleased to confirm that today 18th May 2007 our Division Office XI Mumbai has received remittance of premium through your bank, details of which are as below: -
Erection all risk insurance policy for BLOCK#I premium (including service tax) Rs.7,71,26,011/-.
Industrial all risk policy for block# II premium (including tax) Rs.8,03,70,125.
Stock declaration policy (Fuel stocks) Premium (including tax) Rs.22,53,942/-
Total Remittance: Rs.15,97,50,078/-
Confirmation of receipt is faxed to you by the DO. Policy documents and schedules will be sent separately."
10. Thus, according to the complainant with the acceptance of premium amount on 18.5.200 binding and enforceable contract of insurance between the parties came into force and that as per the terms of contract the insurance coverage commenced from 20.5.2007 valid upto 19.5.2008. It is further the case of the complainant that the opposite party never intimated the complainant that the insurance policy will not cover the loss of profit on account of machinery breakdown under the coverage of business interruption following all perils. Complainant, however, on 31st October, 2007 received the policy document from the opposite party which contained the following clause: -
"Special exclusions to Section II:
This policy does not cover loss resulting from interruption of or interference with the business directly or indirectly attributable to 1.1................................
1.7 Mechanical or electrical breakdown or derangement of machinery or equipment"
11. According to the complainant the aforesaid exclusion clause in the policy document is contrary to the binding contract entered into between the parties which came into operation on 18.5.200 with the acceptance of the premium by the opposite party insurance company.
12. It is further the case of the complainant that on 19.1.2008 there was a breakdown in gas turbine II and upon opening the said machine, it was observed that the damage caused to it was enormous. Complainant, thus, lodged an insurance claim with the opposite party for machinery breakdown and machinery loss of profit in terms of the insurance coverage as per the contract of insurance.
13. It is alleged that though the insurance claim for the damage caused to the machinery has been settled, the opposite party has repudiated the insurance claim for business interruption losses because of machinery breakdown on the premise that as per the terms & conditions of the insurance policy the coverage was not extended to those losses. The repudiation letter dated 30th April, 2008 written by the opposite party reads as under: -
"We refer to your letter dated 29th March 2008 along with enclosures.
We have gone through the RFQ detail and would clarify as under:
We had noted from the contents thereof that you had taken industrial All Risk policy for power block# 2 w.e.f. 20th May 2006 and that you wished "to renew all risk insurance cover, on the lines of standard all risk (IAR) policy as stated in RFQ letter.
The terms ' all other perils', all risk basis' etc., mentioned elsewhere in the RFQ were understood by us within the context of the wordings of standard industrial all risk policy along with its normal coverage under different sections, exclusions, and other conditions.
The terms advised by our reinsurers as well as our Head Office also were for insurance of standard insurance all risk policy wordings only (wherein BI losses arising out of machinery breakdown were specifically excluded), alongwith the special conditions which we had listed in our quote letter.
That is how we have issued a standard IAR policy, wherein business interruption due to machinery breakdown is an excluded peril."
14. According to the complainant net financial loss on account of business interruption due to machinery breakdown suffered by the complainant is Rs.133.52 crores. Being aggrieved of the repudiation of the insurance claim for loss due to business interruption, the complainant has filed the consumer complaint seeking direction to the opposite party to pay to the complainant sum of Rs.133.52 crores together with interest @ 15% p.a. w.e.f. 1.5.2008 till the date of filing of the complaint and further interest @ 15% till realization of the amount besides cost.
15. The opposite party in its written statement took the preliminary objection that the consumer complaint is not maintainable as the complainant is not a consumer as envisaged under Section 2 (1) (d) of the Consumer Protection Act, 1986 because he had availed of services of the insurance company for a commercial purpose i.e. the insurance cover for the loss of business.
16. On merits the opposite party has not disputed the facts. However, the opposite party has justified the repudiation as claim for business loss/profit stating that as per the terms and conditions of the insurance policy the loss of business/profit due to machinery breakdown is within the exclusion clause provided under the terms and conditions of the insurance policy.
