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TMI Blog2023 (12) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... roduce additional reasoning beyond those detailed in their letter, to justify the repudiation. Location of fire if covered under the policy or not - HELD THAT:- Looking at the policy documents, the Leave License Agreement and various communications received from the customs, police, fire electricity departments, it is reasonable to conclude that the insured premises was the one that was identified and insured at Survey No. 9/3, by the insurance company. Needless to say, there is nothing to conclude that the area where the fire occurred on 14.03.2018 was not covered by the said insurance policy. Alteration to insured premises and risk increase - HELD THAT:- Clause 3(a) indicates that the insurance policy would cease to be applicable or cover the insured premises in certain cases where there is an increased risk of loss or damage to the insured premises or goods within it. In this case, the insured had undertaken repairs on the rooftop to prevent water leakage to the warehouse. Such essential repair work on the rooftop by itself, cannot be reasonably construed to be an alteration that would increase the risk of loss or damage, as has been urged by the insurance company. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the claim should, in the given event, be discharged directly to the Customs Department. All other legal consequences will follow on upholding the claim of the insured against the appellants - the appeal stands dismissed favouring the insured. - HRISHIKESH ROY And SANJAY KAROL , JJ. JUDGMENT Hrishikesh Roy, J. 1. Heard Mr. Aditya Kumar, learned counsel appearing for the appellants. Also heard Mr. Parthiv K. Goswami and Mr. Mrinal Kumar Choudhury, learned Senior Counsel for the respondent. 2. This appeal challenges the 10.8.2022 order of the National Consumer Disputes Redressal Commission (hereinafter referred to as, the NCDRC for short), which partially allowed the consumer complaint directing the Insurance Company to pay Rs.6,57,55,155/- for a fire insurance claim with 9% interest from claim denial date within 8 weeks, or face 12% interest beyond the stipulated 8 weeks. INSURANCE POLICIES CLAIM PROCESS 3. The respondent purchased the following insurance policies: Sr. No. Description Date Premium Paid Duration of Policy Sum Insured ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctrical setup and stored combustible materials like boxes, papers and chemicals. 8. The Jawaharlal Nehru Port Trust's investigation, conducted by on-site firefighters revealed in their report (09.05.2018) that the probable cause was an electrical short circuit. 9. Two additional reports (07.08.2018 31.08.2018) prepared by independent surveyors appointed by the claimant's clients were submitted. Both reports indicated that a short circuit was the likely cause of the fire. 10. M/s. Screen Facts Services Pvt. Ltd., the Forensic Examiner hired by the Insurance Company, inspected the portion of the fireaffected warehouse and in their report (10.12.2018) stated that combustible materials were stored where the fire occurred but ruled out short circuit as the cause, due to the absence of electrical wiring. The Forensic Examiner highlighted that welding work on the roof, carried out until 16:04 hrs. on the incident day, was a possible cause. It recorded that negligence during welding work in the secure warehouse caused the fire due to sparks and inflammable materials. 11. The Investigator, M/s. J. Basheer Associates, appointed by the appellants, concluded in their 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m with respect insurance policy no. 17080011170100000734 (Standard Fire and Special Perils Policy- Goods Held in Trust) 3. 14.12.19 Insurance Company s letter repudiating the claim with respect insurance policy no. 17080011170100000734 (Standard Fire and Special Perils Policy) CONSUMER COMPLAINT 14. The respondent, dissatisfied with the aforesaid repudiation of claim, filed Complaint No. 765 of 2020 under the Consumer Protection Act, 1986, citing service deficiencies and unfair trade practices by New India Assurance Co. Ltd. In their response, the Insurance Company referred to the Investigation Report (11.04.2019) from M/s. J. Basheer Associates and the Final Survey Report (15.04.2019) from M/s. J.C. Bhansali Co. They contended that the fire occurred during roof welding work undertaken by the insured without adequate precautions. It was also stated that the insured warehouse at Survey No. 9/3 was not affected by the fire. Furthermore, the roof work in the warehouse increased the risk, violating general condition 3 of the Insurance Policy, justifying the repudiation. 15. In the impugned orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tasked to investigate the fire incident. Since short-circuit as the cause of fire was ruled out, Mr. Kumar argues that the negligence theory on the part of the insured (in undertaking roof construction work in the vicinity of stored combustible materials), ought to be accepted. 