1. The complainant, a partnership firm, on it’s plot No.103, Road No.12, MIDC Area, Andheri (E), Mumbai-400093, has constructed two buildings namely (i) “Amar House” comprising ground, mezzanine plus one floor, and (ii) “Amar House Annexe”. The complainant allowed one Atos Origin India Pvt. Ltd. (hereinafter “ATOS”) to use and occupy the premises under various Business Conducting/ Leave and license Agreements. ATOS incurred substantial expenditure to refurbish the premises suited to their needs. Therefore, specific provision for a lock-in-period was made in the said Agreements. ATOS also availed a Standard Fire & Special Perils Policy dated 29.12.2007 from Bajaj Allianz General Insurance Co.Ltd. (Ann. A).
2. Per the plaint petition, taking advantage of the policy allowing increased FSI for IT park on Amar house, and as the existing plinth and first floor was certified by RCC consultant to be strong enough to bear the load of additional floors, the complainant decided to build additional three floors on the existing structure of Amar House. The existing building was not to be demolished except for the roof/ceiling of the first floor which was required to be removed. As the complainant was bound by the lock-in period in the Agreement, it entered into a Memorandum of Understanding (MOU) dated 29.3.2008 (Ann.B) with ATOS: ATOS agreed to shift to an alternate office arranged by the complainant subject to the condition that the complainant would ensure safety and upkeep of ATOS’s furniture, fixtures, fittings etc. under it’s care and custody. One of the conditions of this MOU was that the complainant would take out a Contractor’s All Risks Insurance Policy (CAR) to take care of any untoward accident or damages arising out of or during the period of the said construction. So, the complainant approached OP-2 – Birla Insurance Advisory & Broking Services Ltd. (hereinafter OP-2) and explained its requirement to take out a CAR to cover not only the complainant’s properties but also that of ATOS lying in the complainant’s custody. OP-2 forwarded various quotes from insurance companies including from Iffco Tokio General Insurance Co.Ltd./Opposite Party No. 1 (OP-1 hereafter).
3. Per the plaint, in an exchange of e-mails on 31.12.2007 between OP-1 and the complainant regarding nature of work proposed to be insured, OP-1 had been asked to revert if they required any further clarification (Ann. C & D). Since OP-1 did not revert, it was fully conscious of the nature of the work proposed to be undertaken by the complainant. In this way, the complainant availed a comprehensive insurance policy providing cover of Rs.22.50 crore under various heads as per it’s needs, and paid the premium of Rs.1,38,371/-. OP-1 issued CAR Policy No.ICA32024152-2008, with various addendums/riders, effective from 19.5.2008 till 18.5.2009 (Ann.E). The complainant objected to the policy document which contained blatant and material misstatement and discrepancies about the quantum of insurance cover and the address. OP-1 thereafter issued a corrigendum titled as “General Endorsement No.2 dated 13.6.2008”, rectifying the risk location address and the third party liability limit of Rs. 5 crore (Ann.F).
4. Per the plaint, pursuant to the MOU, ATOS vacated the entire premises in Amar House building. While furniture and fixtures of the first floor were removed, the same on the ground and mezzanine floors were kept intact. After the premises were so vacated, the complainant appointed a reputed contractor viz. M/s Akshar Enterprise to carry out the construction work, on or about 19.5.2008. It so happened that there was heavy rainfall, unexpected and before time, in the first week of June, 2008 for about 3-4 days. This resulted in severe damage to property, furniture, fitting and fixtures of ATOS in the custody and care of the complainant. How this damage took place was explained by the contractor through a written explanatory letter dated 13.6.2008 (Ann.G). Thereafter, joint inspection was carried out by the officers of the complainant and ATOS on 14.6.2008 and ATOS, vide letter dated 16.6.2008 (Ann.H), reminded the complainant of its obligation to make good it’s losses. The complainant, seeking cover under CAR, informed OP-1 vide letter dated 20.6.2008 (Ann.I) and also informed OP-2 vide e-mail dated 23.6.2008 (Ann.J). On 25.6.2008, one Shri K.Jayakanthan, officer of Absolute Surveyors Pvt. Ltd. appointed by OP-1, visited the site, interacted with the complainant, undertook survey, sought documents etc.. In Jan. 2009, another representative of the surveyor asked the contractor to submit a detailed explanation, which was also submitted (Ann.K). Prior to this, the complainant had been advised by the surveyor vide e-mail dated 26.7.2008 to submit the claim form, with bills and other documents (Ann.L). Vide letter dated 28.8.2008, OP-1 had asked the complainant to submit all documents sought by the surveyor (Ann.N). This was done; however, the complainant received another letter from surveyor dated 5.9.2008, purportedly predated as 28.6.2008, by fax, whereby the surveyor had asked the complainant to submit further details and documents (Ann.O). The complainant informed OP-1 that the damaged material was being shifted from the affected area to which OP-1, in response, instructed the complainant to ascertain from the surveyor whether the survey was completed and seek permission to shift the damage material. (Ann.-P-Colly). Subsequently, the complainant, with all requisite details and documents, such as year of purchase, offer for salvage items, cost of repairs and replacement etc., submitted the claim form and claim bill under covering letter dated 11.12.2008 (Ann.Q – colly). By another letter dated 8.1.2009, the complainant submitted further details and also sought release of some interim payment as ATOS were threatening litigation. The Surveyor however, did not reply (Ann.R). By letter dated 15.1.2009, the complainant submitted quotations for salvage items to the surveyor, seeking instructions for it’s disposal (Ann.S). Surveyor sent a request to one Mr. Mayur Patel asking it to do the needful under CAR. Mr. Mayur Patel, vide email dated 17.1.2009, addressed the complainant, acknowledged receipt of documents and stated that they would get back ASAP.
