National Consumer Disputes Redressal
M/S. Ubale & 4 Ors. vs Icici Lombard General Insurance ... on 10 April, 2023
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI CONSUMER CASE NO. 269 OF 2015 1. M/S. UBALE & 4 ORS. (THROUGH ITS PARTNERS)
SUBHASH ROAD, DISTRICT: JALNA, MAHARASTRA 2. SH. CHANDRAKANT E. UBALE PARTNER M/S UBALE, SHUBASH ROAD, JALNA - 431203 MAHARASTRA 3. SH. GANESH C. UBALE PARTNER M/S UBALE, SHUBASH ROAD, JALNA - 431203 MAHARASHTRA 4. SH. VINOD C. UBALE PARTNER M/S UBALE, SHUBASH ROAD, JALNA - 431203 MAHARASHTRA 5. SH. JITENDRA C. UBALE PARTNER M/S UBALE, SUBHASH ROAD, JALNA - 431203 MAHARASHTRA ...........Complainant(s) Versus 1. ICICI LOMBARD GENERAL INSURANCE COMPANY LIMITED (THROUGH ITS DIRECTOR),
ICICI LOMBARD HOUSE,
414, VEER SAVARKAR MARG,
NEAR SIDDHI VINAYAK TEMPLE,
PRABHADEVI. ...........Opp.Party(s)
BEFORE: HON'BLE MR. SUBHASH CHANDRA,PRESIDING MEMBER
For the Complainant : Mr Kamal Mohan Gupta, Advocate with
Mr Ajay Gupta, Advocate For the Opp.Party : Mr Vishnu Mehra, Advocate
Dated : 10 Apr 2023 ORDER
1.This complaint under the Consumer Protection Act, 1986 (in short, the 'Act') has been filed seeking the enhancement of a fire insurance claim filed with the opposite party with compensation alleging deficiency in service. The complainant is a family partnership firm engaged in the business of sale of readymade garments which had obtained a Merchant's Cover and Insurance Policy (in short, the 'Policy') from the opposite party for Rs 5.22 crores under different coverage for his premises which was completely damaged in a fire on 18.12.2013.
2. The facts of the case, as per the complainant, are that he had a Rs 2 crore hypo (loan) limit for his showroom from Nasik Merchant Co-Operative Multi Schedule Bank which in turn had obtained an insurance policy with the opposite party since 2011. The policy on renewal was valid from 28.05.2013 to 27.05.2014 for an assured sum of Rs 5.22 crores. The shop had 4 floors with the kids section and office on the ground floor, saree section on mezzanine, boys and ladies wear on first floor, menswear on second floor, stores and DG set on the third and water tanks, air cooling system etc., on the terrace. It is stated that on 18.12.2013 night, around 11.30 pm, a fire was reported in the shop premises and the fire brigade reached by 11.45 pm. After nearly 20 hours of fire-fighting, the fire was controlled by 6 pm on 19.12.2013 by approximately 90 fire tenders. There was extensive damage to the building and stocks including fixtures and fittings, computers, CCTV and DVR. A FIR no. 13/13 was registered with the Police on 19.12.2013 and as per panchnama loss was estimated at Rs 8.75 crores. The Maharashtra State Electricity Board (MSEB) opined the probable cause of the fire to be an electrical short circuit. The complainant submitted a claim for an estimated loss of Rs 6,62,36,272/- under various heads.
3. Opposite party appointed M/s Kamal Biyani Associates as Surveyor who inspected the premises on 19th and 20.12.2013 when the fire was still smoldering and 2 fire tenders were summoned to extinguish it. The Surveyor's initial loss assessment was for Rs 1,60,93,556.11. The 'Immediate Loss Advice Report' of the Surveyor dated 23.12.2013 stated that "... It is suspected that the fire might have occurred due to short circuit in the electrical panels near the front shutter". The Preliminary Survey Report submitted by the Surveyor on 04.02.2014 stated that the fire had travelled throughout the entire building causing damage to plaster, ceiling, floor etc and therefore advised that an opinion of an RCC consultant be obtained. Extensive damage to fixtures and fittings and stocks were also noted and a reserve of Rs 4 crores was recommended for insurers. The opposite party/surveyor commissioned M/s Truth Labs, Hyderabad to investigate the matter which, however, came up with the finding that "... the role of management in stage managing the act of fire cannot be ruled out". The complainant contends that the repudiation of the policy was based on the report of M/s Truth Lab which is a private lab and did not have any in house facilities for testing and had outsourced the tests to Lucid Laboratories Pvt. Ltd. And, therefore, the repudiation of claim based on the Surveyor's report is incorrect. The complainant contests that the tests by Lucid Labs were done in January and February 2014 and only the second samples showed presence of hydrocarbons and therefore the veracity of the samples is suspect. It is the complainant's case that though power had been switched off at night, an incidence of voltage fluctuation had been noticed by other shops in the vicinity and therefore the cause of fire being short circuit was not incorrect. The Surveyor's report is also challenged on grounds of the finding that there was no sign of transmission of fire from the ground floor to the higher floors, since the staircases had no walls being on RCC pillars. The absence of adequate quantity of burnt material of wooden shelves and stocks is taken by the Surveyor to conclude that stocks were not there; however, complainant's case is that the water from the fire-fighting operations over 20 hours had washed these away. As the documents including balance sheet and computer hard disk were damaged, a duplicate ledger account based on second copies of the purchase bills were provided apart from Bank statements, various tax returns etc., which are stated to being not verified by the Surveyor in order to arrive at the estimate of loss.
