Case Title: National Insurance Co. Ltd Vs. Meghana (Bio-Tech) Tissue Culture Nursery
Case Number: F.A. No. 39/2018
The National Consumer Disputes Redressal Commission, headed by Mr. Subhash Chandra and Dr. Sadhna Shanker, recently made a ruling concerning insurance claims. They clarified that the job of surveyors in the insurance industry is to quantify a loss for every claim, no matter if the claim is eventually accepted or rejected.
The case involved a Tissue Culture Nursery that had signed an indemnity contract with National Insurance. The insurance policy, managed through the Bank of India, was worth Rs. 1.60 crores and covered the nursery’s operations. The nursery reported a loss to the insurer during the policy’s active period. A surveyor was quickly sent to evaluate the damage. His report concluded that the loss wasn’t due to a fire but was caused by a malfunctioning air conditioner in the growth room. This malfunction was attributed to voltage fluctuations due to heavy rainfall. The incident affected 25,000 bottles of tissue culture due to the continuous operation of 300 tube lights. However, the insurer rejected the claim, arguing that the cause of loss was not covered by the policy’s terms. The nursery then filed a complaint with the State Commission seeking compensation of Rs. 70 lakhs. The State Commission ruled in their favor, but the insurer appealed to the National Commission.
The insurer argued that the State Commission’s ruling was flawed. They pointed out that the loss was not due to a fire, hence not covered by the policy. They referred to a previous case (New India Assurance Co. Ltd. Vs. Novelty Palace) that established that damage from excessive heat without ignition is not covered. They also highlighted the surveyor’s report which noted that the loss was due to voltage fluctuation, a situation covered by Exclusion Clauses 6 and 7 of the policy.
The Commission concluded that the loss was due to temperature variation from an air conditioner failure rather than a physical fire. This type of loss was not covered under the policy. The Commission disagreed with the State Commission’s interpretation that the higher temperature causing tissue browning was equivalent to ‘burning.’ They also stated that the State Commission should not have exceeded the policy’s contractual terms. The Commission also referred to a case (Sri Venkateswara Syndicate Vs. Oriental Insurance Company Ltd. & Anr.) that stressed the importance of a Surveyor’s Report and that it should only be dismissed if proven wrong. The Commission also dismissed the State Commission’s view that quantifying the loss at Rs. 18,12,600 indicated poor service. They explained that quantification is obligatory even for rejected claims.
In conclusion, the National Commission ruled in favor of the insurer and overturned the State Commission’s order. This case serves as a reminder that the terms of an insurance policy dictate what losses are covered. It also highlights the importance of clearly understanding the terms and conditions of an insurance policy before signing it.
