Insurer can't transfer liability to another party

The National Commission said even if the landlord is the tortfeasor, the insurer should settle the claim and then take legal action to recover the amount from the latter

Aroma De France was engaged in the business of perfumes and related products. The firm had taken a godown on rent at Dabhasa Village where packaging materials and bottles were stored. These were insured for Rs 1.5 crore under a Standard Fire and Special Perils Policy issued by United India Insurance.
 

On February 2, 2014, the landlord of the godown arranged a reception for his son’s marriage on an adjacent vacant plot. He took the electric connection for lighting from an adjoining factory. After the party got over around 4 a.m., the workers noticed a fire emanating from the godown rented to Aroma De France. The landlord, the fire brigade and the police were immediately informed.
 

Aroma De France lodged a claim with the insurer for the packaging material gutted in the fire. The insurer appointed a surveyor who promptly inspected the site. He also examined all the relevant records. On February 15, 2014, he submitted an “Immediate Loss Advice” report in which he recorded the cause of loss to be accidental. The net loss was assessed at Rs 95,03,836 in the final survey report dated December 17, 2014.
 

The insurer subsequently appointed Protocol Insurance Surveyors to investigate the claim. The investigator submitted his report on August 8, 2015, recording that all the documents were examined and were found to be in order.
 

The insurer then sought clarification from the surveyor about the cause of the fire and received the reply that it was due to the bursting of electric cables passing through the ground below the godown. Thereafter, the insurer appointed an expert who opined that underground cables should not normally blow off even in the event of a short circuit.
 

The insurer alleged that conflicting statements were made from time to time and repudiated the claim. Aroma De France (the insured) filed a complaint before the National Commission. The case was contested by the insurer contending that it was not liable and that the landlord should be held responsible for the damage under the law of torts. The insurer relied on the opinion of the expert that underground cables do not normally explode even when short-circuited, and hence argued that the claim had been rightly rejected.
 

The National Commission noted that factually there was no power supply to the godown, so a mere provision in the lease agreement for the landlord to pay the electricity charges would not constitute a contradiction. The Commission further observed that the surveyor had personally verified the burst and burnt underground cables and had also inspected the damaged flooring of the godown. It held that this clearly established the cause of the damage.
 

In contrast, the expert had given an opinion which was merely “a hypothetical contingency”, without having actually visited the site for verification, so no reliance could be placed on it. The Commission also observed that even if the landlord is the tortfeasor, the insurer should first settle the claim and then take legal action to recover the amount from the tortfeasor. (A tortfeasor refers to a person or entity that commits a tort—a civil wrong that causes harm or injury to another person or their property, leading to legal liability).
 

Accordingly, by its order of May 4, 2003, delivered by the bench of Ram Surat Ram Maurya and Inder Jit Singh, the National Commission ordered the insurer to pay Rs 95,03,836 as assessed by the surveyor along with interest from March 8, 2014, computed at 2 per cent above the bank rate as provided under the Insurance Regulatory and Development Authority of India (IRDAI) regulations.
 

The writer is a consumer activist