Inflated claim can lead to zero compensation

Robina Kumar was the sole proprietress of Balaji Textiles. She had a shop on the first floor, and was engaged in the wholesale business of ladies’ suits and clothes.

The firm had availed of cash credit facility of Rs 24 lakh from Canara Bank. This required an insurance policy to be taken through the bank, which obtained a Standard Fire and Special Perils Policy from New India Assurance with a coverage of Rs 65 lakh, valid from July 29, 2009 to July 28, 2010. The policy covered stock of all types — clothes, suits, dress materials, sarees, etc — lying in the shop.

On the night between October 17 and 18, 2009, a fire broke out in the shop. The neighbours informed her husband Ramesh Kumar, who had a shop on the ground floor of the same building. Ramesh in turn informed the Fire Brigade which deputed two fire engines. They managed to bring the fire under control with difficulty, after considerable damage had occurred. Both the local police and the insurer were informed. The cause of the fire could not be determined. It was suspected to have occurred due to an electric short circuit originating from the first floor near the generator set.

Robina lodged a claim for the entire sum insured of Rs 65 lakh. The surveyor who was appointed demanded several documents to prove the loss. Despite producing the documents, the surveyor kept asking repeatedly for the same documents. So, Robina lodged a complaint with the Insurance Regulatory and Development Authority of India (IRDAI) against the surveyor.

The Surveyor submitted the Final Survey Report, after which the insured sent an undated discharge voucher worth Rs 5,91,128. Robina signed the voucher agreeing to accept the amount as part payment under protest. She also had a legal notice issued for balance claim. The insurer then appointed an investigator, and refused to make any payment whatsoever. Robina then filed a complaint before the Chandigarh State Commission.

The insurer contested the complaint, pointing out that data on  stock entered by the accountant in his laptop was not provided even though it had been repeatedly sought. The insurer also pointed out that the claim was inflated as the surveyor had observed that the quantity of stock alleged to have been destroyed was beyond the shop’s storage capacity.

The State Commission ordered the insurer to pay Rs 59,08,872. New India challenged the order in appeal, pointing out that the State Commission had ignored the investigator’s report and findings. Robina also appealed as interest had not been allowed.

The National Commission pointed out that it was the insured’s duty to prove the amount of loss suffered. It observed that the data provided by the insured showed a low quantum of sale but a high quantum of purchase. It also relied on the investigator’s finding that the volumetric analysis revealed the quantity of goods in the store exceeded its storage capacity. So, it concurred with the view that the claim amount appeared to be inflated.

The Commission also noted that the insurer had subsequently appointed an investigator who had randomly attempted to verify whether the purchase bills were genuine or not, and had found that certain bills were fabricated and fake and were issued by non existent entities.

In its order of January 12, 2022 delivered by Ram Surat Ram Maurya, the National Commission held that the insurer was justified in refusing to settle the claim as the insured had attempted to fraudulently inflate the claim. Accordingly, it dismissed Robina’s complaint.

The writer is a consumer activist