5. Complainant further states that on 29.1.2009, one Mr.Rajiv Bhatt of the surveyor company came to the site, wanting to re-survey. Despite all documents already submitted earlier, the complainant resubmitted the same. The surveyor came up with a fresh set of requisitions in or around Feb. 2009: a copy of insurance policy of ATOS was submitted vide email dated 25.2.2009 (Ann.U). Again, around 2.3.2009, the surveyor came up with a fresh list which also the complainant complied with under letter dated 5.3.2009 (Ann.V). Vide e-mail dated 6.3.2009, the complainant informed the surveyor that due to their lackadaisical approach, the complainant had been constrained to dispose of the salvage. The surveyor responded with an evasive reply dated 12.3.2009 (Ann.W - colly). A number of e-mails then were sent by the complainant to OP-1 (Ann.X- colly), complaining about inordinate delay in settling the claim. Further, e-mail in Mar. 2009 by complainant to various officers of OP-1 were sent complaining about the complainant’s hardship on account of the apathetic conduct of the surveyor (Ann.Y- colly). After all this, the complainant was surprised and shocked with an e-mail dated 2.4.2009 from the surveyor which asked the complainant as to the section/head of the policy under which the claim was intended to be lodged (Ann.Z-Colly). More e-mails followed but to no avail, leading the complainant to issue a legal notice on 14.11.2009, calling upon OP-1 to forthwith disburse the claim of Rs. 4,17,63,900/- (Ann. FF). A month later, the complainant, vide e-mail dated 11.12.2009 informed the IRDA. This finally made OP-1 respond: by its letter dated 18.12.2009, OP-1 repudiated the complainant’s claim, on frivolous grounds (Ann.GG).
6. The complainant, bound by its MOU to make good the losses suffered by ATOS, incurred liability of Rs.4,17,63,900/- and suffered a tremendous liquidity crunch. As a result, the project also got delayed and owing to the said delay, ATOS terminated the agreement, as a result of which the complainant had to refund Rs.5,22,11,680/-.
7. Aggrieved greatly by the conduct and negligence of OP-1, this consumer complaint was filed with the following prayer :-
a) “Pass an order directing the opposite party no.1 to pay or to settle in favour of the complainant the aforesaid amount of Rs.4,17,63,900/- (Rupees four crore, seventeen lakh sixty three thousand and nine hundred only) due to the complainant as per the insurance policy no.ICA32024152-2008 alongwith the interest at the rate of 18% from the date when the claim materialized till realization (documents supporting the said amount of claim has been annexed as Ann.P being letter dated 11th December, 2008 by the complainant to the surveyor of the respondent no.1);
b) Pass an order directing the opposite party no.1 to pay a compensation of Rs.10,00,000/- (Rupees ten lakh) for the mental agony, harassment and undue financial hardship caused to the complainant;
c) Pass an order granting the costs of the complaint;
d) Pass such other order or orders as this Hon’ble Commission may deem fit and proper on the facts and in the circumstances of the instant case.”
WRITTEN VERSION OF OP-1
8. This complaint was contested by the OP-1 through a written version/reply (WV). Preliminary objections were taken: the complaint was time barred; insurance was for commercial purpose; the OP-1 had denied liability in respect of the insurance claim on the basis of terms and conditions of the insurance policy and as such this could not be called a deficiency in service.
