P.S. MUCHANDI vs United India Insurance Co. Ltd.

IN this case the INsured had purchased an excavator from Larsen and Toubro Ltd. and had taken out an insurance policy for the full value of little over Rs. 34.00 lakhs on 16th September, 1995. The said machine met with an accident on 19th May, 1996 when it fell into a creek near Bombay. The intimation of such accident was given to the INsurer on the following day but the machine could not be retrieved from the creek where it remained immersed under salt water for nearly six days and it was ultimately taken out on 25th May, 1996. Considerable damage to the machine was reported. A claim was lodged with the INsurer on 9th July, 1996. There was a preliminary survey carried out by Surveyor appointed by the INsurer, who could not reach any final estimate of loss. Preliminary estimate of Rs. 8.00 lakhs was submitted by him subject to the condition that precise loss cannot be determined at this stage and he needed assistance of the machine manufacturer as well as the INsured to estimate the amount of loss.

ANOTHER firm of Surveyors was appointed on 11th September, 1996 who have also not submitted any final report so far. In the meantime, Larsen and Toubro Ltd. had given a preliminary estimate of the cost of repairs as Rs. 12.00 lakhs but later on according to the Insured they have informed that the repairs may cost in the region of about Rs. 22.00 lakhs. The Insured has further stated that he has so far incurred an expense of Rs. 6.00 lacs which is alleged to include inter alia the expenses on getting the machines to the manufacturer''s workshop and other expenses in connection thereof. The Insured has further contended that in view of extensive damage this claim should be settled as total loss because the machine will never be the same again and its efficiency will be considerably reduced even after repairs. Two options were put before the Insurer in the course of hearing - (i) either settle the claim on total loss basis and take the machine as salvage or (ii) pay the repair charges whatever they may be as per the manufacturer/repairer''s bills plus Rs. 6.00 lakhs which has already been incurred by the insured, if that amount is not shown in the final bill of the manufacturer/repairer. Out of that total of Larsen and Toubro, an amount equal to 10% of the value of parts replaced may be deducted by way of depreciation.

The Counsel for the Insurance Company on instructions expressed his inability to settle the claim on total loss basis. In the light of this we feel that the only equitable solution will be to direct the Insurance Company to settle the repair bill directly with Larsen and Toubro Ltd. who are the manufacturer of the machine and who have been given the machine for repairs. In case the sum of Rs. 6.00 lakhs is not reflected in the said bill then the total amount of the bill plus Rs. 6.00 lakhs (details whereof shall be supplied by the insured to the insurer within eight weeks from today) will be paid by the Insurer after deducting 10% of the value of the new parts on depreciation as mentioned hereinabove. In the case the sum of Rs. 6 lacs is reflected in the bill of repairs then the Insurance Company will pay the full amount of the bill to the repairers-cum-manufacturers after adjustment of depreciation. The Insurance Company will also pay the costs which are quantified at Rs. 10,000/-. This petition is disposed of in the above terms. A copy of this order be sent to both parties as also Larsen and Toubro Ltd., the repairer. Petition disposed of.