NATIONAL INSURANCE COMPANY LTD. vs Sabari Steel Tubes Ltd.

THE dispute in the present proceedings lies in a very narrow compass. The insurance claim which arose under the policy from the breakdown of 13.3.2005 has not been disputed by the revision -petitioner -National Insurance Company. The surveyor appointed by the Insurance Company, estimated the loss at Rs. 6,41,156. This is also not disputed by the complainant. The only dispute, as very rightly observed by the State Commission, is with regard to the deductions made from the loss assessed by the surveyor. The item damaged in the breakdown of 13.3.2005 was an Oscillator valve. Its replacement value is mentioned in the assessment of the surveyor as Rs. 6,41,156. However, the claim under the policy was finally settled only for Rs. 29,679 by RP/OP. The complainant received the amount under protest and filed the complaint before the District Forum, Myalpore, Chennai.

THE District Forum dismissed the complaint holding that there was no deficiency of service on the part of the OP as the claim had been decided on the basis of the assessment of the surveyor. While doing so, the District Forum also observed: The learned Counsel for the complainant relied on the decision of the National Consumer Disputes Redressal Commission, New Delhi, reported in 1 : (2008) CPJ 4 (NC) in the case. of Pankaj Variety Hall v. Oriental Insurance Co. Ltd. & Anr., as follows: "Arbitrary and imaginary method adopted by surveyors in assessing loss - - Assessment for building loss depreciated by 50%/65% - - No reason for depreciation given by surveyor - - Depreciation appears to be totally unjustified, without any basis - - Depreciation reduced at 25% - - Salvage value assessed for damaged goods @ 80% respectively totally unjustified.'' and would submit that the salvage arrived at by the surveyor at 75% is unjustified and without any basis. But the decision relied upon by the complainant is entirely different to the facts of the case on hand. The opposite party after considering the surveyors report had settled the claim of the complainant. Hence we hold that there is no deficiency in service on the part of the opposite party. The pint is answered accordingly.

It is, therefore, necessary that we take a look at the relevant recommendation of the surveyor, appointed by the National Insurance Co. Ltd. The report says: We have imposed 75% depreciation (Maximum) for the replacement cost of the damaged materials, since the damaged Oscillator Valve has served the expected life of 15,000 Hours and hence we have applied maximum depreciation 75% and deducted from the assessment.

THE State Commission did not agree with this recommendation of the surveyor and held: 9. It is further relevant to note that 75% of the value on Rs. 6,41,156 is deducted which comes to Rs. 4,80,867 towards depreciation which is not justified and is unwarranted and is not supported by legal evidence; and further, we have to note that the depreciation amount has been deducted from the claim amount payable to the complainant and that the amount is not deducted from the replacement value of the machinery. Therefore, having regard to all these, we feel that it would be just and proper to allow depreciation to the extent of 30% from the loss assessed by the Surveyor is only Rs. 6,41,156 and the low exceeds 1% of the sum insured. While so, a deduction of Rs. 14,000 towards police excess is not justified.

Further, it is relevant to note that a sum of Rs. 28,489 has been deducted towards under -insurance. We have to note that the machinery has been insured for Rs. 14 lac whereas the claim is only for Rs. 6,41,156 and in these circumstances, the deduction towards underinsurance is not justified. Further a sum of Rs. 989 has been deducted towards salvage value of the damaged component and this amount is to be granted.

In the facts and circumstances of the case, we feel that except the depreciation at the rate of 30% as stated above and the salvage value of the damaged components, the opposite party is not entitled to deduct or reduce any other amount from Rs. 6,41,156 assessed by the surveyor. Therefore, the complainant is entitled to compensation of Rs. 4,47,821 [i.e. Rs. 6,41,156 minus (Rs. 1,92,346 plus Rs. 989)].

THE above decision of the State Commission is challenged in the present revision petition by the OP/National Insurance Co. Ltd. Ms. Nanita Sharma, Advocate arguing the case of the revision -petitioner, has drawn our attention to an e -mail of 20.5.2005 from the manufacturer showing that the expected life of Oscillator Valve of type RS 3150 CJ is 15,000 to 20,000 hours. A perusal of the written response of the OP before the District Forum shows that in para -6 a reference is made to the terms of the provision 2(a) "Basis of Indemnity," under which, no deduction towards depreciation is to be made in respect of parts replaced, except for wear and tear and where the manufacturer has specified a fixed life for its use. Significantly, the written response of the OP also mentions provision 2(b) which says that the machinery was insured for Rs. 14 lakh while its replacement value was Rs. 23 lakh. Due to mis underinsurance, the company would pay only in proportion to the value insured. Neither the Counsel nor the revision petitioner has made any attempt to explain how two mutually contradictory Clauses have been applied to the same claim. Ground C in the revision petition makes a third proposition when it says that: It is most respectfully submitted that the Hon''ble State Commission while reaching the above conclusion has failed to appreciate Clause 2(b) of the Provision of the policy which specifically lays down that in case where insured item is destroyed the company will pay the actual value of the item immediately before the occurrence of the loss including cost of ordinary freight, erection and custom duties, if provided such expenses have been included in the sum insured such actual value to be calculated deducting proper depreciation from the replacement value of the item.

THE contradiction is quite apparent. It for this reason that the State Commission has called it (i.e. the deduction of 75% from the price of a new one, as against from the IDV, together with deduction for under insurance) unjustified and unwarranted. We find ourselves in agreement with the view of the State Commission. Consequently, we hold that the revision petition has no merit and dismiss it as such. No orders as to costs.