National Consumer Disputes Redressal
National Insurance Co. Ltd. vs Abhoy Shankar Tewari & Anr. on 15 February, 2017
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI REVISION PETITION NO. 555 OF 2015 (Against the Order dated 28/11/2014 in Appeal No. 914/2013 of the State Commission West Bengal) 1. NATIONAL INSURANCE CO. LTD. SURI BRANCH OFFICE, P.S. BRIBHUM, - 7311101 2. NATIONAL INSURANCE CO. LTD., THROUGH MANAGER DELHI REGIONAL OFFICE-1, JEEVAN BHARATI, CONNAUGH CIRCUS, NEW DELHI-110001 ...........Petitioner(s) Versus 1. ABHOY SHANKAR TEWARI & ANR. DIRECTOR OF INDIA JYOTI RICE MILLS PVT. LTD., SRINIKETAN ROAD, BOLPUR, BIRBHUM - 731204 2. JAGANNAT TRIPATHI DIRECTOR OF INDRA JYOTI MILLS PVT. LTD., SRINIKETAN ROAD, BOLPUR, BIRBHUM - 731204 ...........Respondent(s)
BEFORE: HON'BLE MR. JUSTICE D.K. JAIN,PRESIDENT HON'BLE MRS. M. SHREESHA,MEMBER For the Petitioner : Mr. Vishnu Mehra, Advocate For the Respondent : Mr. Ranajit Kr. Mukhopadhyay, Advocate Dated : 15 Feb 2017 ORDER PER M. SHREESHA, MEMBER Challenge in this Revision Petition under Section 21(b) of the Consumer Protection Act, 1986 (for short "the Act") is to the order dated 28.11.2014 passed by the State Consumer Disputes Redressal Commission at West Bengal (for short "the State Commission"), in FA No. 914 of 2013. By the impugned order, the State Commission has allowed the Appeal preferred by the Complainants and set aside the order of the District Forum, directing the Opposite Party Insurance Company to pay a sum of ₹4,26,208/- within 45 days along with interest @ 9% p.a. from the date of first correspondence by the Complainants in this regard i.e. 28.12.2011, till full and final settlement of the claim.
2. The facts material to the case are that the Complainants took a Standard Fire and Special Perils Policy from the Opposite Party on 07.12.2009 for an amount of ₹2.00 crores covering the period from 07.12.2009 to 06.12.2010. It was stated that on 26.04.2010, because of violent storm and rains, stocks kept in the go-down of the Complainants' rice mill suffered severe damage, for which, the Complainants submitted an insurance claim to the Opposite Party on 30.04.2010. A Surveyor was appointed who submitted his report on 11.03.2011, computing the loss on two methods, one as per Standard Fire & Perils Policy and the other as per Declaration Policy. In the case of the former, the loss was assessed at ₹40,86,017/-, while in the case of the latter, the loss was assessed at ₹36,88,996/-. It was alleged by the Complainants that they were covered under the Standard Fire & Perils Policy, but the Opposite Party allowed only ₹36,59,809/- which was neither in accordance with the actual policy nor in tune with the survey assessment report. It was averred by the Complainants that they had never taken the Declaration Policy and that the Opposite Party had arbitrarily deducted the amount and paid under the Declaration Clause and deviated from the policy conditions. It was pleaded that as the Complainants were under financial constraints, the said amount was accepted under protest. Hence the Complaint seeking directions to the Opposite Party to pay a sum of ₹4,26,208/- with compensation and costs.
3. The Opposite Party filed their written version stating that the said Policy was issued under "Monthly Highest Declaration" basis against the stocks of the Insured and the Surveyor assessed the loss, accordingly. It was averred that the insurance is a contract of utmost good faith which is governed as per Indian Contract Act and if there is any misstatement or non-disclosure of material fact, the insurer is at liberty to declare the contract as void. It was also pleaded that the entire amount was received by the Complainants in full and final satisfaction without protest and after signing the discharge voucher the Complainants are estopped from raising a fresh claim.
4. Based on the evidence adduced, the District Forum dismissed the Complaint on the ground that the Complainants did not establish, by way of any evidence, that any fraud or misrepresentation or coercive method was adopted by the Opposite Party, at the time of signing of the discharge voucher and, as such, there is no deficiency of service on the part of the Opposite Party.
