Introduction
In a landmark ruling that underscores the importance of insurer accountability and service diligence, the National Consumer Disputes Redressal Commission (NCDRC) has held Oriental Insurance Company Ltd. liable for wrongfully repudiating an insurance claim despite the insured fulfilling all required obligations.
The case—A.K. Rubber vs. Oriental Insurance Company Ltd. (Consumer Case No. 2750 of 2017)—involved a substantial claim of over ₹2.28 crore for damages caused by a fire, which the insurer had denied citing a location discrepancy in the policy. The Court’s decision, delivered on February 13, 2023, provides clarity on policy interpretation and the scope of service deficiency under consumer protection laws.
Background and Key Facts
The complainant suffered significant property damage due to a fire at its factory located in Sarigam, Umbergaon, on 16 February 2014. Seeking indemnification, the firm filed a claim of ₹2,28,14,988, which was duly assessed and validated by the appointed surveyor.
However, Oriental Insurance rejected the claim on the grounds that the insurance policy—renewed in 2013—covered a different location (Dabhel, Daman) and not the actual site of the fire. The insurer cited this as a violation of policy conditions and claimed the risk at the fire site was never insured.
The twist? The factory had shifted to Sarigam in 2012, and while renewing the policy, the insured’s banker, Oriental Bank of Commerce, had explicitly requested coverage for the new location. Due to an internal oversight, the insurer issued the policy for the old address.
Issues Before the Court
- Whether the repudiation of the claim was justified on the basis of the location mismatch.
- Whether the complainant had breached policy conditions.
- Whether the insurer’s conduct amounted to deficiency in service.
Court’s Findings
1. Repudiation Was Invalid
The Court observed that the insurer was informed about the change in factory location at the time of renewal, and the mistake in issuing coverage for the incorrect address was entirely on the part of the insurer. The insured had acted in good faith and fulfilled its obligation by routing the request through its banker.
2. No Violation of Policy Conditions
The NCDRC rejected the insurer’s reliance on Clauses 1 and 3 of the Standard Fire and Special Perils Policy, noting that there was no misrepresentation or material change in risk from the complainant’s side.
3. Deficiency in Service Established
The insurer’s failure to issue a correct policy despite being informed, along with its refusal to settle the claim, was held to constitute deficiency in service under the Consumer Protection Act.
4. Reliance on Precedent
The Court cited LIC v. Rajiv Kumar Bhasker and Gurmel Singh v. National Insurance Co. Ltd., reaffirming that an insurer is liable for the actions and communications of its agents, including bankers.
Final Order
The NCDRC directed Oriental Insurance Company Ltd. to:
- Pay ₹2,28,14,988 as assessed in the final survey report dated 09.09.2014,
- Pay interest at 9% per annum from 16.08.2014 (six months after the date of loss) until the actual date of payment,
- Comply with the order within two months from the date of judgment.
Conclusion
This judgment serves as a crucial reminder for insurers to exercise due diligence in policy issuance and renewals, especially when acting through third-party agents like banks. It also reiterates the judiciary’s commitment to protecting policyholders from unjust repudiations arising from procedural errors not attributable to them.
For businesses and insured entities, the case highlights the importance of maintaining clear communication with insurers and preserving all documentation related to policy renewals and endorsements.