Liability In Fire Accidents

This summer season the capital has witnessed a number of towering infernos, with scores of fires breaking out in multistoreyed buildings. One inevitable consequence is the rash of litigation which follow. Claims take years to settle. For instance, a claim against the insurance company in a 1991 fire in a skyscraper in Delhi was settled only a few weeks ago at the National Consumer Commission.

There is very little case law on the liability of the owners and insurance companies when fire damages buildings, causing loss and injury. Therefore, this judgment in National Insurance Company vs Pavan Sahani is bound to be useful for those who are affected by such disasters.

 

In this case, the owner of a flat let it out for rent. He had insured both the building and the rent. A fire broke out in another floor, following which the fire officer sealed the whole building. The flat owner lost his rent. He sought compensation from the insurance company. His request was denied by the insurer, National Insurance Company.

The insurer maintained that the loss of rent could be claimed only if the flat was rendered unfit for occupation because of the fire in the flat itself and not because the building has been sealed due to non-availability of fire-fighting equipment in the building. The policy did not cover claims where the building was confiscated, commandeered or requisitioned by a lawfully constituted authority.

The flat-owners argument was that the consequences of the fire were not confined to a particular floor as the whole building was sealed. The commission accepted this argument and awarded compensation. The whole previous train of events must be regarded as a proximate cause, the commission ruled, citing an English case.

Quoting the Halsburys Law of England, it said: To constitute a loss within the meaning of a fire policy, it is not necessary to show that the subject matter of the insurance has itself been burned; it is sufficient that the loss has been proximately caused by the fire. For example, losses may be sustained through attempts to check the progress of the fire, property may be destroyed by water used to extinguish flames or buildings may be blown up by the fire brigade for purpose of preventing fire from spreading.... Losses by theft during a fire must also be regarded as proximately caused by fire.

In the law of torts, Indian courts apparently follow the theory of absolute liability propounded by the common law courts in England. There is no legislation like the Fire Protection (Metropolis) Act in England. While the strict liability principle has been diluted in England, the courts in India theoretically stick to the rule in the absence of a definitive ruling. In the Shriram Industries judgment (1986), the Supreme Court reaffirmed the theory of strict liability with full force. But the reality is that it is not applied by courts which deal with compensation claims.

Measly damages

The rate of compensation granted by courts in the country for victims of negligence has been traditionally low. The Motor Vehicles Act passed in 1988 has a schedule of amounts to be paid for death and injuries, which mocks the worth of an individuals life. On top of it, it is also unworkable, according to the Supreme Court itself. Though the court had asked the law-makers to take a second look at the Act, but they seem to be too busy for such an exercise. So the courts have to ignore the schedule.

In view of the conservatism of the judiciary, the amount of compensation demanded is also low. In a case decided last month by the Supreme Court, the successors of a youth killed in an accident was given Rs one lakh only, that too after 14 years of litigation (Adikanda Sethi vs Palani Transport).

The claimants had asked for only Rs one lakh, though the courts below had found that they were entitled to more than that, taking into account the income of the deceased. Since the claim was only Rs one lakh, the judiciary had to stop at that amount.

The Supreme Court, however, granted them interest at the rate of 6 per cent from the date of the judgment of the Orissa high court judgment. Here also, the court was stingy, as usually the subordinate courts grant at least 12 per cent as interest. In this case, the high court judgment was delivered in 1993 and therefore, the claimants have gained very little from the protracted litigation. After paying off the lawyers, what would be left could hardly be called just and fair compensation, as enjoined by law.

Priority of dues

The Supreme Court has ruled that the cane-growers dues would be the first charge on stocks of a sugar mill attached by the district collector (Agauta Sugar & Chemicals vs State of UP). The other priorities for payment are excise duty and the arrears of wages of the employees.

In this case, the cane-growers had to be paid Rs 29 crores. Therefore, the collector attached the stocks in trade. The company filed a writ petition in the high court, which did not grant the prayers. Therefore, it moved the Supreme Court.

The apex court asked the collector to sell the sugar stocks to the extent the dues of the growers have to be paid. The remaining stocks could be sold within two months for meeting the other liabilities. This judgment would act as a precedent in cases where the sugar mills fail to pay the growers.

In India, there is no legislation like the Fire Protection (Metropolis) Act in England. While the strict liability principle has been diluted in England, the courts in India theoretically stick to the rule in the absence of a definitive ruling.