State Consumer Disputes Redressal Commission
The Oriental Insurance Co. Ltd vs Sri Sarbati Steel Tubes Limited on 11 April, 2008
BEFORE THE STATE CONSUMER DISPUTES REDRESSAL COMMISSION, CHENNAI BEFORE THE STATE CONSUMER DISPUTES REDRESSAL COMMISSION, CHENNAI Present : Hon'ble Thiru Justice K.SAMPATH PRESIDENT Thiru Pon. GUNASEKARAN, B.A., B.L., MEMBER-I F.A. No. 603/2005 [ Against OP No.295/2003 on the file of the DCDRF, Chennai (South) ] DATED THIS THE ELEVENTH DAY OF APRIL, 2008 The Oriental Insurance Co. Ltd :: Appellant/Opp. party Represented by its Divisional Manager rep. by Adv. Divisional Office VI M/s.Nageswaran & Bali Towers, First Floor, Narichania No.1, Abdul Razack Street, Saidapet, Chennai : 600 015. Vs. Sri Sarbati Steel Tubes Limited :: Respdt/Complainant Rep. by its Director rep. by Adv. No.163/1, Broadway, II Floor, Mr.K.Ramaswamy Chennai : 600 108. O R D E R
K.SAMPATH J.
The Opposite party in COP No.295/2003 on the file of the District Consumer Disputes Redressal Forum, Chennai (South) is the appellant herein. The case of the complainant was as follows :- The complainant, a manufacturer of steel tubes, had taken fire insurance policy from the opposite party for their factories situate at Pondicherry for a period of one year from 28/5/2001 to 27/5/2002 for a sum of Rs.7,43,00,000/- paying an annual premium of Rs.1,00,055/- to the opposite party. On 10/5/2001 at around 4 pm strong wind coupled with storm and heavy rain took place in and around the factory area as a result of which more than 100 asbestos sheets were blown off from the roofing of the factory building and truss of the mill section was also badly damaged. There was inundation. The opposite party was duly intimated and the complainant filed two claims one for Rs.50,000/- and the other for Rs.2,50,000/-. The opposite party appointed M/s. Crystal Surveyor, Pondicherry, who investigated the matter and filed a report.
The preliminary report was not furnished to the complainant. Subsequently the opposite party appointed a second surveyor who inspected the whole area and sought the complainant to furnish an estimated cost of repair to the building, shed etc. Accordingly the same was also provided by the complainant. The complainant had done all works spending a sum of Rs.1,81,888/- towards the cost of material and Rs.66,746/- towards the cost of labour and the bills were submitted to the surveyor. The surveyor kept the claim pending. There was delay in furnishing surveyors report. Finally the opposite party forwarded the loss discharge voucher for a sum of Rs.37,624/- by their letter dated 21/3/2003 as against the claim of the insured at Rs.2,48,634/-. The said voucher was duly discharged and sent to the opposite party on 24/3/2003 calling upon them to furnish details of assessed loss made by their surveyor, but that the opposite party did not disclose about the survey report, however replied on 1/4/2003 stating that on the basis of the preliminary and final survey reports and the details provided by the factory representative the amount had been arrived at after applying the average clause and excess as per conditions of the policy. But there was no explanation as to how the opposite party arrived at the average clause.
In these circumstances, the complaint came to be filed for a direction to the opposite party to pay Rs.2,11,014/- with 12% interest p.a. with compensation of Rs.25,000/- and cost of Rs.5,000/-.
2. The version of the opposite party was as follows: - The claim was settled in full as early as 24/3/2000 as per the policy. The opposite party, under statutory obligation, has conducted the survey in respect of claims in excess of Rs.20,000/-. Accordingly, one Mr.Jagadeeswaran, a licensed surveyor was appointed and the amount arrived at was paid to the complainant. The complainant had received it in full and final settlement. As per the report, the assessment was arrived at Rs.1,10,077/-. After deducting the under-insurance and policy excess, a sum of Rs.37,677/- was paid to the complainant.
The surveyor had assessed the loss under two divisions i.e., tube division and flat division. The opposite party had found that under tube division valuation there was an under-insurance of 51.9% and under flat division valuation there was an under-insurance of 77.2%. When assessed together, it had come to Rs.47,592.39 and less the policy excess of Rs.10,000/- the final net amount payable was at Rs.37,592/- and it had already been paid to the complainant. There was no deficiency in service.