9. It was further submitted that the insurance was granted on the basis of a broker slip (BS) (Ann.R-1/1) and that the removal of the existing first floor roof slab as well as flooring had considerably increased the Risk Hazard and the Risk Profile of the construction. As this factum of demolition was not disclosed at the time of taking the policy, it was not covered. As such, the policy was obtained by concealment of material facts and was hence void. Further, the damage was aggravated as a consequence of non-removal of debris as well as accumulated water from ground floor/mezzanine areas. Removal of the roof and flooring, and making of holes for erecting RCC columns at various places, in monsoon period without adequate protection, amounts to the complainant not taking due care with diligence of its property as it might have, had it not taken insurance cover. Such precautionary measures as purported to have been taken by the contractor were however not seen on the ground by the surveyor. Further, the damage was to the existing properties of ATOS which was not covered by the policy. Still further, the policy was intended to cover sudden and unforeseen events. Rains in Mumbai in June cannot be considered to be sudden or unforeseen. Still further, the agreement between the complainant and ATOS contained the clause that “Atos agrees to vacate the entire main building called “Amar House” from …. To ……2008 and handover the possession of the same to Amar Plastics, to enable them to commence the construction activity…..”. As such, since ATOS was to vacate the entire main building, no liability under the policy existed in respect of the alleged loss/damage to the property belonging to ATOS.
10. Rejoinder and affidavit evidence was duly filed on behalf of the complainant as well as on behalf of OP-1. Both parties also submitted short synopsis of their arguments.
11. Learned counsels for the parties were heard at length over two days, on 13.8.2019 and 5.9.2019.
12. Senior counsel for the complainant handed over a short note of dates, events and submissions on behalf of the complainant. He went through the facts of the complaint. He explained that the complainant had leased out it’s premises to ATOS who had spent a good amount to do up their office, approx. Rs. 29 crore. As FSI (Floor Space Index) became available for IT park, the complainant decided to construct three additional floors. ATOS were requested to move to an alternate premise and an MOU, detailing terms & conditions, was agreed upon between the parties. He drew attention to the Standard Fire and Special Perils Policy taken by ATOS (Ann.A) and to the MOU between the complainant – Company and ATOS (Ann.B). He then drew attention to clause 14 of the MOU, emphasizing that it was required of the complainant to take out and maintain, for the duration of the agreement/MOU, a CAR policy with extensions/add-ons, notably third party liability. He then referred to an e-mail from complainant to OP-1 dated 31.12.2007 (Ann.C) essentially to establish that the requirement of insurance had been explained in great detail to OP-1 and that therefore, OP-1 was fully in the know of what it was being asked to insure, and the question of non-disclosure of any material fact did not arise. E-mails dated 31.12.2007 exchanged between the complainant and OP-1 also showed that doubts about insurance were being cleared through correspondence. It was after five months of negotiations, argued the learned counsel, that finally the Contractor All Risk Policy No.ICA-32024152-2008 (CAR) was issued on 19.5.2008, valid up to midnight of 18.5.2009. He then drew attention to the category “GENERAL EXCLUSIONS” in the policy, particularly section (c) therein which provides that the insurance company would not indemnify the insured in case of loss arising from wilful act or wilful negligence of the insured or its responsible representative. Again, referring to General Conditions in the policy, he drew attention to condition no.3 which lays down that the insured shall, at his own expense, take all reasonable precautions etc. to prevent loss, damage or liability and comply with statutory requirements and manufacturer’s recommendations. He then drew attention to condition no.5 which required that in the event of any occurrence which might give rise to a claim under the policy, the insured/complainant shall (a) immediately notify OP-1; (b) take all steps to minimize the extent of the loss or damage;(c) preserve the parts affected for inspection later by a representative or surveyor deputed by OP-1; (d) furnish all such information and documentary evidence as OP-1 may require and (e) inform the police authorities in case of loss or damage due to the theft or burglary. It also provided that if no notice was received by the OP-1/insurance company within 14 days, it shall not be liable for any loss, damage or liability; equally, if a representative of OP-1 did not carry out the inspection within a period of time which could be considered as adequate under the circumstances, the insured was entitled to proceed with the repairs or replacement. On the basis of these policy provisions, the learned counsel argued that in respect of removal of debris, the complainant was forced into removing it by themselves as they did not receive instructions from the insurance company for a long time.
