Branch Manager Oriental Insurance Co. Ltd. vs Yashowanta

THIS First Appeal has been filed by Oriental Insurance Co. Ltd., Opposite Party before the Orissa State Consumer Disputes Redressal Commission (hereinafter referred to as the State Commission) and Appellant herein being aggrieved by the order of that Commission which had allowed the complaint of deficiency in service filed against it in not settling the claim as per the insurance policy and unjustifiably offering a lesser amount which was not acceptable to Yashowanta Narayan Dixit, Complainant before the State Commission and Respondent herein.

FACTS of the case as per the Respondent/Complainant are that he was engaged in the business of oil extraction in the name and style of Dixit Oil Industries for self-employment and had taken an insurance policy from the Appellant/Insurance Company to cover loss or damage to his unit for a sum of Rs.33 lakhs by paying a premium of Rs.5280/- and Rs.2475/- for special peril of Floods for the period 04.09.1999 to 03.09.2000 vide Policy No. 2000/192 dated 06.09.1999. On 29.10.1999 during the validity of this policy, there was a super cyclone followed by heavy torrential rain in the entire coastal area of Orissa, including Bhadrak town where the Respondent/Complainant ''s business was located. Because of the cyclone and heavy rains and due to overflowing of the river Salandi the entire business premises of the Respondent/Complainant was flooded and remained under 4 to 6 feet of water for about four days and as a result raw material (mustard seeds), mustard oil in tanks and it ''s by-product i.e. Khal (de-oiled cakes) were washed away or spoiled. The entire stock became unfit for human consumption. When the situation improved after some days, Respondent/Complainant vide letter dated 02.11.1999 informed the Appellant/Insurance Company giving a brief picture of the damage which was roughly estimated to be Rs.27.21 Lakhs. It was contended that four Surveyors were appointed one after the other, namely, M/s R.P. More And Associates, who visited the Respondent/Complainant ''s premises and also asked him to send some oil for laboratory tests. Thereafter another Surveyor - M/s D.S. Consolt & Network Pvt. Ltd., Bhubaneswar was appointed who confirmed that the water had entered into the godown causing damage to the mustard seeds etc. but instead of settling the claim, Appellant/Insurance Company appointed yet another Surveyor - M/s S. Soni & Co. who again inspected the premises and sought certain clarifications which were supplied. However, even after this, instead of settling the claim Appellant/Insurance Company appointed a fourth Surveyor - M/s Sanjeeb Kumar Mohanty And Associates. As per the assessment of this Surveyor which was based on the survey reports of the three earlier Surveyors, Appellant/Insurance Company offered the Respondent/Complainant a sum of Rs.2,98,145/- in settlement of the insurance claim which was not accepted since it was well below the actual loss caused due to damaged goods. Being aggrieved by the deficiency in service on the part of Appellant/Insurance Company, Respondent/Complainant filed a complaint before the State Commission and requested that Insurance Company be directed to settle the claim for a total amount of Rs.69,06,685/- as per the following break up : "1. Loss sustained due to super cyclone and flood covered under the policy Rs .27,21,685.00 2. Business loss Rs.05,00,000.00 3. Loss of business goodwill Rs.05,00,000.00 4. Payment of interest to the bank + Interest to be paid in future Rs.07,00 ,000.00 5. Expenses incurred for writing letter, going to the offices of the OPs etc. Rs.00.25,000.00 6. Damages / Compensations for sufferings / harassment / humiliation / psychological trauma Rs.10,00,000.00 7. Interest @ 18% on the amount to be awarded from 29&30/10/1999 till the date of payment pendent lite and future interest Rs.14,60,000.00 Rs.69,06,685.00 "

Appellant/Insurance Company on being served filed a written rejoinder refuting the allegations made by the Respondent/Complainant. It was contended that in order to settle the claim of the Respondent/Complainant, with his knowledge and consent three Surveyors were appointed and based on the report of the final Surveyor, whose assessment was based on the earlier three survey reports as also examination of relevant documents, the insurable loss was rightly assessed at Rs.3,74,167/-. In fact, Respondent/Complainant had highly inflated his loss by placing reliance on various purchase bills stating that there was extensive damage to not only raw material but to the finished goods, including those stored in the oil tanks. However, this extensive damage was not backed by credible evidence. The contention of the Respondent/Complainant regarding the loss and also seeking an insurance claim amount which was much higher than the amount insured as per the insurance policy itself indicates that the Respondent/Complainant ''s complaint/allegation lacks credibility.