3. Before the District Forum, on the side of the complainant, Exs.A-1 to A-7 were marked while on the side of the opposite party Ex.B-1 series Survey report with enclosures were marked.
4. The District Forum held as follows :- The complainant had alleged that a sum of Rs.37,592/- was received under protest on 24/3/2002. The opposite party contended that the voucher was duly discharged by the complainant by accepting the said amount towards full and final settlement of the claim but the said document had not been filed by the complainant. Ex.A-6 discharge voucher made by the complainant clearly and categorically proved that the complainant had received the said amount under protest but the opposite party was harping upon the statement that the claim was discharged under full and final settlement. It was contrary to the facts of the case. Further, the Opposite party had taken the stand that there was under-insurance.
If it were so, the opposite party ought not to have accepted the premium and issued the policy. Having given the policy accepting the valuation given by the complainant, the opposite party could not go back. The valuation done by the surveyor was without adhering to the principles of the policy and contrary to Clause 10 of the policy. The Opposite party could not approbate and reprobate.
The survey report was based on assumptions pertaining to the valuation of tube division and flat division. The assessment made by the surveyor could not be taken into consideration. When the opposite party had not filed any document to prove that it had been under-valued excepting the surveyors calculation, it had to be held that there was deficiency in service and the complainant was entitled to relief. So holding the District Forum, by order dated 12/9/2005 allowed the complaint and directed the opposite party to pay Rs.2,11,014/- with interest at 9% p.a. from 24/3/2003 till realisation together with cost of Rs.2,000/- giving a months time to make payment. It is as against that the present appeal has been filed.
5. The learned counsel for the opposite party / appellant made the following submissions: - The District Forum had not appreciated the pleadings and the documentary evidence in the proper perspective and had reached at a wrong conclusion. The District Forum failed to appreciate the general condition No.10 and the general exclusion No.1 of the policy in respect of under-insurance and policy excess.
The District Forum failed to consider the survey report submitted by the independent surveyor appointed by the opposite party under the statutory requirement to conduct a survey as prescribed in the Insurance Act under Sec.64(u)(m) in respect of all claims in excess of Rs.20,000/-. The report of the licensed surveyor Mr.Jagadeeswaran marked as Ex.B-1 had assessed the loss at Rs.1,10,007/- and after deducting for the under-insurance and policy excess, a sum of Rs.37,677/- was paid to the complainant as full and final settlement which was accepted by the complainant. The District Forum failed to appreciate the valuations done by the surveyor in respect of under-insurance as per the policy terms and conditions.
The District Forum failed to appreciate that the language of the insurance policy could not be substituted by a court and it should be strictly interpreted as per the terms and conditions printed in the policy. The District Forum failed to take note of judicial precedents on the point of admissibility and sanctity or importance of the survey report. The District Forum ought to have dismissed the complaint.
6. Per contra, Mr.K.Ramaswamy, learned counsel for the complainant/ respondent submitted as follows :- The District Forum had come to the right conclusion that the amount was not paid in full and final settlement and that the complainant was entitled to the amount claimed in the complaint. The District Forum had referred to the terms and conditions of the policy. The District Forum had noted that the opposite party had not filed any document to prove their case and that no evidence was placed on record except the survey report. Further, the District Forum had rightly found that the opposite party had accepted the premium based on the sum insured mentioned in the policy. The valuation done by the surveyor was without adhering to the rules of insurance and were contrary to the terms and conditions of the policy. The findings by the District Forum were fully justified and there was no error on the face of the record. The order did not suffer from any illegality or material irregularity. Even conceding without admitting that the deduction made by the insurance company on the basis of the surveyors report was proper and correct, there was no evidence to show that the insurance policy authorised the opposite party to do so. The deductions made by the insurance company from the insurance claim were found unjust and arbitrary. The role of the surveyor was to ensure whether the reported loss/ damage was correct or wrong but he could not deduct the amount of loss/ damage assessed by him on his own without valid reasons. The District Forum had rightly granted relief and no exception could be taken to the same. The learned counsel also relied on a number of decisions which we will refer to in the course of our order.