13. Counsel then referred to “Section 1 – Material Damage” of CAR: this provided that if, at any time during the period of insurance, any property be lost, damaged or destroyed by any cause, other than those specifically excluded hereunder, in a manner necessitating replacement or repair, all such losses would be made up by the insurance company upto an amount not exceeding the amount specified in the schedule and not exceeding in the whole the total sum insured. Under “Exclusions to Section I”, in the policy, the counsel referred to Memo no.4 – BASIS OF LOSS SETTLEMENT: (a & b), which provides for cost of repairs necessary to restore the property to the condition immediately before occurrence of the damage less salvage, or in case of total loss, actual value of the property immediately before the occurrence of the loss less salvage. Counsel then drew attention to Memo No.7 – SURROUNDING PROPERTY and Memo No. 8 – MAJOR PERILS/AOG PERILS : Memo 7 covered loss of or damage to property located on or adjacent to the site and belonging to or held in care, custody or control of the principal (s) or the contractor (s) if occurring directly due to the construction of the items insured under Section 1; Memo 8 (c) provided that Flood/Inundation was a major peril/AOG peril under the policy. Counsel then referred to Section II – THIRD PARTY LIABILITY, (a)&(b) thereunder: this provides for liability for accidental loss or damage caused to property of other persons including property held in trust by or under custody of the insured and similarly, liability for fatal or non-fatal injury to any persons other than insured’s own employees etc. Exclusion to this section II, the counsel held, did not apply to the facts of the present case as the property belonging to ATOS was lying under the care and custody of the insured. He then referred to General Endorsement No.1 to the insurance policy dated 19.5.2008 vide which damage due to terrorism clause was included in the policy and General Endorsement No.2 dated 13.6.2008 vide which the risk location address was corrected and third party liability limit was made Rs. 5 crore. Learned counsel referred to letter dated 13.6.2008 from the Contractor to the insured (Ann.G): this explained how all reasonable precautions had been taken at the time of undertaking work on the terrace slab and that despite the care taken, water leakages were found from first floor to the ground floor and basement at many places. He argued that this letter explained that water leakage was due to the unexpected heavy and continuous rain in the first week of June, which was a very rare phenomenon, and that the rain was of the order of 20 to 25% of the total rainfall in the season. He then pointed out letter dated 16.6.2008 from ATOS to the insured, which reminded the complainant that they had promised that the entire area would be refurbished when handing over possession back to them (Ann.H). Thereafter, counsel referred to the complainant’s letter dated 20.6.2008 (Ann.I) to OP-1: vide this, intimation for claim of loss under the insurance policy, Memo 7 thereof covering “surrounding property” and request for a claim verifier for the site verification and reimbursement of the claim, had been made. He then drew attention to a note that was handed over in Jan 2009 to the surveyor of OP-1 which explained how every care had been taken before the heavy rains intervened and caused damage. This note has also been mentioned in para 2 (r) of the consumer complaint. Counsel then referred to a letter dated 28.8.2008 (Ann.N) from OP-1 to the complainant, asking it to provide necessary documents to the surveyors, as soon as possible, and to letter dated 28.6.2008 (Ann.O) vide which the surveyor had asked for these documents, to make the point that all documents had already been submitted. In reply to the insurance company’s letter dated 28.8.2008, the complainant had informed that they had asked for details to evaluate the loss and were expecting the same within 3-4 weeks. He then invited attention to company’s e-mails dated 8.9.2008 and 9.9.2008, to OP-1, informing that they were shifting part of the damaged material outside the premises as it was necessary for evaluation of loss as also to preserve the surrounding area from environmental pollution. The point made was that a lot of time was being taken by the insurance company to decide the claim. Finally, the complainant submitted to the surveyor the claim form duly filled in: the “cause of loss or damage” was declared as “Rain Water”. Full details of damage and amount of claim against each item, as quoted by Image Interiors to ATOS, was furnished through three abstract sheets, the total aggregating to Rs.4,17,63,900/- (Ann.Q-Colly). Vide letter dated 15.1.2009 (Ann.S), the complainant sent quotations for disposal of salvage items to the surveyor. A response was received to this from Mayur Patel, showing that they were scrutinizing the matter and would get back ASAP. A copy of the policy taken by ATOS was also supplied by the complainant to the surveyor, upon its request. Counsel then drew attention to letter dated 5.3.2009 (Ann. V), to make the point that yet once again, all the documents were submitted to Mr.Rajeev Bhatt, Absolute Surveyors Pvt.Ltd. Vide email dated 3.6.2009 (Ann.W-Colly), complainant informed Mr.Bhatt that as there was no feed back from his side, the complainant had decided to dispose off salvage immediately. To this, Mr.Bhatt had responded vide email dated 12.3.2009 that clearance for this could not be given till final admissibility/acceptance by the insurer is established and that they could dispose of the salvage without however any obligation on the insurer. The complainant-company then wrote an e-mail dated 24.3.2009 to OP-1 informing it of their claim and financial hardship and requesting it to look into their claim of Rs.4,17,63,900/-. Learned counsel then referred to e-mail dated 2.4.2009 (Ann.Z-Colly), asking the complainant to specify the section/head of the insurance policy under which the insurance claim was being filed. Counsel expressed great surprise that such a query had to come at this stage. Learned counsel then referred to repudiation letter dated 18.12.2009 (Ann.GG). His submission was that it is only after the complainant sent a legal notice dt. 14.11.2009 to the OP that the repudiation letter followed. Counsel then read out the repudiation letter and remarked that the complainant had not been given a copy of the survey report.