4. Complainant states that the repudiation letter is based upon the Surveyor considering the level of shop inventory to be very high contrary to industry average, over the past 3 years. Creditor's balance is also alleged to have been deducted by the Surveyor without any reference to the stock and Rs 2,16,86,060/- has allegedly been wrongly deducted from stock value of Rs 3,21,42,425/- since all creditors have been accepted by the Income Tax and Sales Tax authorities and hence there is no reason for the list of creditors to be treated as 'non-genuine'. It is also contended that the loss of Rs.1,60,93,556/- assessed by the Surveyor was not shared with the complainant. Although the claim was for Rs.6,62,36,272/- it was being limited to Rs.5,22,00,000/- as per the sum assured. The complainant is before this Commission with the following prayer:
Allow the present complaint and direct the opposite party to pay the policy insurance amount of Rs 5,22,00,000/- or such other amount as may be deemed fit and proper by this Hon'ble Commission alongwith interest @18% p.a. from the date of loss i.e. 19.12.2013 till realization; and Direct the opposite party to pay non pecuniary damage of Rs 60 lakhs under the following heads:
Compensation on account of harassment 20,00,000/- and mental agony Punitive damages 20,00,000/-Deterrent damages 20,00,000/- TOTAL 60,00,000/-
Pass such other/further relief as this Hon'ble Tribunal may deem fit under the circumstances.
5. Opposite party filed his written reply on 12.10.2015 resisting the complaint. Preliminary objection is taken that the complainant is not a 'consumer' under section 2(1)(d) of the Act as insurance was obtained for a commercial purpose. It is contended that the claim was not maintainable since the facts were highly complex that could not be decided in summary proceedings before a Consumer forum. It is also contended that there was no deficiency in service since the repudiation letter dated 25.06.2014 clearly states, on the basis of the forensic report dated 14.04.2014 of the independent investigator, Truth Labs, that the cause of the fire was not a short circuit or on account of chemical, mechanical or other failures or a natural fire (lightening/spontaneous combustion) and its rapid spread in the building in a very short time cannot rule out a stage managed fire by the management. In addition, it was stated that the extent of stock and fixture/ furniture debris was not commensurate to the stocks on the premises as also the damage to the building structure. It was held that there were two different sets of balance sheets submitted to the Bankers and the Income Tax department which indicated a discrepancy of Rs 10 million in some instances. Further, that very high inventory of 334 days was held which was at variance to the fashion industry average. Finally, that there was considerable illegal construction in the building as noted by the valuer of the Nashik Merchant Co-op Bank. Hence, as per clause 8 of the General Conditions of the Policy, the claim was considered fraudulent and based on false declaration and therefore all benefits under the policy were liable to be forfeited. Accordingly the claim was closed as a 'NIL claim'.
