Insurance Claim Settlement: Supreme Court Partially Modifies NCDRC’s Order

The dispute in National Insurance Company Ltd. vs. M/s. Hareshwar Enterprises (P) Ltd. & Ors. involved the rejection of an insurance claim after a fire incident. The Supreme Court reviewed whether the National Consumer Disputes Redressal Commission (NCDRC) was justified in awarding compensation and whether the limitation period for filing a claim had expired.

Case Background

M/s. Hareshwar Enterprises, the respondent, owned a factory engaged in manufacturing polyethylene and plastic films. It had taken a loan from Maharashtra State Financial Corporation (respondent no.2) and Thane Jan Sahakari Bank (respondent no.3). The factory was insured under two policies from National Insurance Company Ltd. (NICL), covering risks like fire, flood, and earthquakes.

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On November 6, 1999, a fire broke out, destroying the factory’s plant, machinery, and stock-in-trade. The insurance company appointed a surveyor, who assessed the loss at Rs.1,06,00,000. However, NICL did not settle the claim and later appointed an investigator to reassess the damages. The respondent, after unsuccessful attempts to obtain the claim amount, approached the NCDRC in 2003, which directed NICL to pay Rs.79,34,703 with 12% annual interest.

Arguments by National Insurance Company Ltd.

• NICL argued that the claim was barred by limitation under Section 24A of the Consumer Protection Act, 1986, which mandates a two-year filing window from the date of cause of action.
• “The fire occurred on 06.11.1999, while the complaint was filed on 26.03.2003, well beyond the limitation period.”
• The insurance company challenged the reliability of the surveyor’s report, arguing that the investigator’s findings should be given precedence.
• “The insured had overestimated the stock quantity for insurance coverage, which was inconsistent with the actual loss.”
• The 12% interest awarded by NCDRC was excessive and should be reduced.

Arguments by M/s. Hareshwar Enterprises

• The insured countered that NICL delayed its response and failed to settle the claim in a timely manner, justifying their appeal to NCDRC.
• “The claim process was prolonged by NICL appointing an investigator in 2001, even after a surveyor had already assessed the damages.”
• Since NICL neither paid nor repudiated the claim, the cause of action remained ongoing.
• “The surveyor’s report was thorough and backed by documentary evidence, making NICL’s investigator’s report unnecessary.”

Supreme Court’s Observations

The Supreme Court analyzed two primary issues:

1. Was the claim time-barred?

• The Court observed that while the fire occurred on 06.11.1999, NICL did not outright reject the claim but continued investigations until at least 2002.
• “When the insurer appoints an investigator and does not take a final decision, the cause of action remains ongoing.”
• The Court held that since NICL delayed its response and continued the inquiry, the limitation period could not strictly start from the fire’s date but rather from the last correspondence between the parties.

2. Was the surveyor’s report valid?

• NICL argued that it was not bound by the surveyor’s report, citing New India Assurance Company Ltd. vs. Pradeep Kumar, where the Supreme Court held that a surveyor’s report is not conclusive.
• The Court, however, found that the surveyor’s report was detailed, considering stock records, market rates, and salvage deductions.
• “The surveyor’s findings were backed by independent records, whereas the investigator’s report was initiated after an unreasonable delay.”
• The Court ruled that the surveyor’s report should be relied upon unless strong counter-evidence exists, which NICL failed to provide.

Supreme Court’s Judgment

The Supreme Court ruled as follows:

• The complaint was not time-barred, as NICL’s prolonged investigation kept the cause of action alive.
• The surveyor’s report was the valid basis for claim assessment, and the insurer’s investigator’s report held little value.
• The Court upheld the compensation of Rs.79,34,703 but reduced the interest rate from 12% to 9% per annum, considering prevailing market rates.
• “NICL must pay the remaining balance within six weeks as per the revised interest rate.”

Conclusion

This judgment reinforces that insurance companies cannot indefinitely delay claims under the guise of investigation. It also establishes that a detailed surveyor’s report, conducted promptly, holds more weight than belated investigator reports. The ruling ensures that policyholders are not denied their rightful claims due to procedural delays by insurers.

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Petitioner Name: National Insurance Company Ltd..
Respondent Name: M/s. Hareshwar Enterprises (P) Ltd. & Ors..
Judgment By: Justice A.S. Bopanna, Justice Hemant Gupta.
Place Of Incident: Thane, Maharashtra.
Judgment Date: 18-08-2021.

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