7. First and foremost, two questions arise for consideration in this appeal. (1) W hether there was full and final settlement as claimed by the opposite party? According to the opposite party, they had offered a sum of Rs.37,764/- and the complainant had accepted the same in full and final settlement and it was not open to the complainant to make any further claim. Rightly did the District Forum reject the case of the opposite party in this regard. There was absolutely no proof that the complainant had accepted the said amount in full and final settlement of their claim against the opposite party. Decisions abound on this aspect. It is not necessary to refer to all those decisions. We had occasion to consider the question in AP No.284/2003 between the same parties. We had referred to the decision of the Supreme Court in United India Insurance Co. Ltd vs. Ajmer Singh Cotton & General Mills & Ors [II(1999) CPJ 10 (SC)]. The Supreme Court, in that decision, has observed that in the absence of any pleadings or evidence to establish that the encashment of the cheque was subsequent to the protest letters by the complainant it was not possible to hold that by encashing the cheques the complainant had not adopted the mode of acceptance prescribed in the letters of the opposite party and that it must be held that by encashing the cheques received from the opposite party the complainant accepted the offer by adopting the mode of acceptance prescribed in the offer. We have found in the instant case that the opposite party has not produced the receipt alleged to have been given by the complainant accepting the said amount of Rs.37,764/- as full and final settlement of the complainants claim against the opposite party. We therefore hold that the stand of the opposite party that the complainant had received Rs.37,764/- towards full and final settlement is not correct and it had been rightly rejected by the District Forum.
(2) The next question that arises for consideration relates to the Surveyors report. The Surveyors report has found that there was under-insurance and in case of under-insurance the legal position is as could be found in the Law of Contracts by Malcolm A. Clarke, III Edition 1997 under Indemnity 28-8A Under-Insurance : Average this is what is stated. Subject matter is often insured on the basis of an estimate of value which has been provided by the insured or has been based on data provided by the insured.
If the estimate understates the true value, the possibilities are as follows:
(a) The insurer may be entitled to avoid the contract on the ground of misrepresentation or non-disclosure.
(b) The insureds information may be warranted at the time of contract and, if the information is incorrect or if it becomes incorrect during the period of cover without, for example, notice to the insurer, the effect may be to terminate cover.
(c) Undervaluation is often accidental, so the insurer may prefer not to avail himself of possibility (a) to waive (b) and to pursue possibility (c) to pay subject to average.
In case of underinsurance the insured is deemed to be his own insurer for the residue.
Dealing with the Excess Clause 28-8B, this is what is stated. An excess clause or deductible is a clause, whereby the insured is to bear the first part of any loss expressed as an amount of money or as a percentage of loss. In the case of separate successive losses, the clause applies to each loss. These clauses are enforced in accordance with their terms. Although the effect is that the insured is his own insurer to the extent of the excess, this does not make the insured an insurer within the meaning of an other insurance clause in another contract on the same risk.
8. The surveyors report in the instant case clearly spelt out that there was under-insurance. So far as the surveyors reports are concerned, there is a lot of literature on the point. A Division Bench of the Madras High Court has in Sri Balaji Traders vs. United India Insurance Co. Ltd & Ors [2005-1-L.W. 595] observed that the surveyors report cannot be easily ignored. Particularly when no motive is alleged attributing any favouritism it is not possible to ignore the surveyors report, the surveyor having been licensed by the Government. There are other decisions too. The surveyor is appointed under Sec.64(u)(m) of the Insurance Act 1938. The report of the surveyor has got a sanctity attached to it and unless mala fides are alleged and established, the surveyors report is entitled to the maximum consideration.
It is an important piece of document.
Sufficient ground must be made to disagree with the report of the surveyor. M/s. Crystal Surveyor, in the instant case, has given a report dated 27/6/2002 found at page 187 of Ex.B-1 series. It is addressed to the opposite party, and it runs as follows :-
At the request of your Pondicherry Divisional Office, I conducted the survey upon the reported damages to buildings on account of Cyclonic wind on 10.05.2002 in the above two industrial units. On my detailed inspection, I could find damages due to cyclone and on account of normal wear & tear and as the insureds representative alone knows very clear on earlier damages, anyone could arrive the extent of cyclonic damages based on discussions with estimate submitted by the claimant. But, as the insureds representative has yet to submit Claim Papers, I am not in a position to release report indicating extent of loss which may require further 3 to 4 days of inspection and discussion. Probably during final survey could be arrived. The approximate loss expected may come around Rs.1,50,000/- only. However, as advised by you, I herewith enclose photographs for enabling you to arrange survey at your end.
