Gaurav Aircon Computers was engaged in the business of distributing electronic items. The company had a warehouse and a tin shed at Vishwakarma Industrial Area in Jaipur, which had been taken on lease.
Gaurav Aircon (the insured) had obtained a Standard Fire and Special Perils Policy from National Insurance. The sum insured under the policy was Rs 7 crore, and it was valid from March 30, 2017 to March 29, 2018. It covered the stock of electric, electronics and health equipment.
A major fire erupted on April 26, 2017 at 7 AM. The security guard immediately telephoned and informed the company's director, the fire brigade, and the police. It took about 12 hours for seven fire tenders to extinguish the fire.
The insured informed National Insurance about the incident.
The surveyor submitted his survey report on October 9, 2017 in which he assessed the loss at Rs 4,00,76,730, after considering Rs 30,265 as the salvage value of the damaged items.
The insurer accepted the survey report. After taking over the salvage, it settled the claim on March 29, 2018 by paying Rs 4,01,06,995 towards the loss plus the value of the salvaged goods.
The insured was not satisfied with the settlement and had a legal notice issued on April 15, 2018, demanding a further amount of Rs 4,03,35,017. Since the insurer did not respond, the insured filed a complaint before the National Commission. The insured contended that the surveyor had wrongly made deductions under the excess clause, for VAT, and for dead stock, and had disallowed the warehouse rent and security guard’s salary. The insured also claimed interest for delay in claim settlement.
The insurer contested the case. It argued that the insured had executed a discharge voucher accepting the amount in full and final satisfaction of the claim, and so was not entitled to raise any grievance regarding the settlement. It justified the deductions made as being valid under the terms of the policy. It argued that value-added tax (VAT) was not payable on damaged goods, and even the returns showed that it had not been paid on the burnt items, and hence the claim for VAT was not justified.
The National Commission observed that insurance is a contract of indemnity, so the insurer is liable to make good only the amount of actual loss suffered by the insured. It noted that VAT is payable only on sale, and if goods are damaged before sale, VAT is not payable, and so the claim for its reimbursement was incorrect. It noted that every year almost 2 per cent of electronic items were accounted for as dead stock, so the deduction made under this head while assessing the loss was justified.
The Commission observed that warehouse rent and the salary of the security guard were not covered under the policy, and so these claims had been rightly disallowed. Hence the Commission concluded that loss had been assessed in a proper manner by adopting proper accounting procedures and the settlement of the claim did not suffer from any illegality.
However, in its order of November 3, 2022 delivered by the bench of Ram Surat Ram Maurya and Inder Jit Singh, the National Commission held that the insured was entitled to interest for delay in settlement of the claim, as provided under Regulation 9 of the Insurance Regulatory and Development Authority of India (IRDAI) regulations. Accordingly, it ordered the insurer to pay 9 per cent interest on the settlement amount of Rs 4,01,06,995 for the period of delay from December 2, 2017 to March 28, 2018.
The writer is a consumer activist
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