5. Aggrieved by this order, the Complainants preferred FA No. 914 of 2013 before the State Commission, which set aside the order of the District Forum observing as follows:-
"On going through the materials on record, it is observed that none of the parties has mentioned the exact date of receipt of cheque by the Appellants or the date of encashment of the same. Therefore, it is not quite clear on what basis the Ld. Forum derived at such conclusion. Ld. Lawyer for the Appellants, at the time of argument, claimed that they lodged protest with the Insurer on the very same day of receipt of the cheque from the Insurer by way of a letter dated 28.12.2011. It also transpires from the copy of letter dated 13.02.2012, which has not been challenged by the Respondent, that the Respondent processed the claim of the Appellants after a huge delay, i.e., 20 months from the date of the incident (26.04.2010) and 10 months from the date of report of the Surveyor (11.03.2011). The first complaint letter being sent by the Appellant No. 2 on 28.12.2011, the same clearly supports the contention of the Ld. Lawyer of the Appellants and therefore, the findings of the Ld. Forum appears to be far off the mark.
As regards the issue of suppression of fact regarding non-disclosure of receipt of compensation by the Insurer/ Appellants in respect of another policy, it bears mentioning that there has been no dispute with regard to the said insurance policy and non-disclosure of the same has had no bearing on the instant case. Therefore, the observation of the Ld. Forum in this regard is totally uncalled for.
As there is no rationale behind non-payment of the assessed value under the Standard Fire Policy by the Respondent, the Appellants are entitled to their claim for a sum of ₹4,26,208/-as prayed for in their petition of complaint."
6. Learned Counsel for the Revision Petitioner vehemently argued that as per the proposal form the policy was taken on "monthly highest declaration" basis and therefore, the assessment of the Surveyor was justified. Learned Counsel for the Respondent, on the other hand, denied the endorsement on the proposal form and submitted that this was undated and was never given by their Company and in fact, was added as an after-thought by the Petitioner herein.
7. The brief point which falls for consideration is, whether, the Petitioner was justified in deducting a sum of ₹4,26,208/- on the ground that the policy was issued on 'Declaration Basis'; in the light of the delay in the filing of the survey report, whether, the stand of the Insurance Company that ₹36,59,809/- was accepted by the Respondents, in full and final satisfaction and therefore now, cannot raise any further claim, is vindicated?.
8. The Surveyor in his report recommended as follows:-
"RECOMMENDATION We recommend payment of the net adjusted amount of ₹1,024,997 under Policy No. 150401/1109/3100000319.
As regards the Policy No.150401/1109/3100000276, we find that the Proposal Form shows that the Insured had opted for the Policy on Declaration basis, whereas, the Policy is silent on this. Therefore, Insurers are advised to verify their records on this aspect and settle the claim as per its merit.
We have adjusted the loss on both the bases as shown below:
If the Policy No. 150401/1109/3100000276 be WITHOUT Declaration clause -₹4,090,293.
If the Policy No. 150401/1109/3100000276 be WITH Declaration clause - ₹36,92,720/-".
9. From the above report, it is clear that the policy was silent as to whether the Insured had opted for 'Declaration Basis' or not. A brief perusal of the proposal form shows that there was a hand-written endorsement to the effect that it was on "monthly highest declaration" basis, which is again 'undated' and is not reflected in the typed-portion of the proposal form or explicitly mentioned in the policy. To reiterate, the policy precisely states that the risk is covered under Standard Fire & Special Perils for an amount of ₹2.00 crores for the period from 07.12.2009 to 06.12.2010, but does not specify that it was on 'Declaration Basis'. It was also expressly pleaded in the Complaint that at the time of payment of compensation, the Petitioner had arbitrarily paid the amount under the 'Declaration Clause' when the Respondents were never insured under the same. There are no substantial reasons given that if an endorsement was indeed made on the proposal form, why it was not detailed in the policy, which is the main form of acceptance by the Petitioner and is construed as a concluded contract. Hence, we are of the considered opinion that the State Commission has rightly given the finding that the claim should be considered on 'Non-Declaration' basis.
