National Consumer Disputes Redressal
Kopargaon Sahakari Sakhar Karkhana ... vs National Insurance Co. Ltd. & Anr. on 9 November, 2020
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI FIRST APPEAL NO. 580 OF 2012 (Against the Order dated 24/07/2012 in Complaint No. 7/2007 of the State Commission Maharashtra) 1. NATIONAL INSURANCE CO. LTD. HAVING ITS BARNCH OFFICE AT-KANYA VIDYA MANDIR, GODAM LANE, KOPARGAON, DIST. AHMEDNAGAR,
THROUGH ITS R.O1.-1, JEEVAN BHARTI TOWER-II, LEVEL-IV, 124, CONNAUGHT CIRCUS, NEW DELHI-110001 ...........Appellant(s) Versus 1. KOPARGAON SAHAKARI SAKHAR KARKHANA LTD. & ANR. THROUGH ITS MANAGER DIRECTOR, AT GAUTAM NAGAR, POST KOLPEWADI, TQ. KOPARGAON, DIST. AHMEDNAGAR 2. DIRECTORATE OF INSURANCE STATE OF MAHARASHTRA, THROUGH ITS DIRECTOR, Griha Nirman Bhawan, 264, First Floor, bandra (East), Mumbai-400051 ...........Respondent(s) FIRST APPEAL NO. 166 OF 2013 (Against the Order dated 24/07/2012 in Complaint No. 7/2007 of the State Commission Maharashtra) 1. KOPARGAON SAHAKARI SAKHAR KARKHANA LTD. KARKHANA LIMITED, THROUGH ITS MANAGING DIRECTOR, AT GAUTAM NAGAR, POST KOLPEWADI, TAL. KOPARGAON, DIST. AHMEDNAGAR ...........Appellant(s) Versus 1. NATIONAL INSURANCE CO. LTD. & ANR. MIDDLETON STREET, CALCUTTA-7000071 2. DIRECTORATE OF INSURANCE, STATE OF MAHARASHTRA THROUGH ITS DIRECTOR, GRIHA NIRMAN BHAVAN, 264, FIRST FLOOR, BANDRA (EAST) MUMBAI-400051 ...........Respondent(s)
BEFORE: HON'BLE MR. JUSTICE V.K. JAIN,PRESIDING MEMBER
For the Appellant : For the Respondent :
Dated : 09 Nov 2020 ORDER
For Kopargaon Sahakari : Mr. M. Y. Deshmukh, Advocate
Ms. Manjeet Kirpal, Advocate
For National Insurance Co. Ltd. : Mr. Ravi Bakshi, Advocate
Ms. Sayma Feroz, Advocate
For State of Maharashtra : Ex-parte
JUDGMENT
HON'BLE MR. JUSTICE V.K.JAIN, PRESIDING MEMBER The complainant is running a sugar factory in Maharashtra. The complainant had obtained an insurance policy from M/s National Insurance Company Ltd. appellant in FA No. 580 of 2012 and respondent in FA No. 166 of 2013 which included insurance of boiler No. GT 23, to the extent of Rs. 1.60 crore, for the period from 01.02.2005 to 31.01.2006. The case of the complainant is that crushing season of sugar factory starts in October and ordinarily lasts till April next year and maintenance work is undertaken after the crushing season is over. The Boiler Inspector carries out inspection and suggests maintenance and repairs, which are duly carried out. This is also the case of the complainant that on 20.10.2004 the Boiler Inspector had inspected the boilers including boiler No. GT23 and had found the same to be fit for operation. A certificate dated 17.11.2004 was issued by the Boiler Inspector after carrying out the inspection on 20.10.2004.
