Insurance Company Cannot Raise Delay As Ground For Repudiation

The Supreme Court has ruled that an insurance company cannot use a delay in claim notification as a reason to reject a claim if this reason was not explicitly stated in the initial repudiation letter. The court found that by appointing a surveyor, the insurer had effectively waived their right to later object to the delay. Consequently, the insurer was ordered to pay the full claim amount assessed by the surveyor, plus interest.

SAURASHTRA CHEMICALS LTD. Vs. NATIONAL INSURANCE CO. LTD
CIVIL APPEAL NO. 2059 OF 2015.
SUPREME COURT OF INDIA

HELD THAT

INSURANCE COMPANY CANNOT RAISE DELAY AS A GROUND FOR REPUDIATION.

BRIEF FACTS

1. The appellant purchased a standard fire and special perils policy from the respondent National Insurance Company Ltd. thereby insuring the risk of loss/damage to the stock of coal and lignite stored in its factory compound.

2. An additional premium was paid by the appellant company so as to cover the risk of loss of the aforesaid stock on account of spontaneous combustion.

3. The appellant was declared a Sick Unit and was accordingly registered under SICA. The factory remained closed from 17.02.2006 to 09.08.2006 and was re-opened on 10.08.2006.

4. After re-opening it was noticed between the period from 11.8.2006 to 20.8.2006 that some amount of stock of coal and lignite has been diminished/destroyed on account of spontaneous combustion, causing loss and damage. Intimation in this regard was sent to the respondent-insurer on 12.09.2006.

5. Pursuant to the claim made, a surveyor was appointed who visited the premises of the appellant and sought certain details.After carrying out the requisite survey, the surveyor submitted his report assessing total loss to the tune of Rs.63,43,679/-.

6. The claim lodged by the appellant was however repudiated by the respondent-insurer on the ground that since spontaneous combustion did not result into fire thus, there is no liability under the policy.

7. On denial of the claim the appellant approached the National Consumer Disputes Redressal Commission (hereinafter referred to as the NCDRC).

8. The complaint was resisted by the Insurer on the ground that:-

(i) No claim was payable under the terms and conditions on which policy was issued inasmuch as destruction or damage, if any, caused to the property by fire on account of its own fermentation, natural heating or spontaneous combustion or undergoing natural heating or drying process is not covered.

(ii) Intimation of claim was sent with considerable delay of over a month thereby violating condition no. 6(i) of the General Conditions of Policy.

(iii) Under Clause 6(i) the intimation of loss and damage was required to be given in writing by way of notice within 15 days of the occurrence thereof. It is an admitted case between the parties that intimation of loss/damage was given by the appellant to the respondent insurer for the first time on 12.09.2006.

ISSUED BEFORE NCDRC

i) Whether the respondent-insurer had waived the condition relating to delay in intimation and lodging of the claim, by appointing a surveyor.

ii) Whether in the absence of any mention, of aspect of delay in intimation and violation of conditions of Clause 6(i) of General Conditions of Policy, in the repudiation letter, the same could be taken as defence before the NCDRC.

THE NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION HELD THAT

1. The NCDRC rejected the claim holding that since the complainant (Appellant herein) had contravened Clause 6(i) of the General Conditions of Policy, no claim is payable.

THE SUPREME COURT HELD THAT

2. By appointing a surveyor the respondent insurer is estopped from raising the plea of violation of condition prescribing a time limit for intimation/lodging of the claim, has no legs to stand.

3. There was no reference of delay in intimation or lodging of the claim as stipulated in Clause 6(i) of the General Conditions of Policy in the repudiation letter.

4. The NCDRC has failed to take into consideration this aspect of the matter and, therefore, cannot be held to be justified in rejecting the claim of the appellant, on that ground.

5. In view of the aforesaid analysis the appeal stands allowed and the impugned judgment and the order of the NCDRC is set aside.

6. The Respondent insurer is directed to make payment of Rs. 63,43,679/-, as assessed by the surveyor, to the appellant with interest @ 8% from the date of the filing of the claim of petition till date of payment. The payment, as above, be made within eight weeks from today.

CONCLUSION

The Apex Court in this case held that since there was no intimation of delay or lodging of claim and volition of clause 6(i) of the insurance policy in the repudiation letter. The insurer also disowned its claim of late intimation of claim by appointing a surveyor for survey of claims lodged by the insured and hence the claim assessed by the Surveyor will be payable.

DISCLAIMER: The case law presented here is only for sharing information and knowledge with the readers. The views expressed are personal and shall not be considered as professional advice. In case of necessity do consult with insurance professionals.