10. The Insurance Regulatory and Development Authority (IRDA), has, from time to time, ARB.P. 459/2015 Page 3 of 22 issued various rules and regulations prescribing guidelines to be followed by insurance companies in settling the claims. The relevant guidelines contained in IRDA (Protection of Policyholders Interests) Regulations, 2002 are as under:
"9. Claim procedure in respect of a general insurance policy :
(1) An insured or the claimant shall give notice to the insurer of any loss arising under contract of insurance at the earliest or within such extended time as may be allowed by the insurer. On receipt of such a communication, a general insurer shall respond immediately and give clear indication to the insured on the procedures that he should follow. In cases where a surveyor has to be appointed for assessing a loss/ claim, it shall be so done within 72 hours of the receipt of intimation from the insured.
(2) Where the insured is unable to furnish all the particulars required by the surveyor or where the surveyor does not receive the full cooperation of the insured, the insurer or the surveyor as the case may be, shall inform in writing the insured about the delay that may result in the assessment of the claim. The surveyor shall be subjected to the code of conduct laid down by the Authority while assessing the loss, and shall communicate his findings to the insurer within 30 days of his appointment with a copy of the report being furnished to the insured, if he so desires. Where, in special circumstances of the case, either due to its special and complicated nature, the surveyor shall, under intimation to the insured, seek an extension from the insurer for submission of his report. In no case, shall a surveyor take more than six months from the date of his appointment to furnish his report.
(3) If an insurer, on the receipt of a survey report, finds that it is incomplete in any respect, he shall require the surveyor under intimation to the insured, to furnish an additional report on certain specific issues as may be required by the insurer. Such a request may be made by the insurer within 15 days of the receipt of the original survey report. Provided that the facility of calling for an additional report by the insurer shall not be resorted to more than once in the case ARB.P. 459/2015 Page 4 of 22 of a claim.
(4) The surveyor on receipt of this communication shall furnish an additional report within three weeks of the date of receipt of communication from the insurer.
(5) On receipt of the survey report or the additional survey report, as the case may be, an insurer shall within a period of 30 days offer a settlement of the claim to the insured. If the insurer, for any reasons to be recorded in writing and communicated to the insured, decides to reject a claim under the policy, it shall do so within a period of 30 days from the receipt of the survey report or the additional survey report, as the case may be.
(6) Upon acceptance of an offer of settlement as stated in sub- regulation (5) by the insured, the payment of the amount due shall be made within 7 days from the date of acceptance of the offer by the insured. In the cases of delay in the payment, the insurer shall be liable to pay interest at a rate which is 2% above the bank rate prevalent at the beginning of the financial year in which the claim is reviewed by it".
11. It is observed that it is not the case of the Petitioner that any additional report was called for and, therefore, Regulation 9(5) (quoted above) squarely applies to the facts of this case. It is not in dispute that the date of loss in the instant case is 26.04.2010; the survey report was filed on 11.03.2011, almost a year after the date of the incident, which is in contravention to Regulation 9(5) stipulated by the IRDA, according to which, the Surveyor should file the report within 30 days from the date of inspection. The Hon'ble Apex Court in United India Insurance Co. Ltd. Vs. M.K.J. Corporation, III (1996) CPJ 8 (SC)=(1996) 6 SCC 428, laid down that a reasonable time of two months would be justified for the Insurance Company to take a decision, whether, the claim requires to be settled or rejected in accordance with the policy.
12. Now, we address the question, to whether, the Petitioner was justified in not allowing the claim of the balance amount on the ground that the Respondents have signed the 'Discharge Voucher' in full and final satisfaction.
13. In National Insurance Company Limited v. Boghara Polyfab Private Limited, (2009) 1 SCC 267, the Hon'ble Supreme Court held that the procedure of the insurance company requiring the claimant to issue an undated receipt (acknowledging receipt of a sum smaller than his claim) in full and final settlement as a condition for releasing and admitting lesser amount is unfair, irregular and illegal.