14. Counsel for the complainant submitted that it was only after the claim had been repudiated that the legal notice issued upon OP-1 was replied to vide letter dated 7.1.2010 (Ann.HH-colly). This letter of 7.1.2010 was replied to by counsel on behalf of the complainant, wherein each issue raised in the letter dated 7.1.2010 as well as, legal notice dated 14.11.2009 was replied to. The main point made in this letter was that the complainant had not been furnished a copy of the surveyor’s report. Besides, every issue raised in respect of the OP-1’s case that the insurance claim was not admissible had been also replied to in detail.
15. Summing up, it was submitted, on behalf of the complainant, that their case was well brought out in their Solicitor’s letter dated 18.2.2010 in reply to OP-1’s letter of repudiation dated 18.12.2009 and letter of OP-1’s Advocate dated 7.1.2010. The first point was that the complainant was not given a copy of the survey report. The second point was that OP-1 always knew why the insurance had been taken and were now wriggling out of the contract, citing technicalities. The third point was regarding debris created on account of removal of the false ceiling and roof of the first floor. It was not removed only because OP-1’s surveyor had instructed not to till the completion of survey, and the fact is that till date, the complainant is not aware whether the survey has been completed or not. Therefore, for the damage caused due to non-removal of debris, OP-1 and their surveyor were solely and exclusively responsible, not the complainant. The fourth point was that the ground taken by the OP that demolition of the roof of first floor was not covered in the scope of insurance ignores the fact that work of construction of the additional three floors necessarily involved demolition of the roof of the first floor: thus, to now allege that demolition was not covered in the insurance would be dishonest and malafide. The last issue is regarding the fact of insurance having been issued based on the broker’s slip (BS). The case of the complainant here is that BS was not prepared by them but by the broker and the complainant could not be blamed for any alleged inconsistency, omission, misstatement about the nature of the proposed work. As such, on this ground, it would not be fair to withhold the insurance claim.
16. Learned counsel for the OP – 1 – insurance company began his submission by mentioning that the insurance contract was to cover risk under Contractor’s All Risk Policy (CAR) (Ann. E-Colly) for construction of three additional floors over a two storied building. Referring then to the letter of repudiation dated 18.12.2009 (Ann.GG), the counsel submitted that this had been done under the provisions of CAR. He then drew attention to OP-1’s Advocates letter dated 7.1.2010 in reply to the complainant’s legal notice which had been issued after the claim had already been repudiated and which addressed each issue raised in the legal notice.
17. Learned counsel submitted that CAR was granted based on the Brokers Slip (BS) (Ann.R-1): project details furnished was “Construction of 3 upper floors on the existing building of ground + one floor (having wooden roof)”. Learned counsel argued that Brokers are licensed entities and insurance policies are issued on the basis of details furnished by them in the BS. He drew pointed attention to the fact that there was no mention of demolition of roof or removal of the first floor, and that this was therefore non-disclosure of a material fact. This significant material fact had neither been disclosed at the time of obtaining the policy nor subsequently endorsed on the policy. He further submitted that the seriousness of this material non-disclosure fact can be gauged from the fact that it was this factum of demolition, in June, when monsoon is expected, which was the cause of the damage and loss. Had this been disclosed, insurance policy may not even have been issued. His point was that any insurance policy covers accidental loss, not expected loss. It is obvious that if there is rain and if the roof and floor of first floor are removed, the rain would fall into the building. The counsel further submitted that premium was quoted on the basis of the BS. He drew attention to sub-para (xiv) in the consumer complaint, under the heading “Submissions in support of the claim”, pointing out that the complainant’s stance viz. the BS had been prepared without authorization, consent, rectification and knowledge of the complainant, and therefore could not have been the basis for the policy, if accepted, would mean that there was no contract between the complainant and OP-1 at all !! If so, this complaint cannot be entertained. Counsel further referred to e-mails dated 31.12.2007 vide which information was being exchanged between the complainant and OP-1 to point out that these also had made no disclosure of the demolition. Therefore, it cannot be denied that there was a material non-disclosure on part of the complainant, and that it was no use blaming the BS. The learned counsel submitted that there was nothing on record to show that BS was unauthorized and therefore this line of argument taken on behalf of the complainant was misleading. In the same context, argued the counsel, the damage was aggravated due to demolition as the whole building thereby stood completely exposed to rains. He drew attention to letter dated 20.6.2008 (Ann.I) from complainant to OP-1: vide this, claim for loss of surrounding property under memo 7 of CAR had been intimated by the complainant to OP-1. He argued that the MOU between the complainant and ATOS, clause 1- VACATION OF THE PREMISES, states that “Atos agrees to vacate the entire main building called “Amar House” from the ______ of__________,2008 and hand over the possession of the same to Amar Plastics, to enable them to commence the construction activity…”. It was amply clear therefore that ATOS had agreed to vacate the entire building which obviously means the first floor as well as the ground floor. However, it is also clearly the case that ATOS had not done so. If so, argued the counsel, where is the question of any legal liability on the complainant of any loss that occurred due to ATOS’s left behind properties? The fact that ATOS left behind some property in the custody of the complainant did not mean that the complainant was therefore legally liable for any loss to this property. Further, Counsel drew attention to the Memo 7 : Surrounding Property, in CAR:
“Loss of or damage to property located on or adjacent to the site and belonging to or held in care/custody or control of the Principal(s) or the contractor (s) shall only be covered if occurring directly due to the construction of the items insured under Section 1 and happening during the period of cover and provided that a separate sum therefore has been entered in the schedule under Section 1, for Principal’s specified surrounding property. This cover does not apply to construction/ erection machinery, plants and equipment.”
