Page 46 - Insurance Times April 2019
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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
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