20. For the appellants, Mr. Kumar also reads the Surveyor s Report (M/s Basheer Associates) dated 11.04.2019 (Annexure A-11) which concluded that the insurance policy did not cover the premises of the fire-affected warehouse. And as such, repudiation is justified since the insurance coverage was limited to the office of the insured and the warehouse which suffered no burning incident. 21. Since Rs. 2,15,18,802.45/- was claimed towards custom duty liability, the appellants argue that compensating the insured warehouse is erroneous as custom duty liability rests only upon the importer under Sections 12 and 46 of the Customs Act, 1962. The counsel relies on Section 23 of the Customs Act, 1962 to argue that granting of compensation for destroyed imported goods stored in the warehouse, is unjustified. Additionally, it is also contended that the Customs Department s demand letter lacked a statutory basis. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urs and the roof welding work did not continue in any case, beyond 16.04 hours on 14.03.2018. Therefore, if the sparks from the welding work were the cause of the fire, it would not go un-noticed for 26 minutes since combustible chemicals, papers, etc. would have instaneously caught fire. Because of the conspicuous gap of around 26 minutes between the end of the welding work and the occurrence of fire, it would be illogical according to Mr. Goswami to attribute the welding work to be the cause for the fire. With this projection, the claimants contend that there was no negligence on the part of the insured and the cause of fire was rightly attributed to an electrical short-circuit. 26. It was further argued that multiple reports from different govt. departments as well as independent surveyors supported the conclusion that the fire had occurred on account of a shortcircuit. In addition, it was also pointed out that no welding took place during the GI sheet roofing work as those would melt during welding. Instead, nuts bolts were used in the GI roofing work. 27. On the aspect of the violation of insurance policy conditions, it was argued that roof repair work was being carrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the location of fire was part of the premises not covered under the insurance policy, and (ii) that there was negligence on the part of the insured in carrying out repairs at the roof of the warehouse which caused the fire. 32. Notably, in earlier cases like Galada Power and Telecommunication Ltd. vs. United India Insurance Co. Ltd. Anr. (2016) 14 SCC 161 and Saurashtra Chemicals Ltd. vs. National Insurance Co. Ltd. (2019) 19 SCC 70 , it was declared that new grounds for repudiation cannot be introduced during the hearing if they were not included in the repudiation letter. This legal principle was reiterated in JSK Industries Pvt. Ltd. vs. Oriental Insurance Co. Ltd. 2022 SCC OnLine 1451 : 10. Mr. Gopal Shankarnarayan, learned senior counsel for the appellants has argued both on substantive and procedural points to assail the aforesaid orders. His first submission is that the insurance company cannot resist a claim petition on grounds beyond those cited by them while repudiating a claim. In support of this argument, a decision of this Court in the case Saurashtra Chemicals Ltd. v. National Insurance Co. Ltd. [(2019) 19 SCC 70] has been cited. In this judgment, it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not covered by the said insurance policy. ALTERATION TO INSURED PREMISES RISK INCREASE 36. To consider this aspect, Clause 3 in the insurance policy is relevant which reads as below: 3. Under any of the following circumstances the insurance ceases to attach as regards the property affected unless the insured, before the occurrence of any loss or damage, obtains the sanction of the Company signified by endorsement upon the policy by or on behalf of the Company:- (a) If the trade or manufacture carried on be altered, or if the nature of the occupation of or other circumstances affecting the building insured or containing the insured property be changed in such a way as to increase the risk of loss or damage by Insured Perils. (b) If the building insured or containing the insured property becomes unoccupied and so remains for a period of more than 30 days. (c) If the interest in the property passes from the insured otherwise than by will or operation of law. 37. Clause 3(a) indicates that the insurance policy would cease to be applicable or cover the insured premises in certain cases where there is an increased risk of loss or damage to the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trate 03.11.2018 IO concluded that the accidental fire was caused pursuant to Short Circuit Section 21 CrPC, Rule 105 of Bombay Police Manual, 1959. 