Combustion can occur without fire

A standard policy covers loss due to fire and an add-on cover includes spontaneous combustion witho

Adani Wilmar had obtained a Standard Fire & Special Perils Policy from Oriental Insurance. This policy covered building, plant and machinery, silo operator, and other fittings and equipment, as well as stock of raw materials, semi-finished goods and finished goods. An add-on cover was taken to include the risk of spontaneous combustion.

On May 5, 2014, it was noticed that there was burning of mustard seeds, with smoke and flame coming out of the central point of one of the silos in which the seeds had been kept. The company’s fire and safety team inspected the silo from inside and conducted an internal inquiry. The conclusion was that the fire occurred due to ignition caused by a flash in the burnt motor that ignited the seeds.

The company lodged a claim under the policy for loss of about Rs 2.5 crore. The insurer appointed a surveyor, who reported that spontaneous combustion without fire had caused the loss, estimated to be about Rs 1.76 crore. According to the surveyor, the policy covered spontaneous combustion only when it occurred due to a fire but in this case since there was no fire, the loss was not payable. In view of the surveyor’s observations, the insurer repudiated the claim.

Adani Wilmar filed a complaint before the National Commission, seeking reimbursement of the loss as assessed by the surveyor. The insurer contested the case, reiterating its stand that the claim had been rightly repudiated, as there was no fire and mere spontaneous combustion without fire was not covered under the policy. 

The Commission observed the scientific definition refers to combustion as the burning of any substance, gaseous, liquid or solid. It is generally associated with fire, generation of heat, and certain chemical reaction. The dictionary meaning of fire includes heat and light due to causes other than burning. These definitions establish that fire need not necessarily be accompanied by flame. Fire is a form of heat energy which causes smouldering, burning, heating, melting, etc.

The Commission observed the policy was a Standard Fire and Special Perils Policy. So, it automatically covered loss due to fire. For the add-on cover to include spontaneous combustion, Adani Wilmar had been charged extra premium. If the insistence was that the loss should be only due to fire, it would be covered under the basic policy and there would be no need for the add-on coverage. The intent and purpose of paying additional premium for spontaneous combustion was to cover combustion without fire.

Considering the definitions of fire and combustion, and that spontaneous combustion was covered on payment of additional premium, the Commission concluded the risk had been accepted. It held that regardless of whether fire was ignited or not, the loss due to spontaneous combustion was payable under the policy. Accordingly, by its order of February 20, 2017 delivered by Justice V K Jain, the National Commission held the repudiation was not justified. It ordered the insurer to settle the claim by paying Rs 1.76 crore, as the loss assessed by the surveyor. This amount would carry 9 per cent annual interest, computed from six months after the lodging of the claim till payment.

(The author is a consumer activist)