Claim can't be denied for an old machine

Abrol Engineering had taken a policy of Rs 40 lakh from New India Assurance to cover a CNC machine made by DMG Deckel Maho Gildemister. During the tenure of the policy, an abnormal noise suddenly started emanating from the spindle in the tool box. The manufacturer's service engineer, as well as the insurer, were intimated.

During a joint inspection by the surveyor and the service engineer, it was found that the spindle needed replacement as it was irreparable in India. The cost was quoted at Rs 10,87,717. The insured paid this amount and then claimed it from the insurer. The claim was rejected, stating that the surveyor had not submitted his report.

Abror Engineering filed a complaint claiming the cost of the spindle and for the loss of production during the intervening period of 20 days. In addition, interest, compensation and litigation expenses were also claimed. The insurer contested the case, contending the machine was being used for commercial purpose and that the spindle had worn out due to normal wear and tear, which was not covered under the policy.

The District Forum dismissed the complaint. The insured challenged the order in appeal. The Punjab State Commission noted the authorised service engineer had not attributed the noise to normal wear and tear. Besides, the surveyor had submitted a preliminary report stating that abnormal noise in the spindle was because of vibration in the tool box, and had later submitted a final report stating that the damage to the spindle could be accidental. So the Commission wondered why the insurer had presumed that the noise was due to normal wear and tear, especially when the spindle was sealed inside the tool box and was inaccessible.

The State Commission also observed that the policy was issued after inspecting the machine in 2011, and if it was felt that the machine was an old one susceptible to breakdown due to normal wear and tear of parts, the insurer could have refused to insure it. The Commission held that the insurer could not be permitted to escape its liability. It directed the insurer to pay Rs 10,89,717,  along with 9 per cent interest from the date of filing of the complaint, and Rs 10,000 towards litigation costs.

New India filed a revision against this order, contending that the machine was installed in 2002, and must have worn out over a period of ten years. The National Commission rejected this contention as being unsubstantiated. It noted that the spindle had to be imported from Germany and replaced as it could not be repaired in India. Accordingly, by its order of January 18, 2018, delivered by M Shreesha, the National Commission endorsed the reasoning of the State Commission for holding the insurer liable. To conclude, the reason for a breakdown would determine whether the claim is payable, regardless of how old the machine is.

The author is a consumer activist