V.K. Jain, Presiding Member:
1. The case of the complainant, as set out in the complaint is that its bank took two insurance policies, one bearing No. 130500/44.2.30073 and the other bearing No. 130500/44.3.30003, for the loss or defect of machinery and for deterioration of stock, on behalf of the complainant. It is alleged that on 14.8.2003, the temperature in the cold storage of the complainant increased due to leakage of Ammonia Gas because of crack in the Gasket. A claim was lodged by the complainant with the insurer on 27.8.2003 alleging therein that the stock was damaged on account of irregularity of power supply and mechanical fault in the DG set. One Samiran Ghosh was appointed as surveyor and loss assessor to visit the cold storage and conduct a survey. He served a letter dated 12.9.2003, informing the complainant that the claim which he had lodged for damage due to irregularity of power supply and mechanical fault, was not covered by the policy terms and conditions since the temperature in each chamber was in normal condition as per the logbook and hence damage was not due to irregularity of power supply / breakdown of DG set. The complainant was advised to withdraw the claim. The claim was accordingly withdrawn by the complainant vide letter dated 15.9.2003.
2. According to the complainant, it tried to contact Canara Bank and when the concerned Manager returned from vacation it came to know that the bank had taken two policies, one for defect/loss of machinery and the other for deterioration of goods. The complainant therefore, asked for a complete copy of the policy but was supplied only Annexures A and B to the complaint, which are the copy of the M.B. Policy and the receipt in respect of the DoS (Deterioration of Stock) Policy. The complainant then engaged an Engineer who reported that the damage had happened because of leakage of Ammonia gas.
3. Vide letter dated 11.10.2004, the insurer repudiated the claim on the following grounds:
“As for loss or damage, the matter has been reviewed thoroughly and threadbare examination made at various level of authority reveals that:
The loss/damage is solely attributable to excessive leakage of Ammonia at high pressure and;
The leakage of Ammonia (refrigerant) resulted from the cracked gasket near the isolation valve.
In respect to the above, applicable provisions of the MB and DOS insurance stand as follows:
1. Clause 2 of Special exclusion of MB insurance excludes liability under the policy for loss or damage in respect of ….. all operating media (e.g. refrigerant) packing material (e.g.cork sheet, gasket) etc.
2. Clause of 1(b) of Definition of exclusion of DOS insurance excludes escape of refrigerant in the refrigerated chamber as a direct result of damage to machinery and plant described in Schedule I…………………
3. Clause 1(a)(i) under Definition of exclusion for DOS insurance also excludes failure of any part or parts (e.g. gasket etc.) requiring periodical renewal to be termed as ‘accident’ for the purpose of admitting liability under the policy.
The cause of escape of refrigerant i.e. Ammonia in the instant case thus being due to the failure of gasket near isolation valve, the above exclusion clause becomes applicable where gasket is coming under ‘exclusion’ to meant the term ‘accident’ finally rendering the claim under MB insurance un-established and intangible. As such and according to the Provision (I) of the DOS insurance our liability under the policy, therefore, stands inoperative and untenable.
Thus, in view of the factual findings and for the reasons hereinbefore elaborated, we express our inability to entertain your claim and repudiate the liability, if any, under the policy in toto.”
4. Being aggrieved from the repudiation of the claim, the complainant is before this Commission seeking direction for payment of Rs. 1,21,00,000 , along with compensation etc.
5. The complaint has been resisted by the insurer primarily on the ground on which the claim was repudiated. It is inter alia stated in the written version/counter-affidavit filed by the insurer that the complainant was fully aware that the leakage of Ammonia gas due to defective gasket was not covered under the insurance policy and that is why it had submitted a claim on the allegation that there was failure of electricity and technical fault in the DG set.
6. The Standard Refrigeration Plant (Stock) Policy, to the extent, it is relevant reads as under:
“At the time of the happening of an accident there shall be in force an insurance covering the interest of the Insured in the costs of repair to or replacing of the insured machinery necessitated by such accident and that the payment shall have been made or liabilities admitted therefor under such insurance but if no payment shall have been made or liability admitted under such insurance solely as a result of the operation of any ‘excess’ thereunder the liability of the company under this policy shall not be affected.
T he term ‘accident’ shall mean and be limited to—
1. Any sudden or unforeseen loss of or damage to the refrigeration machinery described in Schedule I of this policy due to any accidental cause covered by machinery Insurance Policy specified in Schedule I and not hereinafter excluded.