2. According to the complainant a blast/explosion took place in boiler No. GT 23 at about 9.15 p.m. on 12.05.2005 due to which two tubes attached to the boiler got snapped/detached. The boiler was stopped immediately and more water inducted to prevent further damage. On intimation being given to him, Boiler Inspector inspected the damaged boiler on 14.05.2005 and submitted a report dated 31.05.2005. The damage to the boiler was intimated to the insurer, which appointed a surveyor namely Mr. Pradeep Tambe who inspected the boiler and assessed the loss to the complainant. Vide his report dated 30.05.2005 the surveyor Mr. Pradeep Tambe of M/s Standard Surveyors Pvt. Ltd. reported as under:-
"With reference to photographs taken by the Insured and the basis of our inspection of tubes or the boiler, we have to say that:-
(i) Two numbers of boiler tubes had slipped off from the connection with the drum. This connection was made by expanding of tubes in boiler shell holes made for the purpose of connection.
Refer photograph no. 7 & 17.
(ii) Other many tubes had become loose in expanded portion, which were marked by chalk.
(iii) The tubes were seen buldged for rest of the portion of length of tubes. (iv) In the region of expansion of tube, heavy corrosion was observed. (v) Majority of these tubes were fitted in 1986 and had served their useful life."
Taking into consideration all above observations & photographs, we are of the opinion that the loss was occasioned by wasting of the tube material in way of expansion joint due to corrosion which is a slow deterioration over a period of about 20 years, resulted into failure of expanded joint of tube with steam drum.
3. Vide its letter dated 22.06.2005 the insurer repudiated the claim. The said letter dated 22.06.2005 to the extent it is relevant reads as under:-
Our Regional Office had appointed Shri Pradeep Tambe, Surveyor to ascertaining the exact cause of loss who carried out the inspections about reported loss on 27-5-2005 at site & submitted his report According to the report.
1. Two numbers of boiler tubes had slipped off from the connection with the drum. This connection was made by expanding of tubes in boiler shell holes made for the purpose of connection.
2. Other many tubes had become loose in expanded portion, which were marked by chalk.
3. The tubes were seen bulged for rest of the portion of length of tubes.
4. In the region of expansion of tube heavy corrosion was observed.
5. Majority of these tubes were fitted in 1986 and had served their useful life.
Based on the above observations and photographs the loss was occasioned by wasting of tube material in way of expansion joint due to corrosion which is a slow deterioration over a period of about 20 years resulted into failure of expanded joint of tubes with steam drum. Further bulging of tubes in general ,s also in one direction only indicating that it has happened due to long usage.
All above reasons are detailed In exclusion no. 5 of our BPP policy issued to you and we quote the same here for your reference.
" Defects due to the wearing away or wasting of the materials of a boiler or a pressure plant whether by leakage, corrosion or by the action of fuel or otherwise the grooving or the fracturing of any of the parts of a boiler or pressure plant or for deterioration generally or for the development of crakes, blisters, lamination and other flaws or fractures failures of joint within the range of steam or feed pipes or for bulging & deformation due to overheating of tubes ( unless such defects, fractures, failure or bulging result in explosion or collapse) or for the cracking of section of cast iron heating boilers or other vessels constructed of cast iron "
In view of the above referred reasons which are falling under exclusion no.5 of our B.P.P. Policy are absolved from the liability under the policy and hence we ' Repudiate' your claim.
4. On receipt of the repudiation letter the complainant made a fresh representation to the insurer, whereupon the regional office of the insurer asked Mr. P.S. Tambe of M/s Standard Surveyors to look into the matter in view of the said representation. In the meanwhile, Maharashtra State Insurance Fund appointed Mr. S.V. Ghodagaonkar as the joint surveyor. The joint survey report dated 16.01.2006 submitted by Standard Surveyors Pvt. Ltd. and Mr. S.V. Ghodagaonkar, to the extent it is relevant, reads as under:-
6.02.02 Below Iron steam drum several marks of water leakage from bank tubes expanding were observed indicating leakage from tube expanding. However refractory at front wall & sidewalls was found damaged from Inside.
6.02.03 Front steam drum to common water drum tubes (Row Nq.1, Tube No. 8 & Row No. 2, Tube No, 2 both from RHS) found pulled out from tube holes of front steam drums and their ends reached near front wall. Open end of one of these tubes was found slightly flattened; because it had hit the front brick wall of furnace after its release from tube hole In steam drum. Samples of these tubes were collected by Boiler Inspector during his visit ori 14.05.2005 & were sent for testing.
