UNITED INDIA INSURANCE CO LTD vs Milap Telecom

THIS appeal arises out of judgement in complaint case no. 69/2000 rendered by the Gujarat State Consumer Disputes Redressal Commission (in short ''the State Commission ''). By the impugned judgement, the complaint was partly allowed, directing the appellant (insurer) to pay an amount of Rs.7,04,375/- to the complainant (respondent) with interest @9% p.a. from 14.03.2000 until realisation of the amount and also Rs.5,000/- being cost of the proceedings.

FOR sake of convenience, the parties may be referred to hereinafter as per their nomenclature in the complaint case before the State Commission. Milap Telecom is the original complainant and the United India Insurance Company Ltd. (appellant) is the insurer and original opposite party before the State Commission. There is no dispute about the fact that Milap Telecom is a business firm engaged in rendering services as a private telephone exchange. It had set-up infrastructure of the private telephone exchange which comprised of one EPABX (Electronic Private Automatic Branch Exchange) with the capacity of 256 lines, eight incoming lines and eight outgoing lines with 200 extensions with billing software and FCBC (Float Current Boost Charger), a battery of 45 amperes and MDF (Main Distribution Frame). The EPABX was purchased by Milap Telecom for Rs.13,20,000/- under invoice no. 12337 dated 9.06.1997. There is no dispute about the fact that Milap Telecom submitted a proposal form to the insurer with intention to cover the EPABX system against fire peril. The machineries and accessories were insured for a sum of Rs.14 lakh. The insurer issued ''Fire-A Policy '' dated 18.08.1999. The validity period of the policy was upto 17.08.2000. Briefly stated the case of Milap Telecom - complainant is that minor fire broke out in the private telephone exchange on 14.01.2000 at about midday. The incident occurred on day of Makarsakranti which was a holiday. None was present in the premises because traditionally the proprietor as well as the employees had gone out to participate in game of flying kites. After about half an hour Mukesh Sharma visited the premises for routine check-up and noticed that loose smoke was emanating from the machinery. He immediately switched off electrical power supply of the exchange and went to house of the proprietor. A telephone consultant was called at the place of the incident. The telephone consultant located the cause of fire as due to short circuit in the main transformer of FCBC and because of the fact that 230 volts of AC had entered in the exchange which was compatible only for 48 volts of DC. The loss of EPABX mainly was, therefore, caused. The mother board of the exchange and the line control cards in the exchange were damaged beyond repairs. The insurer was informed orally by giving telephonic message. So also, written intimation was given to the insurer. A surveyor by name Mr. Thomas Jacob visited the place of the incident. He took various photographs, conducted necessary inquiry and surveyed the damaged parts of the machinery. Proprietor of Milap Telecom lodged complaint with the Police on 15.01.2000. The Police conducted spot panchnama and necessary inquiry. Milap Telecom had also taken another fire insurance policy from New India Assurance Company Ltd. The surveyor gave advice to proprietor of Milap Telecom to waive the claim under the subsequent policy of New India Assurance Co. Ltd. Proprietor accordingly issued letter dated 27.01.2000 to New India Assurance Co. Ltd. and waived the claim available under that Policy. Though certain clarification was sought from proprietor of Milap Telecom and was given, ultimately, by letter dated 07.03.2000 the insurer repudiated the claim. Consequently, Milap Telecom issued a legal notice dated 18.04.2000 calling upon the insurer to settle the genuine claim. The non-settlement of the claim under the Policy is the reason as to why for the complaint was filed.

THE insurer repudiated the claim on the ground that Milap Telecom had obtained only Fire Policy and had not taken "Electronic Equipment Policy for the Break Down " which could have covered the loss on account of alleged short circuit. The insurer submitted that damage caused on account of short circuit was excluded from the terms of the insurance contract. The insurer further submitted that there was no fire as such which caused loss to the insured, i.e., Milap Telecom. The insurer further submitted that the claim was on higher side, improper and unacceptable. Hence the insurer sought dismissal of the complaint.