6. On merits, it is argued by the opposite party that the complainant is neither a partnership firm nor a 'consumer' under the Act. It is argued that repudiation under clause 8 of the policy for fraudulent filing of a claim was justified in the facts of the case. It is denied that the policies were issued after verification of stocks and all relevant documents from the shop or Bank. It is also denied that the Bank used to verify the stock every 3 months or that the Bank increased the loan amount periodically since the complainants had addressed the Bank on 27.07.2013 seeking increase in the loan amount. It is stated that the building of the shop is not legal for which completion certificate and permission was not obtained from the Municipal Council, Jalna or that the Bank had given a loan to the complainant on this basis. The increase in the business of the complainant year-on-year is contested or that VAT returns were filed regularly or audited statements were approved by the Sales Tax Office. The opposite party denies that the fire spread through the building or that the building suffered extensive damage to plaster etc or that FFF fittings were burnt beyond recovery on the ground floor and to ashes on the upper floors. Newspaper reports regarding the fire are denied and contested to be without bearing on the claim which has to be decided on the basis of terms and conditions of the policy. Opposite party denies that the fire was accidental or that the Police prepared a panchnama or that the MSEB issued any certificate stating the probable cause of fire to be a short circuit. It is stated that opposite party deliberately failed to furnish the hard disk of the DVR linked to the CCTV which amounted to suppressing evidence deserving an adverse inference. The report of Truth Labs establishes through an expert's opinion that the claims of the complainant are not justifiable and that clause 8 of the policy is squarely attracted to establish a case of a fraudulent claim 'stage managed by complainants'. The Surveyor's report is stated to be correct on the basis of the report of Truth Labs and the discrepancies in the audited statements to the Bank and Income Tax department. It is also denied that the fire was extinguished after more than 20 hours and argued that the fire was not accidental as rightly concluded by Truth Labs that the origin of the fire was stage managed. The report of Truth Labs, which relied upon the report of Lucid Labs, is justified as correct even though these are not government labs on the basis of the quality of the report. Deduction of Rs 2,16,86,060/- from the stock value of Rs 3,21,42,425/- towards creditors who were treated as non-genuine is justified on the ground that the report of an independent and impartial Surveyor needs to be accepted.
7. The opposite party also makes an alternative plea without admitting any liability that even if it is held that the fire was accidental, its liability was limited to Rs 1,60,93,556.11 as assessed by the Surveyor vide his final report dated 10.06.2014.
8. I have heard the learned counsels for both the parties and perused the material on record carefully.
9. The complainant essentially argued as per his plaint and written submission of arguments dated 25.02.2020. In sum, his case is that the fire was accidental and the opposite party erred in relying on the report of his Surveyor who concluded, on the basis of a private lab (Truth Labs) that the fire was not accidental and that the claim was based on audited statements to the Bank and Income Tax department which had discrepancies. It was argued that the repudiation of the claim on the basis of stock position by ""unverified customers" was also incorrect and that the issues raised by the Surveyor in his report were not valid or legal grounds for rejection of the claim. He argued that the fire was a major fire which took approximately 90 fire tenders over 20 hours to extinguish and the reasons advanced by the Surveyor to conclude that the fire was 'stage managed' were baseless on the basis of the counter arguments advanced by him. Per contra, opposite party has justified the repudiation of the claim on the basis of the Surveyor's report which is based on the report of Truth Labs, the expert appointed by it. The opposite party has arrived at the conclusion that the fire was stage managed on the basis of the expert opinion and evidence at site and that the complainant's claim was inflated since the account of stocks showed discrepancies. Hence, the claim has been concluded to be a fraudulent claim and repudiated accordingly.
10. The repudiation letter reads as under:
Subject: Your claim under Merchant's Cover Policy no. 4017/80491428/00/000 Reference :
ILGIC Claim no. GEN000112675 Date of Loss 18.12.2013 Loss of Description Damage to buildings, contents (Stock of Readymade, hosiery, dresses, etc.,) P&M, Office equipment's, FFF etc. Dear Sir, We write this in reference to the subject claim.
In this regard we would like to state that immediately on receipt of claim intimation on 19.12.2013 we had appointed M/s Kamal Biyani Associates (referred as Surveyors hereinafter) to conduct the survey on 19.12.2013.
Post survey, the surveyor has issued their final survey report reference no. 9562/ICICI/13-14 dated 10.06.2010 and the summary of his findings on the admissibility of the claim is based on the findings of the forensic investigation into the incident and his observations at site. For the forensic investigation surveyor has solely relied on the findings of the independent investigator M/s Truth Labs who were appointed to conduct an investigation on the basis of the recommendations of the surveyor during the pendency of the survey and who have submitted their report bearing number TLH/HF/034/13 on 14.04.2014.
The contents of the investigation report have already been shared with you vide our e mail dated 11.06.2014. However, the relevant portions of the said report are reproduced as under:
In the absence of any evidence and effects of short circuits at the power transmission and distribution points on the pole, cables connected to the main switch board in the shop as well as the power supply mechanism in the inverter and the generator, the possibility of fire getting initiated on account of any electrical related failures is ruled out.