7. M/s. J Basher Associates 11.04.2019 Relied on Police Report (3.11.18) to conclude cause of fire as Short Circuit. Observed that fire affected warehouse survey nos. are not the risk location as per insurance policy. Insurance Co. 8. M/s Screen Facts Services Pvt. Ltd. Forensic Investigation Report 10.12.2018 Sparks from the ongoing welding work ignited the flammable chemicals b/w A D. Cause not electrical in nature as there was no electrical wiring equipment near the area of incident. Insurance Co. 9. M/s. J.C. Bhansali Co Investigatio n Report 15.04.2019 Negligence by management in not taking adequate precautions while construction work was underway leading to sparks falling during wielding. (Based on M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quently, the workers were seen transporting GI roofing sheets as head loads to the roofing work site, which continued until 16:04 hrs. The CCTV footage showed workers also using a crane to move GI roofing sheets and MS Roofing Trusses to the roof repair area post-welding. A substantial time gap of 4 hours, 19 minutes, and 43 seconds separated the end of welding work from the fire itself. Even if rooftop repair continued until 16:04 hrs., a significant 26-minute time lag existed before the fire started. 38.5 The Forensic Investigator's conclusion that sparks from rooftop welding caused the fire appear to be illogical, as they overlooked other potential causes like short-circuit. Negligence despite workers not being involved in welding-related tasks near the time of the fire, was wrongly attributed to the insured. Moreover, evidence was not available that sparks fell on flammable chemicals attributable to activities, undertaken by workers. 39. Of the nine reports, seven suggest short-circuit as the likely fire cause, while two infer negligence on the insured's part, for inadequate precautions, during warehouse construction. 40. Logically if it were the welding sparks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s above Rs. 20,000 must be initially assessed by an approved surveyor. It is noteworthy that the insurer has the discretion to settle the claim for a different amount, than what is assessed by the surveyor. 44. In New India Assurance Co. Ltd. v. Pradeep Kumar (supra), the court addressed whether one had to accept payment based on the surveyors' assessment or could provide independent evidence to support higher costs for replacement and repairs. The court's pertinent conclusion is as follows: 22. In other words 1although assessment of loss by approved surveyor is a prerequisite for payment or settlement of claim of twenty thousand rupees or more by insurer, yet surveyor's report is not the last and final word. It is not that sacrosanct that it cannot be departed from; it is not conclusive. The approved surveyor s report may be basis or foundation for settlement of a claim by the insurer in respect of loss suffered by insured but such report is neither binding upon the insurer nor insured. 45. Guided by the above ratio, the situation in the present case is found to be similar. The surveyor s report cannot be considered a sacred document and contrary evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to not place reliance on the surveyor s report conducted by M/s Truth Labs, for lack of sufficient analysis held that: In any event, neither in the report of M/s Truth Labs nor in the other reports by the Insurance Company is there anything to show that the insured had set the cold store on fire. Whether the fire took place by a short circuit or any other reason, as long as insured is not the person who caused the fire, the Insurance Company cannot escape its liability in terms of the insurance policy. We reject the contention of the Insurance Company that the fire was ignited by the use of kerosene and hence it is not liable. 50. Therefore, it was unequivocally declared that the precise cause of a fire, whether attributed to a short-circuit or any alternative factor, remains immaterial, provided the claimant is not the instigator of the fire. This case underscored the fundamental principle that an insurance company s obligation to the insured is of much greater import. The NCDRC s judicious application of this binding precedent appears to be well-merited. APPLICABILITY OF CUSTOMS DUTY UNJUST ENRICHMENT 51. In order to better appreciate and understand the ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability. The counsel also cited Section 23 of the Customs Act, which required the Assistant Commissioner of Customs to remit duty for lost or destroyed goods, before clearance. 55. However, the counsel for the claimant rightly contended that the privileges enshrined in Sections 22 and 23 of the Customs Act, pertaining to abetment and remission, extend exclusively to those classified as 'importers' of insured goods. The crux of the argument revolves around the claimant's distinct position, as the claimant neither assumes the role of importer nor owner; instead, they function solely as a custodian entrusted with the goods on behalf of their clients. 56. The upshot of the above discussion is that the reports suggesting electrical short circuit as the trigger for the warehouse fire, is found to fit in with the attendant circumstances. As a corollary, the fire at the warehouse cannot be attributable to any negligent act of the insured. Moreover, the fire is found to have occurred within the insured warehouse and the appellant s plea to the contrary, is not believable. Therefore, it is a case of wrongful repudiation by the appellants. No legal infirmity is thus seen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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