6.02.04 Both side wall tubes found distorted approximately 2" to 2.5" vertically to Vi of its height. All front header tc steam drum (roof) tubes were not found sagged; but distorted to approximately 2" to 2.5" vertically to approximately 14 of its height.
6.02.06 Tube holes of detached tubes/ pulled tubes ends were found Increased in dia. as 87 mm. against 84 mm. required.
6.02,07 It was found that, none of the bank tubes Is renewed since 1986.
6.02.09 High-low water level alarm was not functional; because its bottom valve was found closed.
7.00 Cause of loss On the basis of our inspection findings and as per inspection reports of Boiler Inspector, it was clear that, the cause of accident was slipping of two tubes as mentioned in Paragraph "5.02.02 of this report.
The subsequent damage to other tubes & refractory was due to above cause.
Flue Gas Explosion:
Shall mean an explosion of Ignited gases in the furnaces or flues of the boiler.
8.00 Liability 8.01 There was no rupture or bursting, rending or tearing of any tube of the boiler or any other pressure part of the boiler.
8.02 The operation of boiler was normal prior to the accident. That is to say that feed water supply, its regulating control feed water pumps and steam pressure in steam drum was normal; because main steam valve was open & boiler was supplying steam. Safety valve of the boiler was functionally O.K. Thus there was no reason for boiler pressure to rise suddenly to uncontrollable level.
There was no shortage of feed water supply as water level was normal till the time of accident.
Therefore only reason for accident was slipping of two tubes from drum off their expanded portion in the drum.
8.03 The cause of loss/damage as ascertained by us & Boiler Inspector falls under exclusion of Boiler & Pressure Plant Insurance Policy, which reads as follows:
"Defects due to the wearing away or the wasting of the materials of a boiler or pressure plant, whether by leakage, corrosion or by the action of fuel or otherwise the grooving or fracturing of any parts of a boiler or pressure plant or for deterioration generally or for development of cracks, blisters, lamination and other flaws or fractures, failures of joint within the range of steam or feed pipes or bulging & deformation due to overheating of tubes (unless such defects, fracture, failure or bulging result in explosion or collapse) or for the cracking of section of cast iron heating boilers or other vessels constructed of cast iron.
The failure of individual tubes in boilers of water tube Locomotive or other multitubular types, in Super heater or in economisers (unless such defects result in explosion or collapse).
8.04 Before we opine about the liability in the present case of accident, it would be worthwhile to study the definition of "explosion & collapse".
The Boiler & Pressure Plant Policy is a specifically defined peril based Policy. These perils are "Explosion & Collapse". The definitions are as under:
Explosion Explosion shall mean the sudden & violent rending or tearing apart of the permanent structure of a boiler or pressure plant or any part or parts thereof by force of internal steam or fluid pressure causing bodily displacement of said structure and accompanied by forcible ejectment of its components.
8 05 Keeping above definitions in mind, first we looked for visible signs of flue gas explosion inside the furnace; but we found none. The boiler inspector also did not find any such sign.
There was no damage found outside the furnace.
We therefore concluded, there was no flue gas explosion.
Thereafter we examined steam parts & other pressure parts, No part was found/seen torn apart.
There was no sudden rise in steam/water pressure in the system to cause sudden & violent rending or tearing apart of permanent structure of a boiler.
Thus we observed that, the peril "Explosion" did not occur so far as defined by the Boiler & Pressure Plant Policy.
The report of boiler attendant of hearing loud sound could be release of steam pressure through two holes of steam drum (which were due to slippage of or failure of expansion joint) The refractory was damaged by water falling from these two holes.
8.06 As such with these observations, m am of the opinion that, explosion within the meaning of the Insurance Policy issued to and held by the Insured did not occur.
8.07 However failed expansion joint did cause damages to some of the surrounding tubes.
If the Insured had Machinery Insurance Policy covering this boiler, then such a failure of tube could be indemnifiable under Machinery Insurance Policy.
