ORIENTAL INSURANCE CO LTD vs Modern Insulators Ltd

THIS Appeal has been filed against the order dated 5.7.93 passed by the Rajasthan Consumer Disputes Redressal Commission in Case No. 138 / 92. The opposite party before the State Commission is appellant before us.

FACTS of the case as available from the records may be briefly stated. The complainant, a manufacturer of high tension insulators for transmission lines, had taken an "Erection all risks" policy for imported and indigenous machinery and equipment for installation of 25 kiln with furniture valuing approximately Rs. 50 lakhs; of this, the value of insurance of the kiln furniture was Rs. 15 lakhs. The policy covered inter -alia risks during storage -cum -erection including trial and testing. After completing the erection of 25 M3 kiln. the same was loaded with insulators on 12.7.88 for trial and testing. After fire cycles and cooling when it was opened on 16.7.88 it was found that complete structure of kiln furniture with insulators had collapsed on kiln car and various items of kiln furniture were damaged. The complainant informed the opposite party telegraphically about the loss assessed at Rs. 5,73,397.43 and also lodged its claim. The opposite party appointed M/s. J.S. Anchalia and M/s. K.D. Kolhi & Co. as Surveyors to assess the loss. Shri Anchalia who visited the site on 20.7.88 and 21.7.88 came to the conclusion that as the complainant in the process of testing had used old and used furniture which could have contributed to the breakdown of the machinery and as the present policy did not cover risk of testing with used machinery/equipment, the loss was not covered. He submitted his report in August, 1988. The latter Company who visited the site subsequently assessed the loss at Rs. 4,66,873 / - taking that 50 percent of the furniture used in the trial run was old and that at least 30 percent of its life has been utilised. They submitted their report in October, 1988. But the opposite party did not settle the claim till May, 1991 when they wrote to the complainant repudiating the claim. The complainant, therefore, filed a complaint before the State Commission, therefore, alleging negligence on the part of the opposite party and praying that the opposite party be directed to pay Rs. 4,66,873/ - towards loss suffered with interest @ 21% per annum as well as damages from the date of loss till realisation. The opposite party -Insurer averred before the State Commission that it had repudiated the claim and that there was no deficiency in service on its part; it further pleaded that the damaged kiln furniture was not insured under the policy as the kiln furniture insured for 25 M3 kiln was stated to have been found lying unutilised by the first Surveyor.

THE State Commission observed on the basis of reports of the two Surveyors that the equipment involved in the loss was covered under the policy and directed the opposite party to pay Rs. 4,66,873/ - alongwith interest @ 18% from 12.1.89 till payment.

THE present appeal has been filed by the opposite party against this order of the State Commission. There was a delay of 83 days in filing the appeal which stands condoned. In the appeal, the main point raised is that the appellant is not liable under the policy conditions inasmuch as the respondent -complainant has breached the terms and conditions of the policy by partly using old/used kiln furniture which was not covered in the policy. The appellant pointed out that the policy contains an exclusion clause which reads as follows: "In the case of the second hand/used property the insurance hereunder shall, however, cease immediately on the commencement of the test."

The appellant further contended that the respondent -complainant had not paid additional premium as prescribed in the tariff clause to cover risk of using second hand machinery. We have gone through the records and heard the Counsel for both sides. The main point pertains to whether there was any deviation in the machinery used for testing vis -a -vis that specified in the policy. The respondent -complainant submitted that only the cover note and the schedule to the insurance policy were supplied by the opposite party and that the terms and conditions incorporated in the standard policy had not been communicated to the insured. The cover note inter -alia mentions that the risk is subject to the usual terms and conditions of the standard policy and it is equally the responsibility of the respondent to call for these terms and conditions even if they were not sent by the appellant as alleged, to understand the extent of risk covered under the policy and associated aspects. In so far as the terms and conditions of the policy specify that it will be inoperative the moment second hand/old machinery is used, the appellant is justified in repudiating the claim. In the light of this, we do not find that repudiation by the appellant was arbitrary and without application of mind. We, therefore, allow the appeal, set aside the order of the State Commission and dismiss the complaint. No order as to costs.