V.K. Jain, Presiding Member
1. The complainant company had taken a standard fire and special perils policy from the opposite party, National Insurance Co. Ltd., thereby insuring the risk of loss/damage to the stock of coal and lignite lying in its factory compound. The complainant paid an additional premium to the opposite party so as to include the risk of loss of the aforesaid stock on account inter alia of spontaneous combustion. The factory of the complainant company was closed for the period from 17-02-2006 to 09-08-2006 on account of the workers having been retrenched. When the plant was reopened on 10-08-2006 it was noticed by the employees of the complainant that some stock of coal and ignite had got diminished/destroyed by spontaneous combustion. An intimation in this regard was sent to the insurance company on 12-09-2006. This is also the case of the complainant that all requisite precautions including water sprinkling was regularly done during the period the plant remained closed. On the request made by the complainant, M/s. Mehta & Padamsey Pvt. Ltd. were appointed as surveyors who visited the complainant on 18-09-2006 and sought certain details. The requisite documents were submitted to the surveyor on 28-11-2006. The claim lodged by the complainant company, however, was rejected by the insurance company on 27-07-2007 on the ground that the loss had not been caused by fire only. Being aggrieved from rejection of its claim the complainant is before this Commission with the following prayer:
(a) direct the respondent company to allow the demanded claim of Rs.98,46,732/- on account of loss suffered by it on account of loss of stock of goods insured with the respondent;
(b) award compensation of a sum of Rs.25,00,000/- on account of pain and suffering suffered by the complainant on account of deficient service provided by the respondent company;
(c) award a sum of Rs.11,81,608/-, being interest @18% from the date of the claim till the filing of the petition;
(d) award further interest @18% pendent lite on amounts specified in clause (1) and (b) and
(e) award cost of Rs.1,00,000/- to the complainant.
2. The complaint has been resisted by the insurance company primarily on the ground that no claim was payable under the terms & conditions on which the policy was issued. It is stated in the reply that destruction or damage caused to the property by fire on account of its own fermentation, natural heating or spontaneous combustion or undergoing natural heating or drying process is not covered. In the instant case the spontaneous combustion/heating had not resulted into fire within the meaning of the policy. Thus, the stand taken by the insurance company is that there was no evidence of any actual ignition/fire on account of spontaneous combustion and, therefore, the claim was not covered under the policy. It is also stated in the reply that intimation of the claim was sent after considerable delay of over a month, thereby violating condition No.6(1) of the policy. It is also claimed that since the factory remained closed from 17-02-2006 to 09-08-2006, the insurance cover ceased to attach as provided in condition No.(3) of the policy. Their contention is that had precautions been taken there would be no question of the stock being damaged due to spontaneous combustion, self-heating, etc..
3. This is also claimed by the opposite party that the policy having been taken for a commercial purpose the complainant is not a consumer within the meaning of Section 2(1)(d) of the Consumer Protection Act.
4. It would thus be seen that though the opposite party does not deny that the stock kept in the factory of the complainant got destroyed/damaged due to spontaneous combustion, the claim was rejected solely on the ground that no fire having ignited due to spontaneous combustion, the claim is not payable in terms of the insurance policy. In other words, according to the opposite party, no claim even for the loss/damage due to spontaneous combustion is admissible, unless fire is ignited in the process.
5. The ground on which the claim of the complainant company was repudiated by the insurance company came to be considered by this Commission in Murali Agro Products Ltd. Vs. Oriental Insurance Co. Ltd., I(2005) CPJ 1 (NC). In the aforesaid case the complainant had taken an insurance policy to cover the risk to the stock stored in his godown. The complainant in the aforesaid case had also taken cover on account of the loss/damage due to spontaneous combustion by paying additional premium to the insurance company. The insurance policy issued and the additional cover taken by the insured in Murali Agro Products Ltd. (supra) was identical to the insurance policy and the additional cover taken by the complainant before us. During the course of the hearing in Murali Agro (supra) attention of this Commission was drawn to its earlier decision in M/s. Roshanlal Oil Mills Ltd Vs. M/s. United India Insurance Co. Ltd., 1 (1992) CPJ 293 (NC) and Saraya Sugar Mills Ltd. Vs. United India Insurance Co. Ltd., II (1996) CPJ 6 (NC).