8 08 Finally In our opinion, the loss/ damage did not fall under the scope of coverage of Boiler & Pressure Plant Policy and cause of loss was exclusion of the Boiler & Pressure Plant Policy and therefore loss/ damage is not Indemnifiable.
8.09 It was noteworthy that, the Boiler Inspector did not mention anywhere in his any of the report that, there was "explosion".
However Boiler Inspector need not know the coverage & principles of Boiler & Pressure Plant Policy.
8.10 However the insured had requested us to take review of the situation and assess the loss/damage.
5. However, despite their opinion that there was no explosion in the boiler and the loss was not covered within the scope of the Boiler & Pressure Plant Policy the surveyors, acting on the request of the complainant, assessed the loss and reported that the current cost of repair would be Rs.23,77,291/- and after deduction for the under insurance the remaining cost of repair would be Rs.7,95,330/-.
6. Based upon the report of the joint surveyors, repudiation of the claim was reiterated and the request of the complainant for appointment of the third surveyor was rejected.
7. Being aggrieved the complainant approached the concerned State Commission by way of a complaint. The complaint was resisted by the insurer primarily on the ground on which the claim had been repudiated.
8. Vide impugned order dated 24.07.2012 the State Commission directed as under:-
"2. Opponent No.1 National Insurance Company is directed to pay to the complainant compensation of Rs.49,00,000/- (Rs. Forty nine lakhs only) with interest @ 6% p.a. from the final date of repudiation i.e. 3.7.2006 till realisation of the said entire amount.
3. Opponent No.1 is also directed to pay Rs.l0,000/- (Rs. Ten thousand only) to the complainant as cost of the complaint.
4. Both these amounts shall be paid within a period of 30 days from the date of knowledge of this order, failing which it shall carry interest @ 9% p.a. till realisation of the entire amount."
9. Being aggrieved from the order of the State Commission allowing the claim the insurer is before this Commission by way of FA No. 580 of 2012. The complainant being dissatisfied with the quantum of the compensation awarded by the State Commission is before this Commission by way of FA No. 166 of 2013.
10. Clause No.5 of the exclusions contained in the insurance policy reads as under:
"Defects due to the wearing away or wasting of the materials of a boiler or a pressure plant whether by leakage, corrosion or by the action of fuel or otherwise the grooving or the fracturing of any of the parts of a boiler or pressure plant or for deterioration generally or for the development of crakes, blisters, lamination and other flaws or fractures failures of joint within the range of steam or feed pipes or for bulging & deformation due to overheating of tubes (unless such defects, fractures, failure or bulging result in explosion or collapse) or for the cracking of section of cast-iron heating boilers or other vessels constructed of cast-iron."
11. The question which arises for consideration is as to whether the loss to the complainant is covered under the above referred exclusion clause.
12. The submission of the learned counsel for the complainant was that the Boiler Inspector having inspected the boiler on 20.10.2004 and having issued the requisite certificate on 17.11.2004, the defects referred in the survey report cannot be accepted. This was also his submission that after the accident on 12.05.2005, the boiler was again inspected by the Inspector of Boilers on 14.05.2005 but the defects and deficiencies referred in the surveyor report were not found. This was also his submission that the boiler must have been inspected by the insurer before issuing the insurance policy effective from 01.02.2005.
13. A perusal of the certificate issued by the Inspector of Boilers and countersigned by the Chief Inspector on 17.11.2004 would show that the boilers were re-tubed in 1985-1986, some water wall tubes were added in 1996 and the headers were modified/renewed in 2001 when six tubes at each end were plugged. To the extent I am dissatisfied with the certificate, it reads as under:
"I hereby certify that the above described boiler is permitted by me the Chief Inspector under the provisions of section 7 or 8 of the Indian Boiler Act No. V of 1923, to be worked at a maximum pressure or kg/Cm for the period from 20.10.2004 to 19.10.2005.
XXXXXX I further certify that the main steam pipe was tested hydraucally to a pressure of kg/cm. tag on."
It would thus be seen that the pressure at which the main steam pipe was tested by the Inspector, was to be mentioned in the certificate. The column meant for writing the pressure having been left blank, the presumption would be that the main steam pipe was not tested hydraulically to verify the pressure.