THE State Commission after hearing the parties and on the basis of evidence produced before it allowed the complaint by observing as follows: "7. It is relevant to mention here that the complainant in support of his claim placed reliance on the purchase bills which are as follows :- "Table" He has calculated the damage as follows :- "Average 158.08/8 = 19.76 (1976 per Qtl.) 639.35 Qtl X 1976 = 12,63,355.00 " The last surveyor having relied on the reports of the previous surveyors reduced the quantum of damage without any justification. There is nothing on record to disbelieve the details of purchase bills furnished by the complainant. Taking into consideration totality of the circumstances, we are of the view that the offer of rupees 2,98,145/- by the opposite parties was rightly rejected by the complainant. The occurrence took place in October, 1999. More than eight years have elapsed. As the complainant had taken cash credit loan, he must be paying interest to the financing Bank. The opposite parties have arbitrarily and illegally withheld the legitimate amount. Therefore, his entitlement to interest and compensation cannot be denied. We, accordingly, direct the opposite parties to pay a consolidated amount of rupees 16,00,000/- (sixteen lakhs) to the complainant by 31.01.2008, failing which interest at the rate of 9 percent per annum shall be paid from 01.11.1999. "

BEING aggrieved by the order of the State Commission, the present First Appeal has been filed. Counsels for both parties made detailed oral submissions.

COUNSEL for the Appellant/Insurance Company explaining the reason for appointing four Surveyors stated that the first two Surveyors were essentially preliminary Surveyors who had been deputed to assess the physical condition and not assess the actual loss. While admitting that the third Surveyor - M/s S. Soni And Company assessed the net loss at Rs.11,83,000/-, Counsel for the Appellant/Insurance Company stated that there were inherent contradictions in this survey report vis-a-vis the earlier two survey reports. For example the second Surveyor after an on the spot inspection had categorically stated thatinundation did not cause damage to the finished goods, including 29 bags of deoiled cakes as well as the mustard oil in tanks. Apart from this, the third Surveyor had not gone into some important questions raised by the earlier two Surveyors. For example, the second Surveyor - D.S. Consolt Pvt. Ltd. had stated that Respondent/Complainant to explain the higher amount of stocks stored and damaged had reported that the mill was closed from 03.10.1999 to 29.10.1999 because of which stocks had accumulated but this point needed further investigation. No finding was given on the same by the third Surveyor. Because of this and some other contradictions in the report, it was necessary to appoint the fourth Surveyor to give a correct assessment of the actual loss. Counsel for the Appellant/Insurance Company while admitting that the fourth Surveyor was appointed without the consent or knowledge of the Respondent/Complainant, stated that the fourth Surveyor, while agreeing that the amount of raw material damaged was 199.48 quintals has concluded that there was no loss to the finished goods. The fourth Surveyor further concluded that the third Surveyor had only relied on the version of the Respondent/Complainant while assessing the loss and had not considered the actual physical damage or any credible document. Regarding the closure of the factory to explain the higher amount of stocks in the godowns just prior to the cyclone vis-a-vis other months/years, the fourth Surveyor concluded that the factory was not closed as alleged by the Respondent/Complainant since the electricity bills for the months of September and October, 1999 were higher than the electricity bills for the same months of the preceding years. The fourth Surveyor assessed the loss as follows :- "AFFECTED AMOUNT 4,84,797.48 SALVAGE 28,130.00 ASSESSED LOSS 4,56,667.48 UNDER INSURANCE Not applicable POLICY EXCESS (2.5% of Sum Insured) 82,500/- NET 3,74,167.48 SAY 3,74,167/- "