The lack of signs of the consequential and proportional effects of fire in the 1st, 2nd and 3rd floor by way of conspicuous absence of black soot on the walls and the roof, despite presence of burnt materials lying in heaps in different floors strongly indicate that burning could not have been a progressive and sustained act . Such inconsistency between the presence of burnt material at conspicuous locations and absence of the corresponding symptoms of fire and its effect strongly indicates that the fire on each floor could have been stage managed.
Absence of signs of transmission of fire from ground floor to the 1st, 2nd and 3rd floors through the staircases and the air cooler duct which are the twin paths of fire communication strongly indicate that fire could not have naturally spread from the ground floor to the upper floors.
The absence of wooden racks including its burnt remnants which were claimed to be present in the 1st, 2nd and 3rd floors, further indicate that the stocks could have been removed or depleted, thereby leaving marginal stock at the time of report of fire. The presence of comparatively less quantity of burnt materials that too in the form of small heaps here and there and the conspicuous absence of wooden racks strongly indicate that there was lesser quantity of stock lying the upper floors at the time of fire.
In short period of time lag between closing the shop and initial report of fire is just about an hour and within less than 15 minutes the management reached the shop and within 30 minutes the fire brigade reached the shop. By the time the fire brigade started operation it was stated that the fire engulfed all the four floors, which could not have been possible in such in such a short period to transmit fire through all the floor, especially when there was no fire transmission path along the stair ways or air duct mechanism. This fact further confirms that fire in the each floor could have been on account of pre-meditated and planned action.
In the conclusion the investigator has opined as under:
Based on in-depth inspection of the incident of fire, collection of physical evidence and its analysis, collection of documentary evidence and its evaluation, collection of circumstantial evidence and its correlation, the incident of fire occurred in M/s Ubale HYP 50 at Jalna on 18.12.2013 around 11 p m was:
Not on account of short circuit in any of the electrical systems;
Not on account of chemical, mechanical or other failures in any of the internal gadgets and appliances;
Not on account of natural fire due to lighting or spontaneous combustion, but On account of initiation of fire near the cash counters in the ground floor using extraneous ignitable fire accelerants and spreading such burning materials to the other parts of the premises where small heaps of garments were stocked isolated placed, after removal of substantial quantity of stocks from all the floors of the shop and thus creating multiple sources and multi locations of fires and Based on the means, opportunity and motive to cause such externally induced fires the role of management in stage managing the act of fire cannot be ruled out.
We also draw your kind attention to the observations of the surveyor as elaborated in his final survey report;
The extent of stocks debris is not commensurate to the stocks which were reportedly stocked at your premises. By the magnitude of the reported fire the damages to the building structure was also not commensurate;
The hard disk of the CCTV recorder was available post loss but on repeated requests for providing the same it was mentioned as misplaced;
Two different sets of balance sheets were submitted to the bankers and the Income Tax authorities which has differences in excess of Rs.10 million in some instances;
The inventory level of the shop (average 334 days for last three years) was very high compared to the industry average;
There is considerable illegal construction and this point was highlighted by the valuer appointed by the Nashik Merchant Co-op Bank.
In this regard we would also like to draw your attention to point no. 8 of the General Conditions of the Standard Fire and Special Perils Policy issued to you which is reproduced as under:
If the claim be in any respect fraudulent, or if any false declarations be made or used in support thereof or if any fraudulent means or devices are used by the insured or any one acting on his behalf to obtain any benefit under the policy or if the loss or damage be occasioned by the willful act, or with the connivance of the insured, all benefits under this policy shall be forfeited.
In view of the conclusions arrived by the independent investigator and the surveyor post scientific examination of forensic samples and the circumstantial evidences highlighted in both the reports of the independent investigator and the surveyor we are of the opinion that the claim fails under clause 8 of the above mentioned Standard Fire and Special Perils Policy.
Hence we regret to inform you that all the benefits under this policy stand forfeited.
Accordingly, we are closing the claim as "Nil Claim" in our record."