The certificate required the Chief Inspector to specify the maximum pressure at which the boiler was permitted to work. However, the column meant for recording the said maximum pressure was left blank. The aforesaid deficiencies in the certificate indicate that the inspection was rather cursory and was not comprehensive. Therefore, it would not be safe to conclude on the basis of the aforesaid certificate that the defects/deficiencies reported by the surveyor could not have existed in the boiler.
14. The inspection report based upon the inspection carried out on 14th and 15th May 2005 inter-alia reads as under:
4. Both guage glass were found empty Guage glass cock found working, satisfactory. Both standpipes of this guage glass were found clean. Below front steam drum several marks of water leakage from bank tubes expanding were observed indicating leakages from tube expanding. Boiler was lagged; however, refractory at frontwall and sidewalls found damaged from inside.
5. Front steam drum to common water drum tubes (Row No. 1 tube no. 8 & Row No. 2 Tube No. 2, both from RHS) found pulled out from tube holes of front steam drum and their ends reached near front wall. Open end one of these tube was found slightly flattened, because it had hit the front brickwall of furnace after it's release from tube hole in steam drum.
6. Both sidewall tubes found distorted approx. 1.5" to 2.5: vertically to approx. ½ of its height. All front header to steam drum (roof) tubes were not found sagged but distorted to approx. 1.5" to 2.5" vertically to approx. ½ of its height.
12. It was found that none of the bank tubes is renewed since 1986.
16. One tube, from each row no. 1 to 5 of bank tubes, was removed to see condition, of tubes and-the thks obtained are as follows:- 12, 11.5, 15, 12, 14, 14, 11, 12, 12.5, 5, 13 SWG. Thk of 2 tubes which pulled out from tube holes at the end are 13.5 & 15 SWG. Thk of 2 middle bank tubes are 11.5, 11 SWG. Thks of 2 tubes from rear bank are 13 & 12.5 SWG.
Thus, several deficiencies/defects in the boiler and its attachments were found even at the time of inspection carried out on 14/15.05.2005 after the loss had already happened.
15. As regards inspection by the insurer before issuance of the insurance policy, I have carefully perused the Consumer Complaint. It is nowhere specifically stated in the Consumer Complaint that the boiler was actually inspected by the insurer or its agent before issuing the insurance policy. Though it is stated in the complaint that the insurer is presumed to have inspected the boiler before issuance of the insurance policy, such a statement is altogether different from saying that the boiler was actually inspected by the insurer or by its agent before issuing the insurance policy. If the boiler was actually inspected by the insurer or its agent, there should have been no hesitation in stating on oath that the boiler was actually inspected by the insurer before issuing the insurance policy.
16. In these circumstances, it would be difficult to hold that the boiler was actually inspected by the insurer or its agent before issuance cover for the period from 01.02.2005 to 31.01.2006 was issued. During the course of arguments, I asked the learned counsel for the parties as to whether insurance cover was issued for the first time with effect from 01.02.2005 or this was a case of renewal of an existing insurance policy. But, neither counsel had any information in this regard.
17. As noted earlier, the surveyor Mr. Pradeep Tambe of M/s Standard Surveyors Pvt. Ltd., found the defects referred hereinbefore, during the course of inspection carried out by him on 27.05.2005. He was of the opinion that the defects/deficiencies found by him were covered under exclusion no.5 of the insurance policy and therefore, the insurer was absolved from his liability under the policy issued by it. The report of the surveyor should ordinarily be accepted unless the same is shown to be arbitratory or unreasonable without any material in support of the report being available to the surveyor. In the present case, the report of the surveyor was based upon the physical inspection carried out by him. He found that two boiler tubes had slipped off from the connection with the drum. There is no evidence to prove that no boiler tube was found slipped off from the connection with the drum. He found that many other tubes had become loose in the expanded portion. There is no evidence to prove that no tube in the expanded portion was loose on the date on which the alleged blast took place. The surveyor found that the tubes had bulged from the rest of the portion of their length and there was heavy corrosion in the region where the tube had been expanded. No evidence was led before the State Commission to prove that the tubes had not bulged or there was no corrosion in the region of expansion. The surveyor found that majority of the tubes were fitted in 1986. This is not even the case of the complainant that none of the tubes had been fitted in 1986. This part of the report of the surveyor also finds corroboration from the report of the Boiler Inspector.
