K C Textiles Ltd vs NEW INDIA ASSURANCE CO LTD

THE complainant company took three insurance policies from the opposite party two out of which were fire policies and the third one was a fire and special perils policy. A fire broke out in the factory premises of complainant on 09 -11 -2000. On intimation being given to the insurance company, M/s. C.P. Mehta and Co. and M/s. Thapar, Srinivasan and Kapoor Pvt. Ltd., New Delhi were appointed as joint surveyors to survey and assess the losses suffered by the complainant. Vide their report dated 12 -11 -2002 the surveyor assessed the losses to the complainant at Rs.1,95,98,603/ -. On receipt of their report, the respondent sought consent of the complainant to accept the assessment made by the surveyors. Accordingly, the complainant, vide letter dated 10 -12 -2002, accepted the assessment made by the aforesaid surveyors.

THE grievance of the complainant is that even after taking consent from him on 10 -12 -2002 the insurance company did not release payment to it, despite repeated requests and ultimately it was asked to sign another settlement note, accepting Rs.1,91,91,006/ -. According to the complainant since the payment had been delayed and the insurance company would not otherwise release the payment and under financial constraints, it was left with no alternative but to succumb to the aforesaid pressure from the insurance company and sign the settlement voucher. The complainant is now before this Commission seeking a sum of Rs.2,07,26,286/ - representing interest on the aforesaid amount of Rs.1,91,91,006/ - with effect from 27 -12 -2002 till 23 -12 -2008, at the rate of 18% per annum.

THE complaint has been resisted by the insurance company on the ground that since the claim involved was beyond the sanction limits of the regional office the matter was referred to the Head Office for approval. The Head Office sought clarification from time to time from surveyor as well as the complainant. However, the complainant kept delaying the information and documents sought by the Head Office and the requisite information was provided only after it had settled its dues with the Oriental Bank of Commerce in the year 2007. It is not in dispute that the joint surveyors had recommended settlement of the claim at Rs.1,95,98,603/ - vide their report dated 27 -11 -2002 and on receipt of the said report the insurance company had taken, from the complainant a consent letter dated 10 -12 -2002, whereby it agreed to accept the assessment made by the said joint surveyors. It is also not in dispute that despite taking consent, the claim was not paid by the insurance company. The only justification given by the insurance company for not paying the claim, despite taking consent from the complainant, is that the claim involved required approval of the Head Office and the complainant delayed responding to the queries raised by the Head Office, which, in turn, resulted in delay in approval of the claim by the Head Office.

I fail to appreciate why the insurance company did not take the requisite clarifications from the complainant before consent dated 10 -12 -2002 was obtained. Before taking the aforesaid consent, the insurance company ought to have ensured that all the documents relating to the claim had been submitted and the claim was ripe in all respects for payment to the insured. Only thereafter it should have sought consent of the insured to the loss as assessed by the surveyors. The consent letter dated 10 -12 -2002 was given to the insurance company and not to the surveyor. In fact it was taken quite few days after receipt of the report of the surveyors, which clearly shows that the insurance company had analysed the claim in the light of the report of the surveyors and decided to pay to the insured in terms of the said assessment, provided it was acceptable to the insured. When such a consent is taken by the insurer from the insured, it contains an implied promise to make payment in terms of the proposal, if it is accepted by the insured. Once, the insured accepts the offer so made by the insurance company, the payment should be made soon after the receipt of the consent and there would be no justification either to seek additional documents or any clarification, once such a consent is obtained. In its letter dated 10 -11 -2000 the complainant had estimated its loss to be between Rs.350 lacs to Rs.400 lacs. The surveyor assessed the said loss at Rs.1,95,98,603/ -. When the insurance company seeks consent from the insured to the loss as assessed by the surveyors, in a case where the claim is much more than the assessment made by the surveyors, one of the considerations which weighs in the mind of the insured for giving such a consent is that he would get immediate payment from the insurance company if he gives consent to the assessment made by the surveyors whereas, he may have to fight a long drawn battle with the insurance company in case he insist upon reimbursement of the whole of the claim submitted by him. Therefore, once such a consent is taken, it is not open to the insurance company either to withdraw from the offer made to the insured or to delay the payment unless it is shown that the offer made to the insured was a result of some fraud, undue influence, misrepresentation, mistake, etc. Therefore, I find no justification for any queries being raised by the Head Office after the Divisional Office had already taken consent from the complainant to the loss as assessed by the joint surveyors.

