Consumer protection: Insurer held liable for delay in claim settlement

National Insurance ordered to pay interest and costs after consumer panel finds deficiency in service despite partial settlement of ₹73 lakh claim

Ramesh Kanji Cham owned a motor vessel named “Miraj”, which he used in theshipping business to transport materials. Cham insured the boat with National Insurance from February 8, 1997, to February 7, 1998.

 

On May 11, 1997, the vessel, which was docked at Abra Berth near Deira in Dubai Creek, keeled over on its left side. Upon learning about the mishap, Cham immediately notified the insurer and later submitted all the requisite documents. He registered a Marine Hull claim for DHS 7.56 lakh (about ₹73 lakh).

 

After five years of protracted correspondence, the insurer offered to pay only ₹21.44 lakh. Cham requested that this amount be released as an interim payment and sought reimbursement of the full claim of ₹73 lakh. Upon receiving the ₹21.44 lakh, he protested against the shortfall and requested a detailed computation and an explanation for the deduction. The insurer responded that it had re-examined the claim and had settled it in accordance with the surveyor’s assessment.

 

Aggrieved, Cham approached the Gujarat State Commission, alleging that the remaining ₹52 lakh had been wrongly withheld by adopting unfair trade practices. He stated that although he had protested against the shortfall in payment, he had signed the discharge voucher due to financial constraints.

 

The insurer contended that the survey was conducted by Richards Hogg Lindley of Liverpool, UK, with utmost professionalism, fairness and diligence, and that Cham had accepted the payment in full and final settlement. It argued that the complaint was therefore not maintainable.

 

The State Commission overruled the insurer’s defence and allowed the complaint. It ordered the insurer to pay the balance claim along with 6 per cent interest and ₹5,000 towards litigation costs.

 

The insurer appealed against the order. It stated that the complaint was not maintainable as Cham had accepted the amount in full and final settlement by signing the discharge voucher voluntarily and without any coercion. It also claimed that the short payment was justified on the grounds of under-insurance.

 

The National Commission observed that the loss had been assessed by the surveyor and that the International Maritime Bureau had also conducted an investigation. It identified three key issues for adjudication: whether there was undue delay in the settlement of the claim; whether the execution of the discharge voucher could be considered voluntary and binding on the insured; and whether the insured was entitled to the balance claim amount.

 

The Commission found that the insurer had taken five and a half years to assess the loss, which constituted a deficiency in service and caused financial distress. Further, since Cham had accepted the settlement under protest, the complaint was deemed maintainable.

 

Regarding the balance claim, the Commission stated that the survey report would be binding unless proven to be arbitrary. As there was no indication of any flaw in the report, it concluded that the claim had been properly settled. However, it held that Cham was entitled to compensation for the delay in settlement.

 

Accordingly, in its order dated May 21, 2025, the Commission directed the insurer to pay interest at 9 per cent per annum from November 11, 1997 (six months after the incident) to October 31, 2002 (the date of payment of the claim). In case of delay in payment, the amount would carry 12 per cent interest. Additionally, ₹60,000 was awarded as litigation costs.

    

(The writer is a consumer activist)