9. The complainant submitted the claim which is found at page 193 of Ex.B-1 series.
The claim is for Rs.2,48,634.55.
Thereafter the opposite party appointed Mr.Jagadeeswaran, Surveyor. It is found at page 125 of Ex.B-1 series that the said surveyor had made several visits and had given his findings. It is not necessary to go into the details excepting to say that he has arrived at the loss assessment in the following manner :- Physical quantity of ACC sheets replaced against the claim was checked in the presence of Mr.Seshadri, AGM.
The total came to Rs.73,726/-.
The labour charges for the tube division came to Rs.8,677.98. The loss assessed in tube division adding the two figures comes to Rs.88,912.50.
Coming to the Flat manufacturing division, the work shed in respect of replacement of ACC sheets came to Rs.17,662/- and labour charges came to Rs.2,001.36. The loss assessed in the flat division came to Rs.21,164.38. The grand total of loss assessed ie., tube division and flat manufacturing division came to Rs.1,10,077/-. The survey report further mentions that the list of actual number of ACC sheets replaced by the insured had been signed by Mr.S.Seshadri, AGM, Pondicherry factory [Authorised representative of the insured) and a note is added in the report stating as follows :-
1. The rates for the ACC sheets were found varying in the bills submitted by the insured which could be due to market fluctuations on different dates.
However, I had considered the lowest rate as per the bills submitted.
2. The insured had replaced the damaged ACC sheets with used sheets. I had considered cost of the used ACC sheets as 50% of the cost of new ACC sheet.
3. The insured had replaced some of the corroded / worn-out pipes used in the steel trusses and the labour was also used in replacing them. I had considered the labour cost only for replacing of the ACC sheets @ Rs.1.75 per sq.ft.
10. Coming to Adequacy of Insurance, the report says that the reinstatement value of the building at Tube division was arrived at Rs.3,70,20,000/- and the building was found to be insured for Rs.1,78,00,000/-. The difference between the present reinstatement value and the sum insured as per policy was Rs.1,92,20,000/- (i.e., Rs.3,70,20,000/-
- Rs.1,78,00,000/-). The percentage of under-insurance was 51.9%.
11. Coming to Flat Division, the percentage of under-insurance has been worked out at 76.8%.
We are not giving the full details as they are found in page 131 of Ex.B-1 series. The report proceeds to say as follows:-
Depreciation : The insurance policy issued is of Reinstatement clause and hence no depreciation is considered.
Salvage value : The broken ACC roofing sheets, in our opinion, would not fetch any salvage value.
Warranties : All warranties and conditions have been found complied with this claim.
Loss assessment :
The Insureds claim :: Rs. 2,48,634.55 Total loss assessed :: Rs. 1,10,077.00 This is based on the details submitted by the insureds representative at works, Pondicherry.
Net liability :
Tube Division Loss assessed :: Rs. 88,912.50 Less : Under-insurance 51.9% :: (-) Rs. 46,145.59 Flat Division Loss assessed :: Rs. 21,164.38 Less : Under-insurance 76.8% :: (-) Rs. 16,254.24 Less : Policy Excess @ Rs.10,000/- :: (-) Rs.
10,000.00 TOTAL :: Rs.
37,677.05 NET LIABILITY :: Rs.
37,677.00
12. When there was under-insurance, in our view, the surveyor had properly worked out the net liability of the opposite party and arrived at the figure of Rs.37,677/-.
The District Forum was clearly in error in holding that the opposite party was liable to answer the claim of the complainant in entirety. We have already referred to the legal position relating to under-insurance as also to the status of the surveyors report. The District Forum was in error in ignoring the surveyors report in holding that it was not open to the opposite party to plead under-insurance.
Indeed some mechanism should be worked out that there is no under-insurance in future. The insurance companies should stop accepting the value as given by the proposer and should evolve a mechanism by which the actual value for the insured could be arrived at even at the time of accepting the proposal and issuance of the policy. 90% of the problems between the insured and the insurance companies could be solved if only there is proactive response instead of reactive response.
13. In the result, the order of the District Forum cannot be sustained. The appeal succeeds and the complaint shall stand dismissed. There will be no order as to costs.
Pon.GUNASEKARAN K.SAMPATH MEMBER-I PRESIDENT