Order Date: 15th October 2024
Order Name: National Aluminium Company Ltd. vs Oriental Insurance Co. Ltd. and Anr.
Case No: Consumer Case No. 2159 of 2016
In a recent decision, the National Consumer Disputes Redressal Commission (NCDRC), led by President Justice A.P. Sahi and Member Dr. Inder Jit Singh, found Oriental Insurance Co. Ltd. responsible for wrongly denying an insurance claim from National Aluminium Company Ltd. (NALCO). The dispute arose when the insurance company rejected a fire damage claim by invoking an exclusion clause, without clear evidence about the fire’s origin.
Understanding the Case:
NALCO, a government-owned company, had purchased a ‘Standard Fire & Special Perils’ insurance policy from Oriental Insurance. During the policy period, a fire broke out in a turbo generator, damaging parts like the exciter and generator stator. Promptly, NALCO informed the insurer, and two surveys were conducted. The first survey was preliminary, while the second, by M/s Cunningham and Lindsey, was more detailed. The final report blamed an electrical short circuit in the generator for the fire and cited an exclusion clause in the policy that rules out coverage for electrical failures, such as short circuits.
Based on this report, the insurance company denied the claim. NALCO requested a review, but the insurer stood by its decision, leading NALCO to file a complaint with the NCDRC.
NCDRC’s Findings:
The NCDRC closely reviewed exclusion clause no. 7 of the policy, which excludes damage from electrical failures unless the fire spreads beyond the initial machine. The commission also examined the equipment involved, including the generator and exciter, provided by Bharat Heavy Electricals Limited (BHEL). An expert from the Original Equipment Manufacturer (OEM) suggested that external vibrations, not an internal short circuit, caused the fire. This contradicted the surveyor’s report that focused solely on the generator.
The NCDRC noted that the exciter was also damaged by the fire, a fact overlooked by the insurance company. The commission ruled that the exclusion clause didn’t apply because the fire was due to external vibrations, not internal electrical issues. They referred to a legal precedent, emphasizing that insurers cannot introduce new reasons for claim denial that weren’t stated initially.
Ultimately, the NCDRC sided with NALCO, accepting the OEM expert’s analysis and applying the ‘Contra Proferentum’ rule, which interprets ambiguities against the insurer. Consequently, the insurance company was ordered to pay NALCO Rs. 13,25,37,131/- with 6% interest.
Takeaway:
This judgment underscores the importance of clear evidence and thorough analysis in insurance claims. Insurers must ensure that their reasons for denying claims are well-founded and clearly communicated, while policyholders should be aware of their rights to challenge unjust rejections.
