S A BHAGWAN SETTY vs United India Insurance Co Ltd

AGGRIEVED and dissatisfied by the order dated 22. 3. 1997 passed by the Karnataka State Disputes Redressal Commission in Complaint No. 177 of 1993, the complainant Mr. S. A. Bhagwan Setty has filed this before the National Commission. Brief facts of the case:

THE complainant, Mr. Bhagwan Setty, Director of Mr. Murugarajendra Oil Industry Limited, had insured the Boiler and Pressure Plant of his factory with the United India Insurance Company Ltd. on 21. 5. 1992 for a sum of Rs. 38 lakh for a period of one year from 1. 4. 1992 to 31. 3. 193. The Manager of the complainant observed a bulge on the Boiler Tube Plate on the Furnace side and informed the Inspector of Boilers at Davanagere and also the Insurance Company. The Inspector of Boilers inspected the Boiler and the Pressure Plant on 12. 5. 1992 and gave a report on 15. 5. 1992. The Inspector of Boilers in his technical report mentioned that there was a bulge on the Boiler Tube Plate No. 2 which was exposed to flame. After taking permission from the Chief Inspector of Boilers who is the statutory authority under the Boilers Act, effected the necessary repairs to the Boiler and the Pressure Plant through M/s. Steam Tech Engineers Pvt. Ltd. Bangalore, at the cost of Rs. 7. 16 lakh. When the complainant company claimed the said amount from the Insurance Company, the latter refused to honour the claim on the ground that the policy issued by them did not cover the particular incident. This has given rise to the filing of the complaint before the State Commission.

Before the State Commission both the parties had filed affidavit in support of their respective contentions and certain documents were marked. The matter was adjourned on two occasions and on the date of hearing the learned Counsel for the respondent was present and was heard. The learned State Commission, after examining the case, held that the clause in the Insurance Policy, relating to general exceptions clearly excludes the claim made by the complainant. Accordingly, the complaint was dismissed. Case of the appellant.

THE Manager of the complainant company observed a bulge on the Boiler Plate on the furnace side, covered under the policy, on 11. 5. 1992 and stopped the Boiler immediately and informed the same to the jurisdictional Inspector of the Boilers, Davanagere, and the Insurance Company vide his letter dated 12. 5. 1992. The Boiler Inspector inspected the Boiler on the same day and submitted his report to the Chief Inspector of Boilers. To facilitate the running of the industry, at the request of the complainant the said Inspector permitted the complainant to carry out the repairs of the Boiler which were done through M/s. Steam Tech Engineers Pvt. Ltd. , Bangalore. The claim of the complainant was repudiated after a lapse of seven months by the Insurance Company stating that the loss sustained by the complainant is outside the scope of the policy. In the written submissions the complainant has quoted Section 2 (a) of the Indian Boilers Act, 1923, which reads as follows: "accident means an explosion of a boiler or steam pipe or any damage to a boiler or steam pipe which is calculated to weaken the strength thereof so as to render it liable to explode. "

THE technical opinion of the Inspector of boilers dated 2. 6. 1992 specifically stated that the Tube Plate which has bulged severely was definitely calculated to weaken the strength of the plate and could explode at any moment. Further he has also opined that this major defect results in collapse or explosion. In the written submissions, the complainant has stated that the Boiler and Pressure Plant were inspected before granting insurance coverage and hence the Insurance Company was estopped from taking the contention that the plate had bulged as it was not in accordance with the IBR Norms and Brinell Hardness and also because of faulty designs. He further submitted that the surveyor appointed by the Insurance Company is not as qualified as that of Boiler Inspector and is not competent to express his opinion contradicting the views expressed by the Boiler Inspector. He further stated that on the date of hearing, while he was on his way due to ill-luck, his scooter got punctured and could not reach the Commission at the time of hearing. He filed an affidavit on the same day seeking permission to address the arguments and consider the case after giving him an opportunity of being heard, which was rejected. In his prayer he has requested to set aside the order passed by the State Commission dismissing the complaint of the complainant and allow this appeal. Case of the respondent-Insurance Company: The insured has taken the Boiler and Pressure Plant Policy and not the MBD policy. As the Boiler had not exploded or collapsed and only tube plate No. 2 was bulged the claim is not admissible. The Boiler Inspector has given a certificate stating that only tube plate had bulged due to formation of sludge at the bottom and requires replacement of plate and tube and nowhere in the report the Inspector has stated that the Boiler had exploded or collapsed. In the technical report what the Inspector mentioned was a bulge on the Boiler tube plate No. 2 which was exposed to flame and treated this as accident and presumes that the tube plate which had bulged severely is definitely calculated to weaken the strength of the plate and would have exploded at any moment. This clearly indicates that the manufacturer has not followed the IBR Norms and Brinell Hardness and hence the Insurance Company is not liable to compensate the loss.