17. We have considered the rival contentions and perused the record.
18. The opposite party has placed on record copy of the terms and conditions of the insurance policy. Section II of the terms and conditions deals with the business interruption. The relevant clause is reproduced as under:
"Business Interruption "The insurers agree that if during the period of insurance the business carried on by the insured at all the premises specified & listed in the schedule is interrupted or interfered with in consequence of loss destruction or damage indemnifiable under Section I, then the Insurers shall indemnify the insured for the amount of loss as hereinafter defined resulting from such interruption or interference provided that the liability of the insurers in no case exceeds the total sum insured or such other sum as may hereinafter be substituted there for by Endorsement signed by or on behalf of the insurers.
Special Exclusions to Section II
1. This policy does not cover loss resulting from interruption of or interference with the business directly or indirectly attributable to -
1.1. any restrictions on reconstruction or operation imposed by any public authority 1.2. the insured's lack of sufficient capital for timely restoration or replacement of property lost destroyed or damaged 1.3. loss of business due to causes such as suspension lapse or cancellation of a lease licence or order etc. which occurs after the date when the items lost destroyed or damaged are again in operating condition and the business could have been resumed, if said lease licence order etc. had not lapsed or had not been suspended or cancelled.
1.4 damage to boilers economisers turbines or other vessels machinery or apparatus in which pressure is used or their contents resulting from their explosion or rupture.
1.5 electronic installations, computers and data processing equipment.
1.6 Damage resulting from :
Deliberate erasure loss distortion or corruption of information on computer systems or other records programs or software.
b) Other erasure loss distortion or corruption of information on computer systems or other records programs of software unless resulting from fire lightning explosion aircraft, impact by any road vehicle or animals earthquake, hurricane, windstorm, flood, bursting overflowing discharging or leaking of water tanks apparatus or pipes in so far as it is not otherwise excluded unless caused by damage to the machine or apparatus in which the records are mounted.
1.7. Mechanical or electrical breakdown or derangement of machinery or equipment."
19. On reading of the above, it is evident that as per the terms and conditions of the insurance policy, the policy issued in favour of the complainant does not cover loss resulting from interruption or any interference with the business directly or indirectly attributable to mechanical or electrical breakdown or derangement of machinery or equipment. Undisputedly, the insurance claim of the opposite party for loss of business is because of the damage caused to the machinery resulting in its breakdown, therefore, repudiation of insurance claim for loss of business / profit in view of subject exclusion clause reproduced above is justified?
20 Learned counsel for the complainant has contended that above noted terms and conditions of the insurance policy relied upon by the opposite party are not part of contract because the insurance contract came into being on acceptance of insurance premium by the opposite party insurance company which preceded the issue of terms and conditions of the insurance policy. Counsel for the opposite party on the contrary has submitted that insurance contract came into force only with the issue of the policy and its terms and conditions. Thus, the critical question which needs determination is as to on which date, the insurance contract between the parties came into being?
21. In order to find answer to the above question, it would be useful to have a look on the communications exchanged between the parties.
22. Undisputedly, the complainant had invited quotations from various insurance companies vide its letter dated 21.03.2007. In the said letter, the complainant had spelled out its expectation from the insurer. Relevant expectations are reproduced above in para 3. No doubt, in the said expectations clauses 1 & 2, the complainant made it clear that that their request for insurance for loss of profit / business interruption may not be satisfied with a standard insurance policy with standard wordings and, therefore, the insurer would be required to devise a special policy addressing the issue of cover of loss of profit for a peaking power plant This, however, is only a letter inviting proposal detailing the requirement of the insured. The question is whether the insurer accepted the said proposal vide its quotation dated 26.04.2007?
23. The quotation given by the insurance company in response to the above noted letter of request is reproduced in para 4 of this order. On reading of the above quotation, we find that vide letter dated 26.04.2007 the opposite party quoted the premium for insurance at Rs.7,44,69,135.00/- inclusive of sales tax. In the quotation letter, it was mentioned that all the conditions given in the tender are covered. The letter also records that opposite party is agreeable for signing the Memorandum of Understanding. Pursuant to the above quotation dated 26.04.2007, admittedly the complainant sent a letter dated 17.05.2007 accepting the quotation submitted by the opposite party. In the said letter, the complainant also recorded as under:
"Dear Sir, With reference to the above, it is to inform you that we have decided to obtain the above policy from you as per the offer submitted by you at a premium of Rs.6,63,48,125/- for IAR + Rs.51,80,000/-for terrorism with Service Tax extra as applicable. We are arranging fund transfer of Rs.8,03,70,125/- ( Rupees Eight Crore Three Lac Seventy Thousand One Hundred Twenty Five only) inclusive of revised rate of Service Tax i.e. 12.36% 1.00 The policy will have the following conditions :
Sum Insured shall be as follows :
IAR policy with extensions and deductible as indicated in the attached sheet for total value of Rs. 2150 crores for material damage and standing charges of Rs.470 crores for LOP as indicated above. (All other perils are covered on All risk basis, including fire, Machinery breakdown, impact, Acts of God, etc. but not restricted to above and business Interruption following all perils.Indemnity period in case of LOP will be 6 months) Coverage for "Terrorism" is as per All India Fire Tariff Provisions.
