FRIENDS RICE And GENERAL MILLS vs National Insurance Co. Ltd.

CHALLENGING the repudiation letter dated 13.2.1995 (Annexure C-5), naturally, the insured M/s. Friends Rice and General Mills, Qadian is the complainant before us.

THE facts in brief at which the parties are not at much variance, lie in narrow compass. THE complainant-firm obtained the Insurance Policy (Annexure C-l) dated 3.11.1992 valid for the period from 3.11.1992 to 3.11.1993 paying a sum of Rs. 13,850/- in cash as premium covering the risk on account of paddy, rice, Basmati, Bardana packed in gunny bags at/or loose stored in godown in process block at/or godown at/or open pertaining to the insured''s shelter Kl Class Construction, covering the risk of Rs. 25 lakhs for fire including terrorist action and flood and the said amount of Rs. 13,850/- has been stated to be paid in the policy (Annexure C-l) as under : On account or the audit objection, a sum of Rs. 2410/- demanded vide letter dated 9.5.1994 was also deposited by the complainant-firm with the Opposite Party National Insurance Company and hence the total premium paid was of Rs. 16,269/-. During the month of July, 1993, as the ill-luck would have been, the area was flooded on account of heavy rains and the food grain stock lying in the godown was washed away. The complainant-firm lodged the complaint and the surveyor deputed by the Insurance Company assessed the loss. Ultimately, the complainant was served with the impugned repudiation letter Annexure C-5 dated 13.2.1995.

On the notice being served, the Insurance Company filed written statement, containing its version, primarily stating that a selective cover for flood was granted i.e. only stocks lying in open for the sum insured of Rs. 5 lakhs were covered. The stocks lying in the godown were not covered under the ambit of the policy. It is admitted that as per the report of M/s. Consolidated Surveyors Pvt. Ltd., deputed by the Insurance Company, the loss was assessed at Rs. 9,52,554.94 and out of this loss, the damage to the rice bran to the tune of Rs. 50,000/- was not payable as the item rice bran was not covered by the policy. It is stated that after obtaining vigilance report, the claim filed by the complainant was repudiated and so was intimated to it.

ON the opportunity being afforded, both the parties have rested contended with the filing of certain correspondence and no affidavit either in support of the complaint or the written statement was filed. We have heard the learned Counsel for the parties and scanned the pleadings and documents filed in support thereof. By placing reliance on the judgments of the Hon''ble National Commission and other State Commissions, this Commission in a catena of judgments has held that if there is unexplained and unnecessary delay in deciding the claim filed by the insured on the part of the insurer that per se is deficiency of service as defined under Section 2(1)(g) of the Consumer Protection Act, 1986 and this Commission has further opined that the period taken by the Insurance Company beyond three months in settlement of the claim is reflection of delay on its part and would be, if remain unexplained per se enough for holding it guilty of the charge of deficiency of service and sufficient enough to allow the claim filed by the insured. Suffice it to mention OC No. 44/1994 "M/s. Shree Vallabh Oil Mills (Pvt.) Limited v. The Oriental Insurance Company Limited and Others" decided on 10.3.1994, OC No. 28/1995 "Kaprinas Pharmaceuticals & Chemicals Ltd. v. United India Insurance Company Ltd. & Others" decided on 18.10.1995, OC No. 27/1995 "Kali Charan v. New India Assurance Company" decided on 9.11.1995 and OC No. 41/1995 "Devinder Kumar v. Life Insurance Corporation of India and Others" decided on 7.3.1996 by this Commission. The undisputed facts are that occurrence of flood took place on 10th of July, 1993, and in July, 1993 itself the claim was lodged and the repudiation letter was passed on 13.2.1995 and hence in settlement of the claim, the Insurance Company has taken more than one and half years and no explanation whatsoever has been stated either in the written statement or during the course of arguments for the delay and to depart this Commission from the period of three months observed by this Commission in a catena of judgments for the settlement of the claim and that itself is sufficient enough to give the finding that the Insurance Company has rendered the deficient service to the complainant.

LEFT with is the quantum of compensations/damages to be granted to the complainant. Mr. Rangpuri, Advocate appearing for the complainant has contended that the amount of Rs. 9,52,554.94 assessed by the surveyor be awarded. By placing reliance on the Tariff Manual, Mr. Pardeep Bedi, learned Counsel for the Insurance Company submitted that as per the premium of Rs. 5,000/- paid, the maximum liability of the Insurance Company for the loss of the flood would be Rs. 5,00,000/- only and the additional amount of Rs. 2,419/- demanded vide letter dated 9.5.1994 (Annexure C-2) is only on account of the lesser premium paid towards the loss covered for fire including T.R. Confronted with the contention of Mr. Bedi, the learned Counsel for the complainant could not refute that as per the premium paid, the maximum liability for the loss of flood, would be Rs. 5 lakhs only. So far as the submission of the Insurance Company that the loss covered is for the stocks lying outside the godown and not inside the godown is concerned, is without merit and belies the Insurance Policy (Annexure C-1) issued by it. The Insurance Policy is the sheet anchor and is the best document to witness the bilateral terms of the contract between the insured and the insurer and in the case in hand, it mentioned the stock lying inside the godown or open i.e. outside the godown. The repudiation letter (Annexure C-5) dated 13.2.1995 is in direct conflict with the Insurance Policy dated 3.11.1992 and hence cannot stand the scrutiny of the Commission and it seems the Insurance Company has passed the impugned repudiation order in a cavalier and mechanical manner and has unnecessarily harassed the complainant. It cannot be permitted to travel beyond the Insurance Policy. It is a gross case of neglect on the part of the Insurance Company in attending and settling the claim filed by the insured. For keeping the scales of justice even and for maintaining reputation of the Insurance Company intact, we are of the considered opinion that in such like cases, the Insurance Company should on their own conduct the enquiry for fishing out the hands responsible for the lapes and the Insurance Company in some proportion at least should recover the damages/compensation granted by the Consumer Fora over and above the claim allowed from the erring official. But where the duty is performed capriciously or the exercise of power results in harassment and agony then the responsibility to pay the loss determined should be whose? In a modern society, no authority can arrogate to itself the power to act in a manner which is arbitrary. It is unfortunate that matters which require immediate attention linger on and the man in the street is made to run from one end to other with no result. The culture of window clearance appears to be totally dead. Even in ordinary matters, a common man who has neither the political backing or the financial strength to match the inaction in public oriented departments gets frustrated and it erodes the credibility in the system. Public administration, no doubt involves a vast amount of administrative discretion which shields the action of administrative authority. But where it is found that exercise of discretion was malafide and the complainant is entitled to compensation for mental and physical harassment then the officer can no more claim to be under protective cover. For the reasons peaced above, we partially allow this complaint and order the Insurance Company to pay and indemnify the loss of Rs. 5 lacs caused to the complainant''s stocks lying inside the godown on account of food. In addition to the claim of Rs. 5 lacs, we award interest @ 18% per annum on the amount of Rs. 5 lacs from 13.7.1993 i.e. the date of loss till the date of payment. The interest @ 18%would cover the damages/compensation for the harassment and mental agony etc. In addition to the claim of Rs. 5 lacs with interest @ 18% the complainant would be entitled to costs of Rs. 5,000/-. We further order that the amount awarded by the Commission be paid to the complainant within three months from the receipt of this order. Complaint partly allowed with costs. ____________