He submitted that a bare reading of memo 7 clearly showed that loss of property of ATOS could not be said to be directly due to construction which, indeed, had not even commenced, and the insurance policy under consideration had not even started to operate. So whatever loss that took place was entirely on the complainant’s and ATOS’s account.
18. Learned counsel for OP-1 further submitted that the claim amount put forth was Rs. 4,17,63,900/-. The surveyor, while of the opinion that the claim was not admissible under the policy, had however assessed the loss to ATOS for the properties left behind as Rs. 1,83,87,001/-. He, however, maintained that the claim was not admissible as it was not covered under Memo 7 of the CAR policy.
19. Counsel for OP-2 submitted that OP-2 was a registered entity under IRDA and it’s role was suggestive and facilitative, not binding. Further, he submitted that no relief was sought against OP-2 by the complainant.
20. Learned counsel for the complainant made a short rebuttal. Regarding BS, he drew attention to the WV of OP-2, particularly to para VI, to submit that it is clear from this that OP 1 and the complainant were in direct contact. Also, it is stated clearly by OP-2 that BS merely puts across the basic minimum information required and this primarily contains the kind of cover required with specific add-on perils. Therefore, it was not correct for the counsel for OP-1 to argue that the policy was wholly based on the BS. He further argued that the contention that the main construction work which had been insured had not even started when the unexpected rains happened was also incorrect: policy coverage commenced on 19.5.2008 and covered “ERECTION OF BUILDING” which means all works related to erection. Qua non-disclosure of demolition leading to improper risk evaluation alleged by OP-1, he submitted that CAR was an all risk policy save for the general exclusions and as such everything concerned with erection was included. He then drew attention to Memo 7 of CAR and argued that in fact, it clearly covered the complainant’s case: the property of ATOS damaged was under the care and custody of the complainant. Further, memo 8 of CAR listing MAJOR PERILS/AOG PERILS, (c) thereof, clearly mentioned Flood/Inundation as a peril. And, Section II of CAR on Third Party Liability, clause (a) lays down quite clearly that OP-1 had undertaken to indemnify the complainant-insured against legal liability of accidental loss or damage caused to property of other persons including property held in trust or under custody of the insured for which he is responsible.
21. Learned counsel for OP-1 rebutted by submitting that the insurance policy was not an all risk policy; rather, it was Contractors All Risk Policy, which indemnified accidental damage and loss during construction, not before and not after. The claim had therefore been correctly repudiated.
DISCUSSION AND ORDER
22. After having heard the learned counsels at great length, and perused very carefully the record, it is my considered view that the complainant has not been able to successfully establish it’s insurance claim. Repudiation of the complainant’s claim by OP-1 was therefore justified.
23. Admittedly, the complainant took out CAR policy for covering the risk associated with construction of three additional floors on top of it’s existing two storeyed building. Complainant’s own submission is that this policy was taken as it was a requirement of the MOU between the complainant and ATOS. This MOU detailed the terms and conditions under which ATOS, occupants of the existing building, had agreed to shift to an alternative venue, at the complainant’s expense. Heavy rains (3 to 4 days) in first week of June resulted in damage to ATOS’s office furnishings and fixtures on the ground floor. This was because the roof and the flooring of the First Floor had been removed, allowing water to seep through. Contractor explained the occurrence in letter dt. 13.06.2008; complainant and ATOS jointly inspected the damage on 14.06.2008; ATOS allegedly reminded, vide it’s letter dt. 16.06.2008, the complainant of it’s obligation to make good the loss completely. On 20.6.2008, OP-1 was intimated about the damages and loss to the properties of ATOS which was recoverable from the complainant, and the insurance claim of the complainant under CAR, specifically under memo 7 covering the surrounding property. The surveyor, after some time, submitted it’s report on 17.07.2009. In this report, after expressing it’s opinion that the damage/loss was not covered under CAR, the surveyor went on to assess the loss at Rs. 1.83 crore against claim of Rs. 4.17 crore. However, OP-1, vide letter dt. 18.12.2009, repudiated the claim entirely, leading to the instant consumer complaint.
