Page 56 - Insurance Times July 2023

11. While dealing with the aforesaid issue, relevant clause in that case, the company shall be liable to pay such
9 of Section 2 of the policy is required to be considered, sum as would be requisite to reinstate or repair such
which reads as under: -"9. If the Company at its option, property if the same could lawfully be reinstated to its
reinstate or replace the property damaged or former condition. Present is the case dealing with second
destroyed, or any part thereof, instead of paying the eventuality, namely, the company was unable to
amount of the loss or damage, or join with any other reinstate or repair the property.
Company or Insurer(s) in so doing the Company shall not
The surveyor in its report determined the loss on the
be bound to reinstate exactly or completely but only as
basis of reinstatement value at Rs. 29,17,500/- and on
circumstances permit and in reasonably sufficient
the basis of depreciated value at Rs. 12,60,000/-.
manner, and in no case shall the Company be bound to
Though, the complainant claimed Rs. 76,64,000/- being
expend more in reinstatement than it would have cost
the value of the new machinery, however, as rightly
to reinstate such property as it was at the time of the
observed by the State Commission as well as the
occurrence of such loss or damage nor more than the
NCDRC, the complainant shall not be entitled to the said
sum insured by the Company thereon. If the Company
amount. However, at the same time considering second
so elect to reinstate or replace any property the insured
part of Clause 9 reproduced hereinabove, in case
shall at his own expense furnish the Company with such
company is unable to reinstate or repair the property
plans, specifications, measurements, quantities and
insured, the insurance company shall be liable to pay
such other particulars as the Company may require, and
such sum as would be requisite to reinstate or repair
no acts done or caused to be done, by the Company
such property if the same could lawfully be reinstated
with a view to reinstatement or replacement shall be
to its former condition.
deemed an election by the Company to reinstate or
replace. If in any case the Company shall be unable to For the aforesaid purpose, the report of surveyor wound
reinstate or repair the property hereby insured, be relevantevidence to consider the sum required to
because of any municipal or other regulations in force
reinstate or repair. Therefore, as per second part of
affecting the alignment of streets or the construction
Clause 9 of Section 2 of the policy, the complainant shall
of buildings or otherwise, the Company shall, in every
be entitled to the reinstatement value and not the
such case, only be liable to pay such sum as would be
depreciated value. The NCDRC has mis-interpreted and
requisite to reinstate or repair such property if the same
mis-read the Clause 9. The NCDRC has seriously erred
could lawfully be reinstated to its former condition."
in observing and holding that the insurance company
12. On true interpretation and on fair reading of above shall be liable to pay the depreciated value only and not
clause, firstly the option is given to the insurance the reinstatement value.
company to reinstate or replace property damaged or
The State Commission was absolutely justified in
destroyed instead of paying the amount of loss or
awarding the reinstatement value. The impugned
damage. If the insurance company exercises the option
judgment and order passed by the NCDRC awarding the
of reinstatement or replaces the property damaged,
depreciated value and not the reinstatement value is
the company shall not be bound to reinstate completely
unsustainable for the reasons stated hereinabove.
or partly but only as circumstances permit and in
reasonably sufficient manner, and in no case shall the 13. In view of the above and for the reasons stated above,
company be bound to expend more in reinstatement the present appeal succeeds. The impugned judgment
than it would have cost to reinstate such property as it and order passed by the NCDRC is hereby quashed and
was at the time of the occurrence of such loss or set aside.
damage not more than the sum insured by the company
14. The order passed by the State Commission is hereby
thereon.
restored. The complainant shall be entitled to Rs.
However, in any case the company is unable to reinstate 29,17,500/- being the reinstatement value with interest
or repair the property insured, because of any municipal @ 7% from the date of order of the State Commission
or other regulations in force affecting the alignment of i.e., 10.11.2014 till the actual payment. The present
streets or the construction of buildings or OTHERWISE, appeal is accordingly allowed. No costs.

50 July 2023 The Insurance Times