AMAR TRADERS vs UNITED INDIA INSURANCE CO LTD

THIS appeal is by the complainant -M/s. Amar Trader of Patiala whose complaint filed under Consumer Protection Act was dismissed by the District Forum, Patiala on August 1, 1995. The complainant took an insurance policy for a sum of Rs. 4,10,000/ - from the opposite party United India Insurance Company. The risk covered stocks of bricks, coal and wood, stocked in open at the Brick -kiln of the complainant. The policy was valid during the period February 26,1991 to February 25,1992. Total premium on the policy paid to the Insurance Company was Rs. 4,598/ - as per details below : Fire @11.50% Rs. 4,715.00 T.A. (Terrorist Activities) 30% Rs. 125.00 Rs. 4,840.00 S.D. 5% Rs. 242.00 Total Rs. 4,598.00

ON account of floods, unbaked bricks etc. were destroyed during the month of May, 1991. The complainant thus suffered loss to the tune of Rs. 50,872/ - for which claim was lodged with the Insurance Company. The claim was repudiated by the Insurance Company although the surveyor assessed loss suffered in his report. The complainant was thus constrained to file a complaint, claiming a sum of Rs. 50,872/ - with interest of Rs. 10,000/ - and compensation for mental agony and harassment Rs. 20,000/ -. Contesting the claim, the Insurance Company in its reply took up the plea that loss suffered by fire and terrorist act only was covered, and not loss suffered on account of floods. After both the parties led their evidence, the District Forum while dismissing the complaint held that under the policy of insurance, loss suffered by floods was not covered.

IN order to determine whether loss suffered on account of floods was also covered under the policy of insurance, we have not only to see the terms and conditions of the policy, which are contained in a perform a known as policy ''C'', we have also to take into consideration the attending circumstances, which resulted in completion of the contract. The original insurance policy was not produced having been misplaced as per evidence produced on behalf of the complainant. Copy of the insurance policy was tendered into evidence in the statement of Counsel for the Insurance Company, which is Ex. R -3. Learned Counsel for the appellant argued that in order to determine whether loss suffered on account of floods was covered by the policy or not, the usual printed terms and conditions of the fire policy ''C'' as produced is not enough. It is the amount of premium charged, which would determine the nature of the contract entered into between the parties. The sale of insurance policies by the nationalised companies one of them being United India Insurance Company is governed by set of instructions in the matter of issuing policies, copy of which has been produced during arguments. A brief reference to these instructions is necessary to come to the point that it is the quantum of premium charged, which would determine the nature of the insurance policy issued or to be issued. This booklet of Notes and Instructions for the guidance of Field Force has been published by United India Insurance Company containing 14 Chapters. Three Fire Policies are contemplated under these chapters. Such policies are called Policy ''A'', ''B'' and ''C'', as provided under Chapter -4. We are concerned with Policy ''C''. The tariff for these policies is contained in these instructions. Chapter 6 provides for issuing of Policy ''A'' & ''B''. It is not considered necessary to refer to the tariff provided for these policies. Chapter 7 provides for tariff for Policy ''C''. Tariff provided for insurance of general categories of goods is contained in Chapter 7, Heading VI. Different tariff is provided for three different categories of goods with which we are not concerned. The tariff provided for non hazardous goods not specifically provided for material stored in the open is provided as under : "Rate not less than Rs. per mille per annum 1.80"

For such like goods stored in Ware Houses and godowns, the rate for Class I is not less than Rs. 1.50 and for Class II Rs. 2/ -. It may be observed that the list of articles contained in category Nos. 1, 2 and 3 which are at pages 39 to 51, does not contain the kind of the goods involved in the present case. Learned Counsel for the Insurance Company while referring to Ex. R -3 insurance policy ''C'' stated that under H(ii), loss by flood was specifically excluded. This printed condition in this policy could be applicable if the Insurance Company had charged the premium as quoted above. At this stage, it would be relevant to refer to the Cover Note of the insurance policy, wherein the premium collected as fully described above has been mentioned. It is Ex. R -2. The amount insured is also mentioned in the Cover Note at Rs. 4,10,000/ - as per details below: Bricks Rs. 3,00,000/ Coal Rs. 1,00,000/ Wood Rs. 10,000/ -

AT the sake of repetition, it may be observed that the premium charged for fire is 11.50% and not 1.80% as is provided for Policy ''C'' referred to above. The question arises as to whether at the time of issuing fire policy ''C'' on payment of extra premium as contemplated loss suffered by floods could be insured inspite of the exclusion Clause H (ii) referred to above. For this, answer is contained in the booklet referred to above. Chapter -4, Heading VII reads as under: "VII. The following perils can be covered on payment of extra premium only in respect of Policy ''C''. 1.Deterioration of stocks. 2.Earthquakes. 3.Storm, Tempest, Flood, Inundation. 4.Subsidence and Landslide."

