Page 46 - Insurance Times April 2019

Claim can't be rejected on mere suspicion no mind. So the amount of Rs. 1 lakh awarded as compen-
sation for mental harassment was set aside.
Oswal Plastic Industries had taken a fire and special perils
policy from New India Assurance to cover its industrial es- The conclusion is that an insurer who fails to physically
tablishment. The policy was issued on June 27, 2009. The check the insured property cannot later raise objections
sum insured was increased to Rs 2.5 crore from July 2, when a claim is lodged. Also, a corporate body is not en-
2009. titled to claim compensation for mental tension.
A fire occurred on October 17, 2009 in which four machines
and some raw materials got damaged. The insurer was in- Claim can't be denied for an old machine
timated, and a claim for Rs 1,34,07,836 was lodged. The Abrol Engineering had taken a policy of Rs 40 lakh from
surveyor assessed the loss at Rs 29,17,500 on reinstatement New India Assurance to cover a CNC machine made by
basis, and Rs 12,60,000 as the depreciated value. DMG Deckel Maho Gildemister. During the tenure of the
The claim was repudiated on the ground that the insured policy, an abnormal noise suddenly started emanating from
machine had been shifted and relocated. The insurer also the spindle in the tool box. The manufacturer's service
suspected that the fire was not accidental as the site of engineer, as well as the insurer, were intimated.
relocation did not have any power supply. The insurer also During a joint inspection by the surveyor and the service
disputed the endorsement enhancing the sum insured. engineer, it was found that the spindle needed replacement
The insured filed a complaint before the Punjab State Com- as it was irreparable in India. The cost was quoted at Rs
mission. Even though the insurer contested the case, the 10,87,717. The insured paid this amount and then claimed
State Commission allowed the complaint and ordered the it from the insurer. The claim was rejected, stating that the
claim to be settled for Rs. 29,17,500, along with 9 per cent surveyor had not submitted his report.
interest, payment of 1 lakh as compensation for harass- Abror Engineering filed a complaint claiming the cost of the
ment, and Rs. 11,000 as litigation expenses. spindle and for the loss of production during the interven-
ing period of 20 days. In addition, interest, compensation
The insurer appealed against this order. It argued that the
fire must have been caused deliberately. The insured coun- and litigation expenses were also claimed. The insurer con-
tered that even though the cause of the fire could not be tested the case, contending the machine was being used
determined, neither the surveyor nor the investigator had for commercial purpose and that the spindle had worn out
concluded that it was caused intentionally. So the claim due to normal wear and tear, which was not covered un-
ought not to be rejected merely because the cause could der the policy.
not be determined. The District Forum dismissed the complaint. The Punjab
In its order of February 20, 2019 delivered by Prem Narain, State Commission noted the authorised service engineer
the National Commission held that the insurer cannot al- had not attributed the noise to normal wear and tear.
lege foul play when the surveyor as well as the investiga- Besides, the surveyor had submitted a preliminary report
tor had ruled it out. The Commission also observed that the stating that abnormal noise in the spindle was because of
sum insured was increased subsequent to the shifting of vibration in the tool box, and had later submitted a final
the machines. At the time of enhancement of coverage, it report stating that the damage to the spindle could be
was the duty of the insurance company to check where the accidental. So the Commission wondered why the insurer
machines were being located. Since this was not done, the had presumed that the noise was due to normal wear and
Commission held that the insurer would not be entitled to tear, especially when the spindle was sealed inside the tool
raise this objection after the claim was lodged. box and was inaccessible.
Since the machines were lying unconnected and unused The State Commission also observed that the policy was
and were not reinstated, the National Commission held issued after inspecting the machine in 2011, and if it was
that the claim ought to be settled by paying the depreci- felt that the machine was an old one susceptible to break-
ated value of Rs. 12,60,000, together with 7 per cent in- down due to normal wear and tear of parts, the insurer
terest from November 10, 2014. The order for payment of could have refused to insure it. The Commission held that
Rs. 11,000 towards litigation costs was upheld. the insurer could not be' permitted to escape its liability.
The National Commission further observed that compen- It directed the insurer to pay Rs. 10,89,712 along with 9 per
sation for mental harassment would be applicable only to cent interest from the date of filing of the complaint, and
a natural person and not to a corporate entity, which has Rs.10,000 towards litigation costs. T

46 The Insurance Times, April 2019