THE parties adduced necessary evidence before the State Commission. A large number of documents were filed by them. The State Commission held that the damage was caused when the fire broke out in the premises and though ordinarily it was more likely that cause of the fire was electric short-circuit yet the exclusion clause was of no avail to the insurer for valid repudiation of the liability. The insurer was, therefore, held liable to indemnify M/s. Milap Telecom - complainant, as stated earlier, vide the impugned judgement. We have heard learned counsel for the parties. We have gone through the relevant documents filed by the parties. Chief bone of argument advanced by Mr. Sikka is that the Fire Policy issued by M/s. Milap Telecom did not cover risk of damage caused due to short-circuiting. He heavily relied upon condition (g) of the exclusion clause in the insurance policy. The exclusion clause (g) reads as follows:- "Loss of or damage to any electrical machine, apparatus, fixture or fitting (including electric fans, electric household or domestic appliances, wireless sets, television sets and radios) or to any portion of the electrical installation, arising from or occasioned by over running, excessive pressure, short circuiting, arcing, self-heating or leakage of electricity from whatever cause (lightning included), provided that this exemption shall apply only to the particular electrical machine apparatus, fixture, fitting or portion of the electrical installation so affected and not to other machines, apparatus, fixture, fittings or portion of the electrical installation which may be destroyed or damaged by fire so set up. "

HE also pointed out that report of the surveyor clearly shows that there was a short circuit of main transformer of FCBC which had resulted into the minor fire. He would submit that the risk of such damages was not covered by the insurance policy in question. He further argued that the surveyor ''s report (Annex. P-3) should not have been lightly brushed aside by the State Commission. He submitted that the change of voltage in the electronic system could not be fault of the insurer. Hence he urged to allow the appeal. Per contra, Mr. S.K. Sharma, learned counsel for the respondent, M/s. Milap Telecom, supports the impugned judgement.

WHAT appears from the record is that M/s. Milap Telecom gave intimation to the Police on the same day. Within about 3 days intimation was also given to the Manager of the insurer, i.e., United India Insurance Co. Ltd. The Police conducted panchnama at the spot on 15.1.2000. Copy of the spot panchnama reveals that the EPABX machinery was substantially damaged on account of heavy voltage current. The fact was verified from Mr. Anirudh Joshi, the Service Engineer, that due to heavy voltage in the transformer, it was burnt away. It was found that near wall of the premises there were 486 computers which were also damaged. The back side of Nelco machine doors were found to have received burns. There hardly appears any dispute about the fact of actual loss caused to M/s. Milap Telecom. The clinching question is whether the insurer can claim immunity from the legal liability to indemnify M/s. Milap Telecom on the ground that the insurance policy does not cover the risk of damages caused on account of the minor incident of fire because 230 volts of AC had entered into the telephone exchange which was only compatible with 48 volts of DC. The proposal form (Annex. P-1) clearly shows that furniture, fixtures and fittings including plant-machinery and accessories were included when the underwriter desired issuance of the policy cover.

WE find from the record that stock-in-trade was the subject matter of insurance in the proposal form. There is no dispute about the fact that in response to the proposal form dated 16.08.1999, the insurance premium of Rs.1103/- was received as per receipt (Annex. C), the appellant issued Fire Policy - C accordingly.