Once the Power Block III becomes operational, the same will be covered under this policy at additional pro-rata premium with prior intimation.
10% of total premium on pro-rata basis from date of conversion to date of expiry of policy will be refunded on successful conversion of facility from Naphatha to RLNG subject to no losses reported till date of conversion and prior intimation to the insurer. However, this will not seize right of insured to operate the machine on Naphtha in case of requirement.
The values for Block III when added will be given separately for material damage as well as LOP.
The values declared for insurance are duly evaluated amount on Reinstatement cost basis and there will be no underinsurance, for the policy period of one year, in the event of any claim.
The standing charges cover proposed is only on estimate basis and the sum insured for same shall be adjusted at the end of financial year ending based on actual without limit. You will submit the breakup of premium collected on this account to avoid any dispute at a later stage.
You will enter into MOU for speedy claim settlement and release of on account payment within 15 days of claim and other important policy conditions.
Panel of surveyors will be pre-decided as a part of the MOU. In the event of any changes felt necessary at a later date, the same shall be as mutually agreed by both the parties.
Deductibles will be as below :
All risk : 5% of the claim sub. To min. of Rs.25 lacs Machinery Breakdown : 5% of the claim sub. To min. of Rs.25 lacs Business Interruption (FLOP &? MLOP) : 28 days sub. To min. of 25 lacs with indemnity period of 6 months.
Add on covers as per the attached 'Annexure-I' will be applicable and part of the policy."
24. Bare reading of the above would show that while accepting the quotation of the opposite party and sending the cheque for premium, the complainant added that policy should have the above noted conditions. This clearly implied that letter dated 17.05.2007 sent by the complainant to the opposite party is a counter offer in which while accepting the quotation, the complainant has stated certain conditions to be incorporated in the policy. Thus, it is clear that insurance contract did not come into being on payment of premium amount by cheque to the opposite party.
25. It is pertinent to note that even in the letter dated 21.03.2007, the complainant had mentioned that lead insurer i.e. the opposite party will have to enter into Memorandum of Understanding with the complainant. The opposite party also in its quotation dated 26.04.2007 had clearly mentioned that opposite party is agreeable for signing the Memorandum of Understanding. Thus, it is clear that the complete terms and conditions of the insurance contract were to be recorded in Memorandum of Understanding. This fact makes it clear that quotation dated 26.04.2007 was not acceptance of the offer but only a proposal which was subject to signing of Memorandum of Understanding between the parties.
26. In view of the discussion above, it is evident that insurance contract came into being only on issue of insurance policy as also the terms and conditions by the opposite party insurer to the complainant. Thus, in our view, the opposite party was justified in repudiating the insurance contract in view of the above referred exclusion clause in the insurance policy.
27. Looking from another angle, it is not in dispute that complainant received copy of the terms and conditions of the insurance policy, much earlier than October 2007 when damage was caused to the plant machinery. Undisputedly, the terms and conditions contain the exclusion clause relied upon by the opposite party. Admittedly, even after the receipt of the terms and conditions of the insurance policy, the complainant remained silent till the incident and did not protest against the exclusion clause nor asked for cancellation of the policy. This circumstance by itself makes it clear that terms of conditions sent by the opposite party were acceptable to the complainant and the insurance contract between the parties came into existence after the issue of insurance policy and its terms and conditions.
28. In view of the discussion above, the insurance company cannot be said to be deficient in service particularly in its repudiation of insurance claim for loss of business / profits in view of the above referred exclusion clause in the terms and conditions of the insurance contract. Complaint is therefore, dismissed with no order as to costs.
......................J AJIT BHARIHOKE PRESIDING MEMBER ...................... ANUP K THAKUR MEMBER