THE submission of the learned Counsel for the respondent is that the Company shall be liable in case such bulging results in explosion. There was no explosion due to accident of the boiler and the damage is limited to the boiler plant which could have been due to defective material or due to improper maintenance of the boiler. This squarely falls within the exception clause. Findings :

IT is undisputed that the complainant had taken an insurance policy for Rs. 39 lakh by paying a premium and that during the course of the policy the Manager of the complainant observed a bulge on the tube plate on the furnace side. Further the Jurisdictional Inspector of the Boilers as well as the Insurance Company have been informed of this and, subsequently, with the permission of the competent authority the complainant has got the equipment repaired through M/s. Steam Tech Engineers Pvt. Ltd. , Bangalore at a cost of Rs. 7. 16 lakh. The Insurance Company had contended that the plate had bulged as the base was not in accordance with the IBR Norms and Brinell Hardness and also because of faulty design. As the representative of the Insurance Company had already seen the Inspector of Boilers before the issue of the policy it may not be appropriate on their part to raise this contention after the accident.

Therefore, to arrive at a proper conclusion, it is necessary for us to go through the definition of accident under Section 2 (a) of Indian Boilers Act, 1923. "accident means an explosion of a boiler or steam pipe or any damage to a boiler or steam pipe which is calculated to weaken the strength thereof so as to render it liable to explode. " (Emphasis added)

ERRECTION, specification and maintenance of boilers are carried out under the Indian Boilers Act, 1923 and the hierarchy of officers prescribed to inspect the equipment viz. , Chief Inspector, Boilers, Deputy Chief Inspectors, Boilers, Inspectors of Boilers, etc. are qualified engineers and have the technical knowledge about Boilers. The complainant had informed the Jurisdictional Inspector. Davanagere as well as the Insurance Company before carrying out the necessary repairs and bills were produced. In this case, it is clearly stated that there was a defect in the boiler due to bulging and the Jurisdictional Inspector visited the spot and gave his report and only after his report the repair work was undertaken. If the boiler was not repaired immediately this could have resulted in an accident which could have caused serious injuries to the staff and workers of the industry. The surveyor who was appointed has expressed his satisfaction about the erection of the plant and machinery and came to the conclusion that the loss suffered by the complainant has to be reimbursed.

THE learned Counsel for the Insurance Company contended that bulging of the boiler is not covered as per the exclusion clause of the policy unless it results in explosion or collapse. For appreciating this contention, we would refer to the general exception, which reads as under: "general Exception the Company shall not be liable under this policy in respect of-1. . . . . . . 2. . . . . . . 3. . . . . . . 4. . . . . . . 5. Defects due to the wearing away or the wasting of the material of a boiler or a pressure plant whether by leakage, corrosion or by the action of the fuel or otherwise the grooving or the fracturing of any of the parts of a boiler or pressure plant or for deterioration generally or for the development of cracks, blisters, lamination and other flaws or fractures, failures of joint within the range of steam of food pipes or for bulging and deformation due to overheating of tubes (unless such defects, fracture, failure or bulging result in explosion or collapse) or for the cracking of section of cast-iron heating boilers or other vessels constructed of cast-iron. "

(Emphasis added) The exclusion clause is apparently complicated one. For understanding its true meaning it can be analysed as under: the company shall not be liable under this policy in respect of- (i) Defects due to the wearing away or the wasting of the materials of a boiler or a pressure plant whether by leakage, corrosion or by the action of the fuel or otherwise the grooving; or (ii) the fracturing of any of the parts of boiler or pressure plant; or (iii) for deterioration generally; or (iv) for the development of cracks, blisters, lamination and other flaws or fractures, failures of joint within the range of steam of food pipes; or (v) for bulging and deformation due to overheating of tubes (unless such defects, fracture, failure or bulging result in explosion or collapse): (vi) or for the cracking of section of cast-iron heating boiler or other vessels constructed of cast-iron".

(Emphasis added)

IN the present case, admittedly there was bulging of some part of the boiler. It is the contention of the Insurance Company that as there was no explosion or collapse, the complainant is not entitled to reimbursement. In our view, it is settled law that it is for the Insurance Company to establish all ingredients of the exclusion clause for repudiating the claim. As stated above, in the present case, the Insurance Company has to establish that bulging was due to overheating of the tubes. There is no evidence on record that there was bulging of the plate due to overheating. For the said bulging reasons are not known, and the Insurance Company has not brought or brought out anything on record to arrive at the conclusion that the bulging was due to overheating of the tubes. In this set of circumstances, the repudiation by the Insurance Company, on the basis of the exclusion, is unjustified.

HENCE, we have to determine the loss suffered by the complainant. For this, the surveyor has assessed the loss at Rs. 6,40,000. As the surveyors were appointed under the Insurance Act who are authorized to inspect the insured property and assess the loss, they are also considered to be the independent loss assessors. Accordingly, we have no reasons to disagree with the assessment made by the surveyor. Therefore, while partially allowing the appeal we direct the Insurance Company to pay Rs. 6,40,000 with interest @ 9% per annum from the date of the surveyor''s report till the date of payment. There shall be no order as to costs. Appeal partly allowed.