COUNSEL for the Respondent/Complainant challenged the above contentions of Counsel for the Appellant/Insurance Company. In the first place, it was pointed out that since the fourth Surveyor was appointed behind the back of the Respondent/Complainant and his report was submitted in 2000 i.e. four months after the occurrence of the incident, no correct assessment of the actual damage was possible and, therefore, as admitted by the Appellant/Insurance Company, it was the third Surveyor who essentially went into the details of the actual loss incurred after physical verification and examination of the stock register and related documents. Counsel for the Respondent further stated that Appellant ''s contention that the two preliminary Surveyors had found that the finished goods were not affected by the inundation is not factually correct. He brought to our notice the report of the second Surveyor - M/s D.S. Consolt Networks Pvt. Ltd. which clearly stated that the oil kept in the oil tanks had a bad smell and the by-products kept in the separate godown were also found damaged due to inundation. Counsel for the Respondent/Complainant also challenged the finding of the fourth Surveyor that the factory had not been closed in October, 1999 by relying on the electricity consumption, which, according to the Surveyor, indicated that the average units consumed as per the electricity bill of October, 1999 was higher than the electricity bill for the corresponding period of preceding years. This sort of calculation is erroneous and should not be the basis of settling the insurance claim, inasmuch as a perusal of the electricity bills for preceding months would indicate that the units consumed in April, May, June, July, August and September, 1999 were higher than in October, 1999. If an average is taken from April, 1999 to October, 1999 it would indicate the average unit consumed per quintal. The exercise should have been to add all the units consumed from April, 1999 to September, 1999, divided by the total quintals of materials sent for milling to arrive at the average unit consumed per quintal. Further the units consumed in October 1999 should be divided by the average unit as obtained hereinabove. The resultant will be the amount/quintal milled in the month of October, 1999. The assessment of loss based on the report of the fourth Surveyor was made purely to suit the convenience of Appellant/Insurance Company and without taking into account the various stock registers maintained by the Respondent/Complainant as also the fortnightly stock statements sent by the Respondent/Complainant to the Civil Supplies Department of the Government of Odisha as required under the Essential Commodities Act. Apart from this, the long and dilatory procedure adopted by the Appellant/Insurance Company in this case was in contradiction of a joint decision of the Government of India, Government of Odisha and the Insurance Companies taken in a meeting on 25.11.1999 that insurance claims of all those affected in the super cyclone should be settled within a period of 45 days.

We have heard learned Counsels for both parties and have also gone through the evidence on record. In the first place, we find substance in the contention of Counsel for the Respondent/Complainant that the Appellant/Insurance Company was not justified in appointing one Surveyor after another and in appointing the final Surveyor without the consent and behind the back of the Respondent/Complainant. As per Section 64-UM of the Insurance Act the Insurance Companies can appoint another Surveyor only after recording reasons for not accepting the earlier survey report and after informing the Insuree. The Hon ''ble Supreme Court in a catena of decisions, including in SikkaPapers Limited Vs. National Insurance Company Ltd. [(2009) 7 SCC 777], has condemned the practice of some Insurance Companies in appointing one Surveyor after another without recording reasons for the same and behind the back of the Insuree. In the instant case, it is an admitted fact that the four Surveyors were appointed and even if three Surveyors were appointed with the knowledge and consent of the Respondent/Complainant, the fact remains that the fourth Surveyor was appointed without the knowledge of the Respondent/Complainant and without the Appellant/Insurance Company recording reasons for the same. In view of these facts, we are not inclined to consider the report of the fourth Surveyor particularly since this Surveyor was appointed several months after the reported incident and, therefore, no meaningful physical verification of the actual damage caused would have been assessed by them. Apart from this, a number of facts recorded by the fourth Surveyor are not supported by the earlier three survey reports particularly in respect of the damage to the finished goods. On a perusal of reports of the three Surveyors, we note that the third Surveyor had confirmed that there was extensive damage not only to the mustard seeds but also to the finished goods, including the oil stored in the tanks. The first Surveyor had also stated that so far as the finished goods are concerned, even though they were found intact but a bad smell was coming out of the oil kept in the oil tanks. It was further stated that the by-product was also found damaged in inundation. The second Surveyor gave a somewhat ambiguous report stating that although there was 1 ft. of water in the oil storage room and impurities were found at the bottom of the tanks, flood water entering the tanks is ruled out. The third Surveyor, who has given a much more detailed report, has given a clear finding that there was damage not only to the mustard seeds but also to the finished goods. The third Surveyor also conducted a very detailed survey after examining the stock registers, sales tax records, fortnightly statements of the stocks sent to the Civil Supplies Department as per the provisions of Essential Commodities Act and other books and concluded that the actual loss suffered was Rs.12,83,955/- and after deducting the less loss clause (Rs.1,00,000/-) as per policy the net insurable loss was assessed at Rs.11,83,955/-.

TAKING into account the above facts, we are in agreement with the order of the State Commission that the third Surveyor had rightly calculated the damage on the basis of the actual loss suffered at Rs.12,83,955/- and recommended that an amount of Rs.11,83,955/- be paid. In addition, since more than 8 years have elapsed for which the Respondent/Complainant is paying interest to the financing bank, he is entitled to interest and compensation also for the delay caused by the Appellant/Insurance Company in the settlement of the insurance claim for the various reasons as cited above.

WE , therefore, uphold the order of the State Commission and dismiss the present First Appeal. Appellant/Insurance Company is directed to comply with the order of the State Commission and pay the awarded amount to the Respondent/Complainant within a period of 3 months.