A perusal of the documents filed by the opposite party would show that the first letter written to the complainant was dated 12 -09 -2003 meaning thereby that no query was made to the complainant for more than nine months after taking its consent to the assessment made by the surveyor. There is no explanation for this total inaction. A perusal of the letter dated 04 -02 -2004 would show that the insurance company sought some information regarding the quantity of the stock they had been maintaining during the period mentioned in the said letter. The letter was immediately replied by the complainant on 11 -02 -2004. It appears that the insurance company wrote another letter dated 12 -02 -2004 to the complainant which they responded vide their letter dated 17 -02 -2004.Therefore, it cannot be said that there was any undue delay on the part of the complainant in responding to the queries raised by the Head Office of the insurance company. It appears that the insurance company had also sent some queries to the surveyors, but the complainant cannot be held responsible for the delay on the part of the surveyor in responding to the said queries. What is more important is that eventually the Head Office of the insurance company also approved the claim almost to the same extent to which it was recommended by the surveyor and consented by the complainant. The Head Office of the insurance company did not find any fault either with the documents submitted or with the assessment made by the joint surveyors. The insurance company thereby utilised, for its own use, the amount of Rs.1,91,91,006/ - which it ought to have paid to the complainant immediately after obtaining the consent dated 10 -12 -2002. There is no reason for the insurance company not to compensate the complainant for depriving it of the aforesaid amount for about six years and thereby obtain an unjust enrichment to that extent, at the cost of the complainant.

IT was contended by the learned counsel for the insurance company that having accepted the amount of Rs.1,91,91,006/ - in full and final settlement of its claim by way of second discharge voucher submitted by it, the complainant is estopped from claiming interest on the aforesaid amount. I, however, find no merit in the contention. This is not a case where an insured, after accepting a particular amount in full and final settlement of its claim, seeks a higher principal amount and thereby seeks to wriggle out of his settlement with the insurance company. Here, the insured is seeking interest, in a case where the insurance company takes his consent for settling the claim at a particular amount, does not pay that amount for six years, does not give any valid justification for delaying the payment despite obtaining consent of the insured and then prevails upon him to give a second settlement voucher, accepting almost the same amount after a period of more than six years. The act and conduct of the insurance company, in the facts and circumstances of the case, is highly unethical, unjust and unreasonable. Since there was already a settlement between the parties for making payment of Rs.1,95,98,603/ - to the complainant in terms of its letter dated 10 -12 -2002, there was no occasion for the insurance company to seek and obtain a second consent from the insured. Such an act on the part of a public sector undertaking would be highly unfair and cannot be approved.

FOR the reasons stated hereinabove, the complaint is disposed of with directions to the insurance company to pay interest to the complainant on the amount of Rs.1,91,91,006/ - at the rate of 9% per annum with effect from 23 -12 -2008 when the principal amount was paid to the insured, till the date of payment. The payment in terms of this order shall be made within six weeks from today. The complaint stands disposed of. 01 -04 -2015 CORRIGENDUM There is a typographical error in the operative part of the judgment. Para 8 of the order, therefore, shall read as under: "8. For the reasons stated hereinabove, the complaint is disposed of with directions to the insurance company to pay interest to the complainant on the amount of Rs. 1,91,91,006/ - at the rate of 9% per annum with effect from 27 -12 -2002 to 23 -12 -2008 when the principal amount was paid to the insured. The payment in terms of this order shall be made within six weeks from today.