24. First, it is clear that OP-1, after considering the surveyor’s report, and applying it’s mind to the entire matter, despite their being an estimate of loss by the surveyor, decided to repudiate the claim. Grounds for repudiation were mentioned. As such, strictly, the only deficiency in service arguably was the delay in repudiation, and this delay, as OP-1 has explained, was due to delay in submission of the surveyor’s report.
25. Second, the first ground taken in the repudiation letter was that the demolition of first floor roof and removal of first floor flooring, of the order of 15,382 sq. ft., increased the Risk Hazards and the Risk Profile as even a small amount of rain would have resulted into seepage of water since the bare slab with some voids and cracks stood exposed directly to the rains. OP-1 contends that that this factum of demolition was not disclosed at the time of taking out the policy which had been issued on the basis of the Brokers Slip (BS). This BS had, in the column, Project Details, stated “Construction of 3 upper floors on the existing building of ground plus one floor (having wooden roof)”. During oral arguments, counsel for OP-1 held that had the factum of demolition been known, the policy may not even have been issued. Complainant has contested this alleged non-disclosure chiefly by referring to e-mail correspondence of 31.12.2007 ending with an e-mail from Jagdish (complainant’s side) to Naina Kapadia (OP-1’s side): this mentions inter alia (i) vacation of first floor by ATOS, (ii) continued occupation and working from ground floor by ATOS subject to conditions including ATOS’s insistence on CAR, details of which already sent to OP-1, (iii) ATOS’s insistence on hourly compensation for any loss of operation due to construction (hence, would like to cover such risk for 7-10 days for approx. Rs. 2.5 crore during the policy period), (iv) request OP-1 to revert if any further clarification required. So, while OP-1 is steadfast that the CAR policy was based on information furnished in BS, complainant argues that OP-1 was well aware of everything and that the policy was issued after months of negotiations. In evidence thereof, complainant has relied upon the e-mails mentioned above. After considering rival submissions, I am inclined to agree with OP-1. One, these e-mails do not demonstrate negotiations as submitted during oral arguments nor prove that OP-1 knew precisely what was being sought to be insured. Two, leave alone OP-1, the complainant himself did not seem fully aware of what information was exchanged: it was mentioned in e-mails above that the ground floor would continue to be occupied by ATOS; however, this ran afoul of the MOU between the parties, clause 1 whereof clearly proclaimed that ATOS agrees to vacate the entire main building called Amar House. Further, in the said e-mail, mentioning ATOS’s insistence on hourly compensation for any loss of operation due to construction, and adding casually that therefore the complainant would like to cover such risk for 7-10 days for approx. Rs. 2.5 crore during the policy period, seemed quite out of place. Surely, this is not how a professional company should be handling it’s insurance. Also, by it’s own admission in the complaint petition, in para 2(g), complainant had explained everything to OP-2, the broker/consultant, a registered entity. If so, where was the occasion to exchange e-mails in which new facts were slipped in? And why was the BS remiss in furnishing the full project details? During arguments, counsel for OP-1 had pointed out that the complainant, in para 2(xiv) of the plaint, had stated that BS was without authorization and then argued that if that be the case, there was no insurance contract, to begin with. It is quite clear therefore that the complaint petition, in para 2(g) and 2(xiv), has made somewhat confusing submissions, and if it is to believed that the e-mails (supra) were the basis for the insurance contract, and not the BS, it would also have to be accepted that there was no insurance contract, to begin with.
26. Third, the insurance claim was filed under Memo 7 of CAR policy which covered damages to “surrounding property”. Both the learned counsels read this memo, in their own ways, to argue on behalf of their clients. The text of Memo 7 –Surrounding Property, under Section 1-Material Damage is as under:
“Loss of or damage to property located on or adjacent to the site and belonging to or held in the care, custody or control of the Principal(s) or the Contractor(s) shall only be covered if occurring directly due to the construction of the items insured under Section 1 and happening during the period of cover, and provided that a separate Sum therefore has been entered in the Schedule under Section 1, for Principal’s specified surrounding property. This cover does not apply to construction/erection machinery, plants and equipment.”