1. Failure of any part or parts requiring periodical renewal (such as failure of bolts, gaskets, packing material, joints of any kind and insulation)
2. Operation of fuses and safety devices.
3. Escape of Refrigerant in the refrigerated chamber as a direct result of damage to machinery and plant described in Schedule I for which damage a claim is admissible under the Machinery Insurance Policy specified in the schedule).
It would thus be seen that the term ‘accident’ as per the said policy expressly excludes failure of any part or parts requiring periodical renewal such as gaskets and packing material. This is complainant’s own case that the Ammonia had leaked on account of a crack in the gasket. Therefore, the leakage of Ammonia Gas, which led to damage to the stock of potatoes kept in the cold storage would not be covered under the aforesaid insurance policy.
7. The leakage of Ammonia Gas due to crack in the gasket is not covered under Clause (b) of the term ‘accident’, as damage to the gasket, which is a packing material not made of metal, is expressly excluded in Clause(2) of the Special Exclusions, contained in the MB Policy. It would be pertinent to note here that in its final survey report dated 18.6.2004, the surveyor has specifically stated that that the Cork sheet gasket falls in the category of Packing Materials, while an Hydrous Ammonia is the refrigerant. Hence, both the affected items, gasket and An Hydrous Ammonia are under stipulation of above Special Exclusion.
8. The case of the complainant however, is that since the policy for insurance of the stock was not supplied either to it or its bank, the aforesaid exclusion clause is not binding on him. Reliance in this regard is placed upon the decision of the Hon’ble Supreme Court in M/s. Modern Insulators Ltd. v. Oriental Insurance Co. Ltd., I (2000) CPJ 1 (SC)=II (2000) SLT 323=(2000) 2 SCC 734.
9. Though, in his affidavit by way of evidence, Mr. Bishnu Dutta Choudhary, Divisional Manager of the Insurance Company has inter alia stated that as per the record of the insurance company, a complete copy of the insurance policy, along with standard form of registration was issued and sent to the complainant and endorsement to this effect was also made on the preamble of the policy. Mr. Mainak Ghosh, Branch Manager of Canara Bank, Govindpur Branch, in his affidavit stated that the insured had issued only a receipt dated 21.4.2003 in respect of the DOS policy No. 130600/44.3.30003.
10. In view of the fact that no documentary proof of having actually delivered the above referred insurance policy to the bank has been submitted by the insurer, I proceed on the basis that the said policy was not received by the bank and only the receipt of payment of premium in respect of the said policy was received by it. The question which arises for consideration is as to whether the complainant is bound by the standard terms and conditions of the above referred policy, despite its copy having not been received by it or not. In General Assurance Society Ltd. v.Chandumull Jain & Anr., 1966 (SLT SOFT) 184=(1966) 3 SCR 500, the respondent submitted two proposals to the appellant, which were accepted vide two separate letters. Two interim protection cover notes in respect of the said two proposals were then issued by the insurer. It was inter alia stated in the cover notes that the property was insured subject to the terms of the applicant’s proposal and to the usual conditions of the Society’s policies. The case of the appellant society was that the insurance policy was cancelled by it as per condition No. 10 of the said policy. The suit filed by the insured was dismissed by the Trial Court holding that the protection available to the plaintiff was as per the usual terms and subject to the conditions of the policy. In an appeal, filed by the plaintiff, the Division Bench of the High Court held that as the cover note was only for a month and had ceased to operative Condition No. 10 of the insurance policy, which permitted its cancellation, was not applicable. The Hon’ble Supreme Court felt that the application of Condition No. 10 was dependent on how far the terms and conditions could be said to be incorporated in the contract of insurance between the parties. Dealing with the issue the Hon’ble Supreme Court inter alia held as under:
“ 11. …… A cover note is a temporary and limited agreement. It may be self-contained or it may incorporate by reference the terms and conditions of the future policy. When the cover note incorporates the policy in this manner, it does not have to recite the term and conditions, but merely to refer to a particular standard policy. If the proposal is for a standard policy and the cover note refers to it, the assured is taken to have accepted the terms of that policy. The reference to the policy and its terms and conditions may be expressed in the proposal or the cover note or even in the letter of acceptance including the cover note. The incorporation of the terms and conditions of the policy may also arise from a combination of references in two or more documents passing between the parties.