18. In the present case, the complainant was not satisfied with the report of M/s Standard Surveyors Pvt. Ltd. and made a representation to the Regional Office of the insurer. They also approached Maharashtra State Insurance Fund which appointed one Mr. S.V. Ghodagaonkar as joint surveyor to carry out a fresh inspection alongwith Mr. Tambe of M/s Standard Surveyors Pvt. Ltd. Both the surveyors inspected the premises of the complainant on 07.11.2005 and they jointly reiterated the defects and deficiencies, which Mr. Tambe had noticed at the time of inspection carried out by him on 27.05.2005. Both, Mr. Tambe and Mr. S.V. Ghodagaonkar, nominee of Maharashtra State Insurance Fund having reiterated the defects and deficiencies, I find no reason to reject the report jointly submitted by them. In para 7 of the report, they stated, after considering the report of the Boiler Inspector, that the cause of accident was slipping of two tubes as mentioned in para 5.02.02 of their report. In para 8.02 of the report, they concluded that the only reason for accident was slipping of two tubes off their drum from their expanded portion in the drum. In para 8.05 of the joint report, they clearly stated that there was no visible sign of gas explosion inside the furnace. They also noted that even the Boiler Inspector had not found any such sign. No damage was found by them outside the furnace. The steam part and other pressure parts were not found torn apart, there was no sudden rise in steam/water pressure in the system and the refractory was damaged by water falling from two holes of the steam drum. In para 8.07 of the joint report, they noted that had the insured taken machinery insurance policy, a failure of tube could be indemnifiable in such a policy. However, the policy taken by the complainant was not a machinery insurance policy. In para 8.08 of the joint report, they opined that the loss/damage did not fall under the scope of the coverage of boiler and pressure plant policy and that the cause of loss was the exclusion contained in the said policy and therefore, the loss was not indemnifiable. In para 8.11 of the report, it was recorded that neither Mr. Tambe nor Mr. Ghodagaonkar had found operation of the defined perils, namely explosion and collapse.
19. In my opinion, the repudiation of the claim based upon the survey report submitted by Mr. Tambe of M/s Standard Surveyors Pvt. Ltd. which finds full corroboration from the joint report of Mr. Tambe and Mr. Ghodagaonkar and to some extent, from the inspection carried out by the Boiler Inspector after the damage to the boiler, was fully justified in the facts and circumstances of the case. Though the Boiler Inspector had permitted the use of the boiler after carrying out inspection on 20.10.2004, it is evident from the surveyor reports that the Boiler Inspector did not examine the question as to whether the damages to the boiler and its installations were covered under exclusion no.5 of the insurance policy or not. The certificate given by the Inspector of Boilers does not rule out the defects/damages found by the surveyors nor does it come in the way of the insurer proving the said defects and damages through the report of the surveyors.
20. The learned counsel for the complainant submitted that the survey reports having not bene filed before the State Commission, the said Commission was justified in drawing an adverse inference against the insurer on account of non-production of the said reports. I however, find myself unable to accept the contention. The State Commission, in my opinion, ought to have directed filing of the survey reports when there was a clear reference to the said reports in the repudiation letter. The gist of the survey report was reproduced in the repudiation letter and the relevant portion of the report was also extracted by the insurer in the written version to the Consumer Complaint.
21. For the reasons stated hereinabove, I hold that the State Commission was not justified in directing the insurer to pay a sum of Rs.49 lacs to the complainant and that the Consumer Complaint ought to have been dismissed. Consequently, the impugned order is set aside and the Consumer Complaint is hereby dismissed with no order as to costs. FA No.580 of 2012 filed by the insurer stands allowed accordingly, whereas FA No.166 of 2013 filed by the complainant stands dismissed, with no order as to costs.
......................J V.K. JAIN PRESIDING MEMBER