Sub Clause III as reproduced above, leaves no manner of doubt that on payment of extra premium in respect of policy ''C'' risk on account of floods could also be covered for which rate of premium is prescribed in Chapter 12 Clause IV, which is reproduced as under : "Storm, Cyclone, Typhoon, Tempest, Hurricane/Tornado, Flood and Inundation Cover: (iv) Stocks in open including uninstalled machineries etc. lying in open. 10.00"

As demonstrated above, it is quite clear that extra premium of Rs. 10% was charged from the complainant by the Insurance Company while issuing policy Ex. R -2 and R -3. May be that by placing an endorsement separately to be attached with the policy ''C'' -Annexure R -3, the policy would have been complete. Otherwise, Counsel for the Insurance Company has not been able to explain as to on what other account premium of 10% was charged from the complainant, when for issuing simple fire policy ''C'' the premium to be charged was only to the extent of 1.80% (or 1.50% actually charged).

EX . A -10 is the letter of repudiation of the claim as issued by Insurance Company addressed to the complainant. The ground of repudiation given thereunder reads as under : "We have to inform you that we have marked above said claim as ''NO CLAIM" as inspite of our repeated requests you could not meet with requirements."

The contention of learned Counsel for the Insurance Company that when claim had been repudiated vide letter Ex. A -10, the Consumer Forum rightly declined to go into merits of the case and dismissed the complaint. This contention is devoid of merit. It appears that the claim was repudiated by the Insurance Company without applying its mind. The ground given in the repudiation letter Ex. A -10 as reproduced above is that the insured inspite of repeated request could not meet with the requirements. This repudiation is vague giving no reason. It was only for the first time while filing reply that the reason was disclosed that the risk of flood was not covered by the insurance policy. Such a ground was not taken in the repudiation letter, which cannot be considered as a bar for proceeding with the complaint.

ON behalf of the complainant, PW 1 Shri Amarjit Singh entered into the Witness Box and deposed to the facts as briefly narrated in the complaint that the bricks were destroyed by floods. He also produced relevant documents indicating the stock of such bricks being available at the Brick -kiln and he also asserted that the flood was also covered in the policy and he had paid the premium of Rs. 4,598/ -. No doubt, a suggestion was put during cross examination that the terms of the policy only covered risk by fire and terrorism. On the other hand, Shri Ashok Kumar Gupta, Assistant Administrative Officer of the Insurance Company deposed that in the Fire Allied Insurance Policy, the risk by flood is not covered. He referred to the report of the surveyor Shri Prabhjot Singh, copy Ex. A -11. During cross -examination, he did state that the Company did not charge premium to cover risk of the flood. The insurance policy was purchased by the bank in the name of the complainant. It may be observed that in his statement he has not explained as to how a sum of Rs. 4,598/ - was charged for a simple Fire Policy ''C'' and what risk was covered on charging 10% of the insured amount. The silence on the part of this witness and in the absence of any explanation coming forth on the record from the side of the Insurance Company, there is no reason to disbelieve the complainant''s version that risk by flood was also intended to be covered on payment of extra premium, which was actually paid. Holding as above, it is further found that non settlement of the claim or repudiation thereof was illegal. This amounted to deficiency in the matter of rendering service of the contract of insurance policy. In the survey report Ex. A -11, loss has been found to the tune of Rs. 50,872/ -. Accepting the same, which is also being claimed by the complainant in the complaint, it is held that the complainant is entitled to the aforesaid amount suffered on account of loss to the bricks.

FOR the reasons recorded above, this appeal is allowed. The order of the District Forum is set aside. The complaint is allowed with the directions to the Insurance Company to pay a sum of Rs. 50,872/ - with 18% interest thereon from the date of loss i.e. May 20,1991 till payment. The complainant was harassed on account of non settlement of the claim during all this period. Apart from Rs. 10,000/ - as claimed towards interest, the claimant also prayed for Rs. 20,000/ - as compensation. Though some evidence could be led with respect of the profit to be earned by number of bricks sold after baking them, the grant of 18% interest on the amount found due is considered reasonable to cover the damages as such as well as loss suffered on account of mental agony and harassment. The claimant would also get costs of the complaint before the District Forum as well as in this appeal, which are consolidately assessed at Rs. 5,000/ -. The amount as determined above is ordered to be paid by the opposite party -Insurance Company, to the complainant within a period of two months from the communication of the order.