Concealment of material facts by an insurance company, NCDRC imposes costs

A bench comprising Justice C. Viswanath, Presiding Member and Ram Surat Ram Maurya, Member, has observed that the insurance company deliberately attempted to conceal the separate report submitted by the surveyor regarding the cause of the fire and did not file it with the appeal.

The bench noted that there is a clear concealment of a material fact on the part of the insurance company. The repudiation of the insurance claim on the grounds that the plaintiff filed a fraudulent claim was certainly not warranted.

The bench observed that the plaintiff did not take any fire safety measures, such as installing a running water fire extinguisher, etc. For this reason, the State Commission found contributory negligence on the plaintiff’s part.

In this case, the plaintiff is a sole proprietorship engaged in the activity of plastic reprocessing. The appellant (opposing party no. 1) is the national insurance company. Respondent #2 (opponent party #2) is Ahmednagar Merchant Co-op Bank. The plaintiff took out a standard fire and special risks insurance policy for Rs.29 lakhs. On 30.07.2004, the stock of plastic kept on the premises of the factory caught fire and the fire spread rapidly. The insurance company delegated Mr. Thombre as an inspector, who inspected the factory premises. The insurance company rejected the complainant’s claim on the grounds that it was a fraudulent claim. The complainant turned to the insurance ombudsman. The insurance ombudsman rejected the claim. Aggrieved by the dismissal of the claim, the plaintiff filed a complaint with the State Commission and requested the opposing party to pay a sum of Rs. 26,00,000 with 18% interest. The State Commission partially upheld the appeal and ordered the opposing parties to pay Rs.13,30,000/- with 9% interest from the date of dismissal of the claim.

Agreed by the decision of the Maharashtra State Commission, the appellant (insurance company) appealed to the National Commission under Section 19 of the Consumer Protection Act 1986.

Before the National Commission, the the Appellant, argued that the State Commission did not understand that the claim filed by the Complainant was fraudulent. The State Commission did not appreciate that the claim was covered by exclusion clause 8 of the insurance policy according to which in the event of a fraudulent claim, the insurance company would not be liable for to honour. It was stated that the Maharashtra State Electricity Board report showed that on July 30, 2004, there was no explosion in the transformer and there was no fire in the premises of the utility. plaintiff’s factory.

The Respondent (Complainant) argued that the Appellant had not filed any documentation to establish that the claim filed by the Complainant was fraudulent. The opposing party completely ignored the investigation report and accepted the expert’s report. It was further argued that the inspector failed to mention the cause of the fire. The investigation report regarding the cause of action was therefore not acceptable. The opposing party, based on the investigation report, observed that the incident of the cause of the fire was fabricated and rejected the claim, which was not justified. There was therefore no breach of clause 8 of the insurance policy.

Analysis:

The issue to be considered before the bench was whether or not the insurance company is liable for the injury suffered by the plaintiff.

The bench noted that plaintiff had taken out an insurance policy with Opposing Party #1. As of the date of the incident, the policy was in effect. The incident of the fire is also not disputed by the adverse party n°1. The cause of the fire is disputed by the insurance company.

The bench further noted that, according to the surveyor, the exact cause of the fire could not be determined. The immediate cause has been separately discussed elsewhere. The insurance company filed a copy of the same surveyor’s investigation report where the surveyor had specifically observed that the fire was accidental.

The bench said that, the said report is an essential document on which the whole affair rests. It appears that the insurance company deliberately attempted to conceal the separate report submitted by the surveyor regarding the cause of the fire and did not file it with the appeal. The same was only filed on 06.07.2017, after instruction by this Commission dated 06.06.2017. There is therefore clearly concealment of an important fact on the part of the insurance company. The repudiation of the insurance claim on the grounds that the plaintiff filed a fraudulent claim was certainly not warranted.

The bench further said that the State Commission thus assessed the total loss at Rs.19,30,000/-. The surveyor assessed the cost of the rescue at Rs.2,60,000/-. The State Commission therefore deducted the recovery cost of Rs.2,60,000/ from the net loss and assessed the loss at Rs.16,70,000/-.

The bench noted that, The State Commission observed that the Complainant did not take any fire safety measures, such as installing a running water fire extinguisher, etc. of Rs.16,70,000/- and finally assessed the loss at Rs.13,30,000/-. The head office subscribed to the conclusions of the State Commission and observed that there is concealment of material facts on the part of the Appellant.

The bench imposed a cost of Rs. 50,000/- on the appellant (insurance company) and ordered to pay within two months from the date of the order.

Case name: National Insurance Co. Ltd. vs. M/S. Nitin Industries & Anr.

Case no: FIRST CALL NO. 207 OF 2012

Court: Judge C. Viswanath, Presiding Member and Ram Surat Ram Maurya, Member

Determined to: 24e May 2022

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