National Insurance Co. Ltd. vs Abdul Rashid Kichloo

Doabia, J.—The insurance cover/ policy which was provided to cover immovable property also contained exclusion clause. This reads as

under :

It is hereby understood and agreed that loss or damage due to mere cracking or settlement of the building nor for any loss unless the entire

building or a part thereof has collapsed through the shifting or falling away of the soil beneath it.

It is submitted that as there were mere cracks in the building and the building had not collapsed, therefore, the appellant company is not liable to

meet the liability.

A surveyor was appointed in this case. He submitted his report on 16-8-1996. In this report it was stated that the minor damage has been

caused to the partition walls. It was observed that the walls of the first and ground floor require re-construction. The building was however,

standing. The loss was said to have been caused by heavy rains and because the land underneath the building had sunk. The structure had

developed cracks. The claim was not honoured. The respondent-complainant filed a complaint before the Commission. The Commission came to

the conclusion that the complainant was entitled to be compensated. A sum of Rs. 1.00 Lakh has been assessed to meet the costs of restoration of

the building. Interest at the rate of 12% p.a. has been allowed from the date of loss.

The argument raised by the learned counsel for the appellant is that the exclusion clause would be attracted. It is also urged that when the

surveyor had submitted a report indicating that the amount required for restoration is Rs. 66,110/- then there was no Justification to grant the

compensation to the extent of rupees 1.00 Lakhs.

After having heard the learned counsel for the parties, we are of the opinion that the plea taken by the Insurance Company that the complainant

was not entitled to be compensated is a plea which cannot be accepted. If the Dictionary meaning of the word 'Collapse' is taken note of then it

would also include a situation where there is caving in of the structure. The cracks in the building had developed because of the sinking of the land

underneath. In these circumstances to say that compensation is payable only when the building completely falls down would be an argument which

may lead to unjust consequences. If the cracks are such that the building is not safe then its occupant is not to wait for its total collapse.

Minor cracks in the building may not fall within the exclusion clause but if the cracks developed in entirety or in part because of the sinking of the

soil underneath then the exclusion clause would not be attracted. On this Interpretation it cannot be said that the Commission committed any error

in allowing the compensation to the complainant.

The question arises as to what should be the quantum of compensation. The surveyor in its report submitted on 16-8-1996 has assessed the

loss to the extent of Rs. 66,110/-. We Lake this figure as a reasonable figure.

The claimant is also held entitled to interest at the rate of 12% per annum payable from two months after the Surveyor submitted his report. This

date is fixed as 1-11-1996.

This appeal is accordingly disposed of with the following observations :

i) that the quantum of compensation would be as observed above :

ii) that the rate of interest would be 12%. This would be payable with effect from the date indicated above;

iii) that insurance company would now re-calculate the amount. This would be deposited with the Registrar (Judicial) of this Court within a period

of three months from today. If this is not done then rate of interest would be 15%.

iv) if the amount has already been deposited and on re-calcualation some amount is found to be in excess then insurance company would be

entitled to its refund;

v) if any amount has been deposited by the insurance company with the State Commission then that be refunded to the appellant insurance

company. This would be done on furnishing proof of fact that amount now found to be payable has been deposited with the Registrar (Judicial) of

this Court.

vi) Let the amount be released to the complainant after proper verification. This appeal is disposed of accordingly.