A plain reading of memo 7 would suggest that the impugned property has to be on or adjacent to the site. This condition is satisfied as the property was on the ground floor of the site. Further, it has to belong to or be held in custody or control of the Principal (complainant). It is far from clear whether this condition is satisfied. As per the MOU, the entire building had to be vacated. Notably, this MOU had also made provision for much else viz. extension of license period, alternate accommodation at complainant’s expense, waiver of license fees, reimbursement of cost of shifting etc., as also taking out a CAR policy with specified extensions such as third party liability etc., so it is not understood as to why it failed to mention that ATOS would continue to operate from the ground floor. Therefore, the argument that memo 7 was applicable because the property was under the complainant’s care and custody is hard to appreciate because it was not meant to be so. Counsel for OP-1 has correctly countered that if ATOS, after agreeing to vacate the entire building, had not done so, any loss or damage was to their own account and could not be foisted on the complainant, and certainly not thereafter by the complainant on OP-1. Further, there is merit in the argument that memo 7 also required that the loss shall be a direct consequence of the construction insured under section 1, a condition that was not fulfilled as the main construction work sans demolition (not specifically covered under the policy) had not even begun. Complainant’s argument that construction had begun because it was obvious that demolition of first floor roof and removal of first floor flooring were necessary before construction on top of the existing building could take place and that OP-1 was well aware of this, does not pass muster. One, arguably, if the existing building was strong enough to support 3 floors above, removal of the wooden roof declared in the BS could have been sufficient to carry on construction, and the need to demolish the roof (part RCC and part wooden, as it transpired) may not have b
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een there. Two, even if demolition of roof, wooden or RCC or a mix, was obvious, it was certainly not obvious why the flooring had to be removed. This has been explained in the surveyor’s report: trunking done in the floor for data & power cables of ATOS had to be removed to carry out further work; this rendered first floor slab bare and exposed; 80% of breaking of the floor was over by end May. And so when heavy and continuous rains came in first week of June, rain seeped through, causing damage to the entire furniture etc. on the ground floor. So, nothing was as obvious as is being made out by the complainant. Most importantly, it is clearly established that full disclosure was necessary and had not been done. So, OP-1 was not wrong in holding that it had insured construction of 3 floors, not the demolition, and that the cause of loss was not a direct consequence of what had been insured. 27. Fourth, the claim was also repudiated on the ground that the policy was for covering sudden and unforeseen events, and the rain in Mumbai in the month of June cannot be considered as sudden/unforeseen event. Complainant’s have argued that the scale on which rains took place was indeed unforeseen and therefore it should be treated as an accident. However, as discussed in paras above, it would be reasonable to say that even a small amount of rain would have ended up causing damage since the entire ground floor, with furniture and furnishings, lay completely exposed to seepage from the first floor whose flooring had been removed. What in fact is hard to appreciate is that if the roof and flooring were to be so removed, how could ATOS have continued to occupy the ground floor? And how could this be permitted despite the MOU clearly stating that ATOS would vacate the entire main building? Besides, the other important point is that rains in June was a “known” and cannot be said to be “sudden and unprecedented”. Therefore, this ground for repudiation also cannot be faulted. 28. Finally, some observations are in order. It was strange that ATOS and the complainant had entered into a MOU which inter-alia required the complainant to take out CAR. It raises the question as to whether the complainant would not have taken out an insurance for the erection work had it not been a part of the MOU. It also suggests that the policy was being taken for ATOS’s left-behind properties rather than the erection work. It is hard to comprehend that when virtually all costs of shifting were being borne by the complainant, why should it have mattered so much to ATOS to insist that the complainant also take out a comprehensive insurance policy. It is stranger that while the MOU provides for complete vacation of the building, with all costs to be borne by the complainant, only the first floor was vacated and the ground floor continued to house the office and furniture and fixtures. Not only this, the complainant, instead of mentioning these details to OP-2 and thereby OP-1 in order that the insurance policy could take account of all this, chose to disclose the information casually vide e-mail exchange on 31.12.2007, and thereafter argued that since OP-1 did not revert with any queries/clarifications, it was understood that the policy was based on a complete understanding of complainant’s requirements. This was clearly not so as seen in the discussion above. At the very least, this was a rather unprofessional approach on the part of the complainant and it has to suffer the consequences. 29. It is again odd that the complainant submitted a letter dated 16.6.2008 from ATOS with the claim form: referring to their joint inspection undertaken on 14.06.2008, ATOS wrote to the complainant, mentioning all the damage sustained due to construction work, and adding that “…you have promised us that you will refurnish the entire said area while handing over possession back to us”. It is not clear why this letter was attached except to impress OP-1 that the claim was urgent. But it is noteworthy and somewhat inexplicable that the letter did not invoke the MOU at all and instead invoked the promise made by the complainant. It is this promise that was sought to be made good through the insurance claim. OP-1 was therefore justified in repudiating the claim. 30. In view of the discussion above, upon a careful consideration of the arguments and the record, this consumer complaint cannot sustain and is therefore dismissed. In the facts and circumstances of the case, parties shall bear their own costs.