(Emphasis supplied)
11. It is evident that the opposite party has relied on the report of the Surveyor and the Expert appointed by the Surveyor (Truth Labs). The conclusion of the Surveyor and by extenso, opposite party no.1, is based on their reading of the rapid spread of fire, absence of debris and their interpretation that the spread of fire in the absence of a stair well and lack of spreading through the ducts of air cooling ducts indicated that the fire was stage managed and not an accident. This conclusion is based on the lack of physical evidence of debris of wooden racks and material on the different floors. It is also based on the assumption that the fire could not have spread so rapidly since the fire brigade had arrived within a short period of 15 minutes from the time of detection of the fire. It is significant to note that a large number of fire tenders, which are stated to have been numbering 90 according to the complainant, were deployed over 20 hours for fire fighting operations. This fact is not disputed by the opposite party or its Surveyor/ Investigator. It is also evident from the report of the surveyor that on 20.12.2018 when the surveyor went for inspection, the fire was still smoldering and two fire tenders had to be summoned to douse the same. The Surveyor does not appear to have considered the flammable nature of the stock on the premises which could also have been the reason for the fire to have taken such a long time to be controlled. The conclusion that the fire was stage managed is contrary to the opinion of the MSEB that the fire was likely to have been caused due to short circuit. The MSEB's report has also been ignored. The initial advice of the surveyor/ loss assessor that a reserve of Rs. 4 crores be considered has also been disregarded. The conclusion that the fire was stage managed by placing inflammable material at different locations on different floors is based on assumptions and surmises in the light of the foregoing.
12. The Surveyor has relied upon the report of a private forensic laboratory, Truth Labs, as part of its investigation/ assessment of the claim. The report of this lab is based upon tests conducted on its behalf by another private laboratory, viz., Lucid Lab. The conclusion arrived at is that 'the role of management in stage managing the act of fire cannot be ruled out" on the basis that the second sample tested by Lucid Lab showed presence of hydrocarbons and, therefore, there was likelihood of the complainant placing heaps of inflammable material at different places in order to create and aid spread of fire. The appointment of an Expert under section 13 (1) permits testing in an 'appropriate laboratory' as defined under section 2 (1) (a) (i) (ii) and (iii) of the Act. The 'appropriate laboratory' has to be recognized by the Central/ State Government or be one which is maintained, financed or aided by the Central/ State Government. In this case, it is not brought on record whether Truth Labs or Lucid Lab fall under any of these categories. This report, therefore, cannot be relied upon. The conclusions by the opposite party drawn on the basis of the report of Truth Labs report cannot be given credence to as they are speculative and based on assumptions and surmises.
13. The complainant had attempted to rebuild the stock register destroyed in the fire through duplicate bills. This has been rejected by the Surveyor on the ground that several new parties have been introduced. However, it did not consider appropriate to disregard only such new parties and limit the claim to include those who were the existing the parties/ suppliers.
14. While the appointment of surveyor under section 64 UM of the Insurance Act 1938 is a mandatory requirement, it has also been held by the Hon'ble Supreme Court in New India Assurance Co. Ltd. Vs. Pradeep Kumar (2009) 7 SCC 787 that:
"...the assessment of loss by the approved surveyor is a prerequisite for payment or settlement of claim of twenty thousand rupees or more by insurer, but surveyor's report is not the last and final word. It is not that sacrosanct that it cannot be departed from; it is not conclusive. The approved surveyor's report may be the basis or foundation for settlement of a claim by the insurer of the loss suffered by the insured but surely such report is neither binding upon the insurer not insured."
(Emphasis added)
15. The repudiation of claim by the opposite party on this ground of the surveyor's report, therefore, needs reconsideration. A policy of insurance is taken by the insured in the expectation that the event of an unforeseen mishap occurring he would be indemnified against the loss incurred. Therefore, a constructive approach, not one that is based on assumptions and surmises with an intention to negate the claim by categorizing it fraudulent is desirable. In the instant case, the policy was approved for a sum assured of Rs.5.22 crores. It was open to the opposite party/ insurance company to have verified the stock position and the stocking policy of the insured at the stage of approving the policy rather than hold that the stock position was far in excess compared to the industry standard. The insured had several floors in his premises which included different sections for readymade garments for children, women, boys and men. Therefore, the stock position being high cannot be ruled out. In any case, the insured had agreed for an assured sum of Rs.5.22 crores. The deduction of Rs.2,16,86,060/- towards creditors balance from the stock value of Rs.3,21,42,425/- is not justifiable.
16. In view of the foregoing, the conclusion of the opposite party that the fire did not qualify for the claim of the insurance under general condition no. 8 of the policy does not sustain. The claim of the complainant is valid for a sum of Rs.3,21,42,425/- based upon the loss estimated at Rs.6,62,36,272/- against an assured sum of Rs.5.22 crores.
17. For the aforesaid reasons, I find merit in the complaint which is partly allowed. The opposite party is directed to pay the complainant a sum of Rs.3,21,42,425/- towards the claim preferred along with interest @ 9% from the date of repudiation of the claim within 8 weeks failing which the default rate of interest shall be 12% till realization.
18. No orders as to cost.
...................... SUBHASH CHANDRA PRESIDING MEMBER