BEFORE adverting to the question pertaining to application of exclusion clause under the insurance policy, let it be noted that the surveyor of the appellant had carried out the survey on 15.01.2000. He took various photographs. He conducted enquiry regarding cause of the fire. He also sought many documents from the complainant. The complainant ''s case, inter alia, is that he had taken one more Fire Policy A, from New India Assurance Co. Ltd., which was subsequent in time. His further contention was that the surveyor (Mr. Thomas Jacob), advised him to waive the claim under the subsequent policy. Therefore, on 27.01.2000 he waived the claim vide a letter addressed to M/s. New India Assurance Co. Ltd. It is pertinent to notice that the copy of the letter addressed to M/s. New India Assurance Co. Ltd. was placed on record. The complainant would not have ordinarily waived the claim which was available under the subsequent policy issued by M/s. New India Assurance Co. Ltd. but for assurance given to him by the surveyor of the appellant. The surveyor was not examined by the appellant to deny such contention of the complainant. In other words, authorised surveyor of the appellant made the complainant to believe that the claim will be honoured in due course. The surveyor had not immediately informed him that the claim was inadmissible due to the exclusion clause referred in the insurance policy conditions. Coming to the merits of the matter, it is true that the report of the surveyor (Annex P-3) goes to show that cause of the damage is due to burning of some components of electrical cards due to over-voltage and heating. The surveyor also opined that this was result of short-circuiting. The surveyor reported that there was short-circuiting of main transformer of FCBC. The surveyor (Mr. Thomas Jacob) also reported that the power supply was switched off by technician Mr. Mukesh Sharma of the insured on 14.01.2000 at about 12:30 hours. The report of the surveyor shows that because there was absence of EE policy for breakdown and it was only a Fire Policy A, the damage was not covered as it resulted from short-circuiting of electricity supply. As a matter of fact, the appellant did not examine any expert electrician or electrical engineer to prove the allegation that the damage was direct result of short-circuiting. Even though, it was stated by the complainant that there was damage caused due to short-circuiting as per the opinion of the surveyor, and intimation was given to the fire brigade in the same manner yet the fact remains that the heavy voltage transformer had been burnt during course of the incident. So also 486 computers assembled in the premises were damaged.

THERE cannot be any dispute about the legal position that the terms of the contract are required to be interpreted as they are. The proposal form (Annex P-1) shows that the furniture, fixture, fittings, plant & machinery and accessories as well as stock-in-trade, were subjected to the insurance policy as indicated in column no. 2. The insurance policy form shows that the standard fire policy provided cover against fire lighting explosion, Air craft damage, impact Damage, riot and strike risks. The form of proposal further shows that on payment of additional premium the other perils caused due to earthquake, spontaneous combustion, storm, tempest, flood and allied perils may be provided. The proposal form does not show that the additional premium was required to be paid for the coverage of peril caused due to short-circuiting. This exclusion clause only appears in the conditions which are subsequently annexed with the policy. The appellant failed to establish that the relevant conditions were furnished to the complainant when the insurance policy was issued to him.

FOR sake of argument, even if it is assumed that the exclusion clause (g) is required to be considered yet interpretation thereof will have to be pragmatically made. The peril did not arise due to over-running of the machinery. The proviso to the exclusion clause (g) reveals that the exclusion will be applicable only in respect of the particular electrical machine apparatus, fixture, fitting or portion of the electrical installation so affected and not in respect of other machines, apparatus, fixture, fittings or portion of the electrical installation which may be destroyed or damaged by fire so set up. Obviously, the exclusion clause will be applicable only to the extent of the damage caused to the machine which was subjected to the short-circuiting and not to any other fittings fixtures or items. The report of the surveyor shows that damage was caused to various cards. The damage was caused to mother board. The major items were the damaged cards and mother board valued at Rs.7.60 lakh. The repair cost of partially damaged cards was assessed at Rs.0.20 lakh. The replacement of control transformer of FCBC was assessed at Rs.0.25 lakh and the re-installation charges by the consultant (fee) was assessed as Rs.0.20 lakh. The depreciation value was also assessed and total loss was estimated at Rs.7,04,375/-. The damage caused to the FCBC, at the most, may fall within the exclusion clause if it is assumed that the short-circuiting was the cause of the fire and resulted into the damage which comes within the exclusion clause (g) of the condition. Admittedly, the complainant had insured the machinery and accessories of private telephone exchange. The intention was to insure the mother board, cards and other machinery items. In our opinion, even if the exclusion clause is considered the loss of transformer of FCBC, which was estimated at Rs.0.25 lakh could have been excluded from the payment. Still, however, since there is hardly any proof regarding proper intimation given to the complainant about impact of the exclusion clause and since such exclusion clause is not part of the fire insurance policy itself, we deem it proper to hold that such a technical plea is raised with a view to avoid the legal liability. We are not satisfied that the exclusion clause was part of the mutual contract with due understanding of the legal consequence thereof by the insured.

TAKING over all view of the matter, we find ourselves in general agreement with the reasons recorded by the State Commission. Needless to say, we do not find any substance in the appeal. Hence the appeal is dismissed with costs of Rs.5,000/-.