In Saraya Sugar Mills (supra) this Commission had inter alia observed as under:
'The definition of combustion and spontaneous combustion was considered by this Commission in M/s. Roshanlal Oil Mills Ltd. Vs. M/s. United India Insurance Co. Ltd., I (1992) CPJ 293 (NC). It was observed: In scientific literature combustion is defines as under:
‘The burning of any substance, whether it be gaseous, liquid or solid. In combustion, a fuel is oxidized evolving heat and often light….’
The combustion of solids such as coal and wood occurs in stages. First, volatile matter is driven out of the solid by thermal decomposition of the fuel and burn in the air. At usual temperature, the burning of the hot, solid residue is controlled by the rate at which oxygen of the air diffuses to is surface…(McGraw Hill Encyclopedia of Science & Technology, New York, Vol.3 1982).
Another test defines combustion as under:
‘The term combustion signifies the process of burning associated generally with fire, flame, the generation of heat and certain products of reaction.(Enclyopaedia Dictionary of Physics Chief Editor Thewlis, Pergamon Press, Oxford, 1961).
As noticed above, the case of the insurance company is that auto combustion/spontaneous combustion did not cause fire. Therefore, the loss is not covered under the policy. ‘Fire’ had been defined in Chambers 20th Century Dictionary as follows:
‘the heat and light of burning: a mass of burning matter, as of fuel in a grate: flame or incandescence: a conflagration: firing: fuel: a heating apparatus: heat or light due to other casues than burning.’
In the concise Oxford Dictionary the meaning of ‘fire’ has been given as follows:
‘Active principle operative in combustion in which substances join chemically with oxygen in air and usu.give out bright light and heat: flame, incandescence.’
From the above definition of fire given in the two dictionaries, it is clear that fire need not necessarily be accompanied by flame. Fire is a form of heat energy which causes smouldering, burning, heating, melting and perhaps some few more words.'
The complainant had paid additional premium at the rate of 0.25 per thousand for spontaneous combustion over and above the basic rate. If the basic rate for the damage by fire simplicitor covered the risk there was no precise purpose of charging additional premium for spontaneous combustion. As remarked in Roshal Lal’s case (supra) by this Commission if the contention of the insurance company is to be accepted it would mean that the risk ‘spontaneous combustion’ is merely tautological inasmuch as it already falls under ‘Fire’ for which basic premium has been prescribed. We have not been able to understand why the additional premium for ‘spontaneous combustion’ was charged if the loss was payable only if its leads to fire.'
In Roshanlal Oil Mills (supra) this Commission had observed as under:
'We may, further, observe that if it was the intention to exclude damage by damage by spontaneous combustion in the pre-ignition stage i.e. combustion without fire as contended by the respondent, this ought to have been stated much more clearly and directly. In any case, it has already been observed that the language used in the insurance policy is unqualified and the rejection of the insurance claim by the respondent was not justified in terms of the insurance policy.'
This Commission in Murali Agro (supra), declined to take a view different from the view taken in Roshanlal Oil Mills (surpa) and Saraya Sugar Mills (supra) inter alia on the following grounds:
'(a) Firstly, undisputedly, if the damage to the property is because of fire for any reason, there is insurance coverage. The exclusion clause does not provide that loss or damage caused by fire on account of ‘spontaneous combustion’ is excluded. Reading the term as it is, it can be held that what is excluded is loss or damage caused by spontaneous combustion which may or may not cause fire or flame.
(b) Secondly, for the peril which is excluded, namely, the spontaneous combustion, insurance coverage is given, i.e., to say, if the insured property is destroyed or damaged by spontaneous combustion the insurance company is liable to pay to the insured the value of the property. Therefore, it can be stated that it is agreed that insurance coverage is given for spontaneous combustion which could be item 7, as per the policy which covers damage by such items namely fire, lightning, explosion, etc..
(c) thirdly, recovery of additional premium indicates the nature of the contract that subsits between the parties. That contrat cannot be of giving insurance coverage only in case of damage by fire. If that contention is accepted, the object and purpose of payment of additional premium is frustrated. Recovery of additional premium indicates acceptance of risk by the insurance company for the perils contemplated.'
6. In Murali Agro (supra) when the learned counsel for the insurance company referred to some English cases, this Commission observed as under:
'The aforesaid principles laid down by the English courts would have no bearing to the policy in question. The policy, in the present case, is not a simplicitor ‘fire policy’ but a comprehensive policy covering various perils including fire. By taking additional premium, risk by one part of the exclusion clause is given insurance coverage, namely, for loss caused by its own fermentation, natural heating or spontaneous combustion.'