12. …… The policy not only defines the risk and its duration but also lays down the special terms and conditions under which the policy may be enforced on either side. Even if the letter of acceptance went beyond the cover notes in the matter of duration, the terms and conditions of the proposed policy would govern the case because when a contract of insuring property is complete, it is immaterial whether the policy is actually delivered after the loss and for the same reason the rights of the parties are governed by the policy to be, between acceptance and delivery of the policy. Even if no terms are specified the terms contained in a policy customarily issued in such cases, would apply. There is ample authority for the proposition.”
11. In the present case, the proposal for issuance of DOS policy duly signed by the complainant, contains a declaration clause, which to the extent, it is relevant reads as under:
“I /we agree to accept the policy in the forms issued by the Company subject to exceptions the terms and conditions prescribed therein or endorsed on the policy.”
It would thus be seen that the complainant itself had applied for and agreed to accept a policy issued by the insurer on such exceptions and terms and conditions as might be prescribed therein. Therefore, in view of the decision of the Hon’ble Supreme Court in Chandumull Jain (supra) the complainant is taken to have accepted the terms and conditions contained in the policy usually issued by the insurer, even if the said terms and conditions were not made available to him at any point of time before the damage to the stock took place.
12. In Modern Insulators Ltd. (supra). on which reliance is placed by the complainant, the appellant was supplied only with a cover note and schedule of the policy but the other terms and conditions containing the exclusion clause was not communicated. It was held by the Hon’ble Supreme Court that as the above terms and conditions wherein the exclusion clause was included was neither a part of the contract of insurance nor disclosed to the appellant, the respondent could not claim the benefit of the said exclusion clause. However, Modern Insulators Ltd. (supra), was not a case of the insured having agreed to accept the policy in the form issued by the company, subject to the exceptions and terms and conditions prescribed thereunder, whereas in the present case, the complainant had expressly agreed to accept the policy subject to such exceptions, terms and conditions. Therefore, the present case is squarely covered by the decision of the Constitutional Bench of the Hon’ble Supreme Court in Chandumull Jain (supra).
13. During the course of arguments, reference was made to the decision of this Commission in M/s. Anjaneya Jewellery v. New India Assurance Co. Ltd. & Ors., III (2018) CPJ 565 (NC)=CC/1094/2018, decided on 22.5.2018.
In Anjaneya Jewellery (supra) the complainant had alleged that the terms and conditions including exclusions on the basis on which the claim had been repudiated were not known to him. His case was that only the policy schedule was left in his office, without any forwarding letter. A perusal of the policy schedule showed that the policy was subject to the insurance policy clauses attached therewith. It was therefore held that the policy clauses were actually attached to the schedule and therefore, the plea taken by the complainant could not be accepted. It was felt that it would be unnatural for a person obtaining such a policy to remain silent on receiving the policy schedule without policy clauses when the schedule expressly stated that the clauses were attached thereto. This Judgment, in my opinion, is of no help to the complainant and does not exclude the applicability of the terms and conditions contained in the standard policy.
14. During the course of hearing, a reference was a
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lso made in United India Insurance Co. Ltd. v. M.K.J. Corporation, III (1996) CPJ 8 (SC)=(1996) 6 SCC 428. In M.K.J. Corporation (supra), the insurer sought to rely upon a clause contained in the Fire Policies, Endorsement Clauses and Warranties as recommended by the Tariff Advisory Committee constituted under Section 64U of the Insurance Act, 1938 to contend that the insurance did not cover the loss or damage resulting from total or partial cessation of work, etc. The contention however was rejected, holding that the insured was not put on notice of the said clause. It was held by the Hon’ble Supreme Court that after completion of the contract no material alteration can be made in its term except by mutual consent and the clause forming part of the instruction of the Tariff Advisory Committee having not been incorporated as a part of the policy, the insured was not bound by the aforesaid clause. This Judgment has no application to the present case since the complainant expressly agreed to accept the policy in the form issued by the company, subject to the terms and conditions prescribed therein. Therefore, the decision of the Constitutional Bench of the Hon’ble Supreme Court in Chandumull Jain (supra), in my view, would apply to the present case, the complainant having agreed to accept the policy on such terms and conditions. 15. For the reasons stated hereinabove, the complainant is not liable to any reimbursement, as the loss was suffered by it on account of the leakage of Ammonia Gas because of crack in the gasket. The complaint is therefore, dismissed. Complaint dismissed.