Order Name: M/S. R.R. Energy Ltd. Vs. Oriental Insurance Co Ltd.
Case No.: F. A. No.272/2012
The National Consumer Disputes Redressal Commission, led by Subhash Chandra and Sadhna Shanker, recently ruled that an insurance company cannot shorten the two-year period for filing a complaint, as provided by the Consumer Protection Act 1986, by including a clause in the policy.
Here’s a summary of the case: R.R. Energy Ltd., the complainant, runs a power plant that required an electro-static precipitator (ESP) as a pollution control mechanism. The company had taken out a Machinery Breakdown Insurance Policy from Oriental Insurance, which covered the ESP among other items. When the ESP broke down, the company filed a claim, but the insurance company rejected it, citing an exclusion clause in the policy. The complainant argued that this was unfair as they hadn’t been provided with the policy terms and conditions.
After the State Commission dismissed their complaint, R.R. Energy Ltd. took their case to the National Commission.
The insurance company contested the complaint, arguing that the damage was due to gradual wear and tear, not a specific event covered by the insurance policy. They also argued that the complaint was not filed within the time limit specified in the policy.
The National Commission first addressed the issue of the time limit for filing the complaint. They referred to a previous case, Grasim Industries Limited vs. State of Kerala (2018), which established that an agreement or clause that sets a shorter limitation period than what’s legally allowed is unenforceable and void. So, the insurance company could not impose a shorter period than the two years provided by the Consumer Protection Act 1986.
The Commission also found that the claim had been denied based on a clause in a different policy that R.R. Energy Ltd. did not hold, which was a service deficiency by the insurance company. It was also noted that the final surveyor’s report, which was used to deny the claim, was based on a non-existent clause or policy.
The Commission overruled the order of the State Commission, dismissing the surveyor’s report as arbitrary. Based on a preliminary surveyor’s estimate of the repair costs, it was determined that the loss was indeed covered by the Machinery Breakdown Insurance Policy. Therefore, Oriental Insurance was ordered to pay R.R. Energy Ltd. Rs. 30 lakh, plus 9% interest per annum from the date of claim rejection until payment.
The takeaway from this judgment is that insurance companies cannot impose a shorter time limit for filing a complaint than what’s legally allowed. Furthermore, claim rejection should be based on the specific policy held by the insured, and not on a different or non-existent policy.