7. When the counsel for the insurance company relied upon the slip attached to the insurance policy covering the spontaneous combustion submitted that even for spontaneous combustion there should be fire, this Commission rejected the contention observing as under:
'Firstly, it is to be stated that under item No.8 of the policy spontaneous combustion is covered for which additional premium is recovered. Secondly, the aforesaid term is apparently vague. It provides that for consideration of additional premium the company agrees-
‘notwithstanding what is stated in the printed exclusion of this policy shall extend to include loss or damage by fire only of or to the property insured caused by its own fermentation, natural heating or spontaneous combustion.’
By a bare reading of this clause, it would be difficult to conclude that what it exactly conveys. It is required to read down as-
‘this policy shall extend to include loss or damage by fire only’, or ‘loss or damage to the property insured caused by its own fermentation, natural heating or spontaneous combustion’.
In any case, if it was intended to cover only loss or damage by fire, there is no question of taking additional premium, because the first part of the policy itself provides that it gives coverage by loss or damage by fire.'
8. While allowing the complaint in Murali Agro (supra) this Commission held as under:
'Further, it is settled law that contract of insurance is based upon good faith. It is the duty of the insurers and their agents to disclose all material facts within their knowledge since obligation of good faith applies to them equally with the assured [Re. M/s. United India Insurance Co. Ltd. Vs. M.K.J. Corporation, III (1996) CPJ 8 SC = (1996) 6 SCC 428]. If the insurance coverage was not extended even by taking additional premium for the damage caused by spontaneous combustion/natural heating which may not result in fire, it ought to have been clearly stated.
Secondly, if the contract is vague, benefit should be given to the insured. The exclusion term of the insurance policy must be read down so as to serve the main purpose of the policy that is to indemnify the damage caused due to fire [(B. V. Nagaraju Vs. M/s. Oriental Insurance Co. Ltd.) II (1996) CPJ 28 (SC) = (1996) 4 SCC 648)].
9. In view of the aforesaid decisions of this Commission, it cannot be disputed that there is ignition even in spontaneous combustion and consequently, we hold that damage/loss, due to spontaneous combustion was covered under the policy, irrespective of whether fire was ignited in the process or not.
10. Clause 3 of the General Conditions contained in the policy to the extent relied upon by the insurance company, reads as under:
'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 policy.
(b) If the building insured or containing the insured property becomes unoccupied and so remains for a period of more than 30 days.
The contention of the insurance company was that since the factory remained closed, for about six months without any endorsement from the insurance company, the insurance company cover ceased to exist.
In our view the reliance upon the aforesaid clause is solely misplaced. There is no material before us from which we may conclude that the risk of loss or damage to the insured property increased on account of the shutdown of the plant for about six months. Neither the surveyor stated so in its report nor did the insurance company claim so in the repudiation letter. There is no material before us to prove that had the factory not been shutdown, the risk on account of loss by spontaneous combustion would have been less. Moreover, this is the case of the complainant company that even during the period the factory remained shutdown they had taken adequate precautions by sprinkling water on the stock kept therein. This is an indicator that even during the shutdown period some employees of the company who may not be ‘workmen’ within the meaning of Industrial Disputes Act were on duty in the factory premises. Therefore, neither the factory premises was wholly unoccupied during the period of loss occurred nor do we have any material to show that the risk of loss or damage to the material had increased on account of the plant having been shut down for about six months. Had the insurance company or its surveyor taken such a stand during evaluation of the claim the complainant company would have got an opportunity to satisfy it that the risk of loss/damage to the stock kept in its factory had not increased on account of shutdown for about six months.
11. Clause 6(i) of the General Condition of the Policy reads as under:
'On the happening of any loss or damage, the insured shall forthwith give notice thereof to the company and shall within 15 days after the loss or damage, or such further time as the company may in writing allow in that behalf, deliver to the company.
(a) A claim in writing for the loss or damage containing as particular an account as may be reasonably practicable of all the several articles or items or property damaged or destroyed, and of the amount of the loss or damage thereto respectively, having regard to their value at the time of the loss or damage not including profit of any kind.
