Insurance firms lingering on settling claims: Consumer forum

"This has become a general practice that the insurance companies tend to linger on the settlement of the claim and use the money which the insured is otherwise legally bound to have for as much longer period as they can. This clearly amounts to harassment and unfair trade practice," the North East District Consumer Disputes Redressal Forum said.

The forum presided by N A Zaidi made the observation while pulling up New India Assurance Company Ltd (NIACL) for "sitting on a claim" for over three years prior to rejecting it and directed the insurance company to pay its policy holder Rs 13.84 lakh, including Rs 1 lakh compensation.

"We hold the rejection of the claim by respondent company (NIACL) as wholly untenable and it smacks of vendetta to cover their own shortfall for not deciding the claim of complainant for more than three years.

"We allow this complaint and direct respondent company to pay complainant a sum of Rs 12,79,367, the sum assessed by the surveyor, with compensation of Rs 1,00,000 for harassment suffered. We further award a sum of Rs 5,000 as cost of litigation," the forum said.

The order came on the plea of Delhi-based cosmetic firm Colorbar Cosmetics Pvt Ltd, whose stock insured with NIACL was damaged in a fire in September 2007.

The cosmetic firm had filed a claim for the loss and NIACL had appointed a surveyor who had assessed a loss of Rs 12.79 lakh, the firm had said in its complaint.

It alleged that despite the surveyor's assessment, NIACL did not settle the claim and then after three years had rejected it in October 2010.

NIACL, in its defence, had contended that it had rejected the claim as the cosmetic firm's stock was in the custody of another firm which was not related to Colorbar.