14. The Hon'ble Delhi High Court, in Worldfa Exports Pvt. Ltd. Vs. United India Insurance Co. Ltd., Arb. P. 459/2015, decided on 11.12.2015, relying on the IRDA's Circular, dated 24.09.2015, observed as follows:
"On 24th September, 2015, IRDA, issued a circular to all the insurance companies directing them not to withhold the claim amount where the liability is established. IRDA further directed the insurance companies not to use the discharge vouchers as a means of estoppel against the insured to seek higher compensation before any judicial forum. Circular dated 24th September, 2015 is reproduced hereunder:
"INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY Ref. No: IRDA/NL/CIR/Misc/173/09/2015, Date :24.09.2015 To CEOs of all General Insurance Companies. Circular-ARB.P. 459/2015 Page 17 of 22 Reg: Discharge Voucher in settlement of claim.
The Insurance Companies are using 'discharge voucher' or "settlement intimation voucher" or in some other name, so that the claim is closed and does not remain outstanding in their books. However, of late, the Authority has been receiving complaints from aggrieved policyholders that the said instrument of discharge voucher is being used by the insurers in the judicial for a with the plea that the full and final discharge given by the policyholders extinguish their rights to contest the claim before the Court.
While the Authority notes that the insurers need to keep their books of accounts in order, it is also necessary to note that insurers shall not use the instrument of discharge voucher as a means of estoppels against the aggrieved policy holders when such policy holder approaches judicial fora.
Accordingly, insurers are hereby advised as under: Where the liability and quantum of claim under a policy is established, the insurers shall not withhold claim amounts. However, it should be clearly understood that execution of such vouchers does not foreclose the rights of policy holder to seek higher compensation before any judicial fora or any other fora established by law.
All insurers are directed to comply with the above instructions.
(Suresh Mathur,) Senior Joint Director".
(Emphasis supplied) 7.1. The insurance companies cannot deny the payment of the admitted claim amount to the insured unless a complete discharge is given by the insured. The insistence of the insurance company to sign a discharge voucher of full and final settlement before release of admitted claim amounts to coercion and undue influence as defined in Sections 15 and 16 of the Contract Act and such contracts are ARB.P. 459/2015 Page 18 of 22 voidable under Section 19 and 19A of the Contract Act.
7.2. The withholding of the admitted amount by the insurance companies unless complete discharge is given, amounts to deficiency in service within the meaning of Section 2(1)(g) of the Consumer Protection Act, 1986 as the insurance companies are not expected to withhold the admitted claim amount till the insured gives the receipt of full and final settlement.
7.3. Despite well settled position of law, insurance companies are indulging in unfair trade practices and therefore, the Court issued notice to the IRDA on 17th August, 2015.
7.4. The IRDA has promptly set the controversy at rest by issuing the circular dated 24th September, 2015. All insurance companies are bound to comply with the circular dated 24th September, 2015 issued by IRDA and shall not insist on discharge voucher for releasing the admitted amount in view of the circular dated 24th September, 2015 issued by IRDA. However, in cases where such discharge voucher has been already been taken, the insurance companies shall not raise any objection to the maintainability of the claim on the basis of the discharge voucher.
7.5. This Court hopes that the pending and future claims will no longer consume the Court time for deciding this issue and to this extent, the Court's time will be saved and the claims on this account shall not be delayed or denied".
15. It is also an admitted fact that the Surveyor assessed the loss, 'without declaration' at ₹4,090,293/- and 'with declaration' at ₹36,92,720/-, whereas, the amount offered to the Respondents was ₹36,59,809/-, again, for which no justifiable reasons have been given. It is pertinent to note that there was a specific averment in the Complaint that only because of their poor financial condition, the Respondents had accepted the amount, 'in protest', on 28.12.2011, which is, 1 year and 8 months, after the date of loss, and for a small rice mill, this inordinate delay by the Petitioner in settling the claim tantamounts to the accord not being voluntary or by free consent. This establishes that there was no question of final accord of satisfaction to make the insured ineligible for making a claim for the balance amount against the insurer.
16. For all the afore-mentioned reasons and specifically the report of the Surveyor, which clearly mentions that the policy was silent about the declaration basis; the inordinate delay of more than one year taken by the Surveyor to file his report and also the discrepancy in the amount offered to the Complainant, towards full and final satisfaction, we do not see any illegality or infirmity in the order of the State Commission in allowing the balance amount of ₹4,26,208/- with a reasonable default interest @ 9% p.a.
17. In the result, this Revision Petition fails and is dismissed, accordingly. No order as to costs.
......................J D.K. JAIN PRESIDENT ...................... M. SHREESHA MEMBER