(b) Particular of all other insurances, if any:
The insured shall also at all times at his own expense produce, procure and give to the company all such further particulars, plans, specification, books, vouchers, invoices, duplicates or copies thereof, documents investigation reports (internal/external), proofs and information with respect to the claim and the origin and cause of the loss and the circumstances under which the loss or damage occurred, and any matter touching the liability or the amount of the liability of the company as may be reasonably required by or on behalf of the company together with a declaration on oath or in other legal form of the truth of the claim and of any matters connected therewith.No claim under this policy shall be payable unless, the terms of this condition have been complied with'.
12. This is the case of the complainant that when the plant was reopened on 10-08-2006 for manufacturing purposes it was noticed by its employees that some amount of stock of coal and lignite had been diminished/destroyed by spontaneous combustion. This is also an admitted case that information of the said loss was given to the insurance company, for the first time vide letter dated 12-09-2006. In terms of clause 6(i) of the policy conditions, the complainant was required to give notice of the loss/damage to the insurance company as soon as the said loss/damage was noticed by its employees on 10-08-2006. By intimating the loss to the insurance company for the first time on 12-09-2006, the complainant company committed breach of the condition incorporated in clause 6(i).
13. The complainant has not given any explanation at all for the delay in intimating the loss / damage to the insurer. The complaint was opposed, inter-alia on the ground that the complainant violated the condition No. 6(i) of the policy by sending intimation after considerable delay of over a month. Even thereafter, no attempt was made by the complainant to explain, while leading its evidence, as to why the intimation of the damage / loss was not given to the insurance company as soon as the said loss / damage came to its notice. The expression ‘forthwith’ has been described in Oxford Dictionary to mean 'immediately; at once'. The intimation given after more than one month of acquired knowledge of the loss / damage, cannot by any stretch, be said to be immediate or at once. Thus, not only did the complainant fail to intimate the loss forthwith to the insurance company, it also failed to give any explanation for the abnormal delay of more than one month in giving the said intimation to the insurance company.
14. In Oriental Insurance Co. Ltd. Vs. Parvesh Chander Chadha, Civil Appeal No.6739 of 2010 decided on 17.08.2010, the Hon’ble Supreme Court, inter-alia observed as under:
'In terms of the policy issued by the appellant, the respondent was duty bound to inform the theft of the vehicle immediately after the incident. On account of delayed intimation, the appellant was deprived of its legitimate right to get an inquiry conducted into the alleged theft of the vehicle and make an endeavour to recover the same. Unfortunately, all the consumer foras omitted to consider this grave lapse on the part of the respondent and directed the appellant to settle his claim on non-standard basis. In our view the appellant cannot be saddled with the liability to pay compensation to the respondent despite the fact that he had not complied with the terms of the
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policy'. In Suraj Mal Ram Niwas Oil Mills (P) Ltd. Vs. United India Insurance Co. Ltd. & Anr. 2011 CTJ 11 (SC) (CP), the Hon’ble Supreme Court, inter-alia observed that the terms of contract of insurance have to be strictly construed and no exception can be made on the ground of equity. In United India Insurance Co. Ltd., Vs. Harchand Rai Chandan Lal, 2004 CTJ 1018 (SC) (CP), the Hon’ble Supreme Court held that the terms of the policy to be construed as it is and we cannot add or subtract something. 15. The purpose of requiring the insured to give immediate intimation of the loss / damage to the insurance company is to give an opportunity to the insurer to investigate the claim without any loss of time and before an unscrupulous insured gets opportunity to temper with the evidence which is available immediately on occurrence of the loss / damage. The possibility of tempering with the evidence cannot be ruled out in a case where there is an abnormal delay in intimating the loss / damage to the insurance company and at the same time, there is no plausible explanation for the said delay. 16. It was pointed out by the learned counsel for the complainant that the delay in intimating the loss to the insurer was not the reason for repudiation of the claim and therefore, the insurance company cannot be allowed to take the said plea by way of its reply to the complaint. We however, cannot accept the contention. In our view a plea based on admitted facts can be allowed to be taken for the first time in the reply filed by the insurance company since, neither any prejudice is caused to the insured nor can it be said that he is taken by surprise on account of such a plea can be taken in the reply. Moreover, as noted earlier, even in its evidence, the complainant gave no justification for the delay in intimating the loss to the insurance company. 17. Since, the complainant contravened Clause 6(i) of the General Conditions contained in the policy, no claim under the said policy is payable to it. 18. For the reasons stated hereinabove, we hold that the complainant is not entitled to any reimbursement from the opposite party. The complaint is therefore dismissed. No order as to costs.