NCDRC Orders Compensation: United India Insurance to Pay DCW Ltd. for Unjustified Claim Denial

NCDRC Orders Compensation: United India Insurance to Pay DCW Ltd. for Unjustified Claim Denial

The National Consumer Disputes Redressal Commission of India (NCDRC), comprising Justice Sudipahluwalia as the Presiding Member and AVM J. Rajendra, AVSM VSM (Retd.) as the Members, upheld the complaint lodged by DCW Ltd. (Complainant) against United India Assurance Co. Ltd. (Insurer). The NCDRC found the insurer liable for deficient service.

The NCDRC nullified the order of the Maharashtra State Commission, which had rejected the Complainant's complaint. It instructed the Insurer to disburse ₹23,09,051 as compensation for the damage to the DG set, along with simple interest at an annual rate of 8 per cent, to be paid within three months.

The Complainant, a manufacturing company engaged in producing caustic soda, synthetic rutile, PVC, etc., procured an Industrial All Risk Policy from the Insurer to safeguard a Captive Power Plant encompassing six DG sets. Within the policy's duration, DG Set No. 5 encountered an accident leading to harm to it and related equipment. The Complainant duly notified the Insurer about the damage and enlisted the services of Rastek Pvt. Ltd., an expert entity, to probe into the incident's cause. Subsequently, Rastek submitted a report detailing their conclusions.

Following this, the Insurer engaged Anantha Padmanaban, a designated surveyor, to assess the incurred damage. Anantha Padmanaban noted that the Complainant had operated the DG set engine for 10 days while experiencing a decline in oil pressure, a situation indicative of substantial negligence on the Complainant's behalf. Consequently, the Complainant submitted an insurance claim amounting to ₹54,34,858.

The surveyor, however, appraised the claim's value at ₹35,53,868. Drawing from both the surveyor's and expert's reports, the Insurer dismissed the insurance claim, citing Clause 2(a) of the insurance policy that exempts claims stemming from "any intentional act or intentional negligence on the part of the insured or anyone acting on their behalf."

Consequently, the Complainant lodged a Consumer Complaint with the State Commission, seeking a sum of ₹54,34,858 along with interest at a rate of 18 per cent per annum, in addition to an exemplary damages amount of ₹5 lakh.

The State Commission rejected the complaint, stating that the Insurer did not exhibit any deficiency in service and that the rejection of the insurance claim was not arbitrarily made.

The Commission underscored that the Complainant did not take immediate measures to avert damage to the DG set, as evident from the observations of both the surveyor and the expert testimony.

The Insurer's stance before the State Commission revolved around the assertion that the insured DG set was negligently managed by the Complainant. According to the Insurer, the Complainant should have taken swift action by shutting down the machine immediately when the alarm was triggered, thereby preventing further damage.

Furthermore, the Insurer challenged the Complainant's argument that the engine could not be halted abruptly, stating that this reasoning lacked logical coherence. Citing the circumstances of the incident, where the engine tripped and came to a halt at full speed, the Insurer contended that the notion of being unable to stop the engine during an emergency was unsubstantiated.

The Insurer asserted that there was indeed a viable option to distribute the load to other engines and proactively shut down the specific engine well ahead of the failure, particularly considering that the Complainant had documented the observed drop in lube oil pressure. This perspective was supported by the findings of both the surveyor and expert, K Gopalkrishnan.

The NCDRC granted approval to the complaint and annulled the ruling of the Maharashtra State Commission, attributing a deficiency in service to the Insurer. The Commission determined that the claim of deliberate negligence stemming from the mishandling of the DG set, based on its lube oil pressure falling below the manual's specifications, was merely an assumption. Furthermore, the NCDRC highlighted the absence of documented prerequisites mandating specific actions by the Complainant when the lube oil pressure fluctuates between the range of 5.5 to 4.8 bar.

Moreover, the NCDRC emphasised that beyond the two reports provided by the same surveyor, there exists a lack of independent evidence to substantiate claims of negligence, particularly the contention of deliberate negligence leading to the DG set's trip-off and consequential damage. Additionally, no definite connection has been established between the purported delay in shutting down the DG set and the resultant damage. As a result, the failure of the DG set was unforeseen for the Complainant,

The Commission underscored that there was no valid justification or rational foundation for dismissing the Insurance claim, as there was no apparent omission or neglect on the part of the Complainant.

In conclusion, the NCDRC determined that the surveyor's assessment of the liability for the DG set's damage, amounting to ₹23,09,051, was rational and aligned with the stipulations of the insurance contract. Consequently, the Commission directed the Insurer to disburse the sum of ₹23,09,051 to the Complainant for the DG set's damage, along with simple interest at an annual rate of 8 per cent, within three months from the issuance of this order.