Delay in repudiating insurance claim cannot be the only factor to presume deficiency in service
The Hon’ble Supreme Court in the matter of New India Assurance Co Ltd vs. Shashikala J Ayachi held that an
insurance company cannot be held guilty of deficiency of service merely if there is delay in processing/repudiating claims. The said matter was filed as an appeal against the order of the NCDRC, wherein the NCDRC had directed the appellant to make payment of the sum of Rs.16270000 assured under a Marine Insurance Policy to the Respondent together with interest @9% per annum.
The brief facts of the case are that the Insured had taken a policy of insurance covering risks to the mechanical sailing vessel MSV Sea Queen for the period 04-10-2010 to 03-10-2011. The respondent had alleged that, the subject matter of the insurance, the vessel, allegedly sank on 30-05-2011, due to bad weather and rough tides, which damaged the lower portion of the vessel. Consequently, the respondent lodged a claim with the appellant. The insurer did not either admit nor repudiate the claim over 2 years, which led the insured to file a complaint before the NCDRC
The NCDRC held that the claim was repudiated by the insurer more than 2 years after the incident. This inordinate delay constituted deficiency in service which was a violation of the Insurance Regulatory and Development Authority (Protection of Policyholders’ Interests) Regulations, 2000.
The Supreme Court held that the Consumer Forum has a limited jurisdiction to find out if there was any deficiency in service; it could not have allowed the complaint on the basis of sketchy pleadings supported by doubtful evidence. The delay on the part of the Insurance Company in securing the final survey report and the further delay in issuing the letter of repudiation, cannot per se lead to the complaint being allowed. The Supreme Court also held that the exact place of incident was not mentioned and the cause was stated vaguely, in the marine casualty report, also there were crucial contradictions by the captains of the insured and the rescuing ship as regard to the rescue time. The enquiry by the Surveyors with Muscat Radio revealed no SOS calls were made nor any were received. The Court held that the National Consumer Disputes Reddressal Commission was in error in allowing the complaint. There was no categorical evidence of any deficiency in service on the part of the appellant –Insurance Company. The delay in processing the claim and delay in repudiation could be one of the several factors for holding an insurer guilty of deficiency in service but it cannot be the only factor thus carving out an important point of
law.
In the backdrop of this judgement, another judgement to be taken note of is the judgement of the NCDRC in the case of Kochar Woollen Mills Pvt. Ltd and another Vs United India Insurance Co. Ltd and Others, wherein the complainant had a fire insurance policy and during the term of the policy a major fire broke out. The Respondent appointed a surveyor and on finding the report unfavourable the insurance company appointed 2 other surveyors. The Hon’ble National Commission held that the report of the first surveyor was based on the all records maintained by the complainant. And the second and third surveyors had not submitted their report, whereas it was easy for them to submit their report on the basis of verifications of the first surveyor, but they did not do this. Therefore the respondent is liable for deficiency in services as they have made delay in settling the claim as the insurance company had also not informed them of the reason for not accepting the first surveyors claim.
This case is clearly distinguishable from the case of New India Assurance Co Ltd vs. Shashikala J Ayachi that carved out an exception to the Kochar woollen Mills case, that the delay on the part of the Insurance Company in securing the Final Survey Report and the further delay in issuing the letter of repudiation, cannot not per se lead to the complaint being allowed. It has to be backed by a strong case that favours the insured and not filed on the basis of sketchy pleadings.
