Indiscriminate Appointment Of Surveyors By Insurance Companies To Get Favorable Report Violates IRDA Regulations: NCDRC

Brief Facts:

Timeless Jewels (“Jewel Shop”) was operating a business of manufacturing, wholesale, and retail sales of certified gold and diamond jewellery. To safeguard its business interests, it obtained a 'Jewelers Block Policy' from the National Insurance Co. Ltd. (“Insurance Company”), effective from 13.02.2015 to 12.02.2016, for a premium of Rs 2,14,936/-.

On 13.06.2015, a partner of the Jewel Shop travelled to Delhi in a car to purchase and finalize jewellery orders. In the afternoon, while the vehicle was stationed on Vishnu Mandir Marg in Karol Bagh, it was intercepted by an unknown individual. Subsequently, when the driver and the partner alighted from the vehicle to inspect it, they discovered that a bag containing jewellery had been stolen from the car. The incident prompted them to file an FIR with the local police, on the following day.

In response to the theft, the Jewel Shop promptly informed the Insurance Company about the incident on 15.06.2015. A surveyor was appointed to assess the situation. A claim amounting to Rs 18,11,097.57/- was filed, supported with relevant bills and invoices. However, on 04.09.2015, the police reported the case as "untraceable" before the Magistrate at Tis Hazari Court, Delhi. Despite the efforts made by the Jewel Shop and the subsequent legal proceedings, the claim was repudiated on 08.04.2016 by the Insurance Company. This decision was grounded on two clauses of the policy: Clause 10, alleging a failure of due diligence to prevent or mitigate loss, and Clause 5, stipulating that the vehicle containing the jewellery should not have been left unattended.

Feeling aggrieved, the Jewel Shop filed a consumer complaint in the District Consumer Disputes Redressal Commission, U.T. Chandigarh (“District Commission”). However, this case was later withdrawn and re-filed before the State Consumer Disputes Redressal Commission, U.T. Chandigarh (“State Commission”). The State Commission directed the Insurance Company to pay Rs. 9,87,425/- to the Complainant with 9% interest along with Rs. 20,000/- for litigation costs.

Dissatisfied by the amount of compensation granted by the State Commission, the Jewel Shop filed an appeal before the National Consumer Disputes Redressal Commission (“NCDRC”), praying for the reimbursement of the entire claim amount of Rs. 18,11,097.57/- along with Rs. 20 Lakh compensation for mental agony.

Observations by the NCDRC:

The NCDRC confirmed that a theft of the jewellery indeed occurred during transit on 13.06.2015. However, the claim was repudiated due to the violation of policy conditions, which required the insured to diligently secure the goods and prevent unattended situations. The NCDRC held that since the Jewel Shop did not contest the findings of the FIR regarding the theft of 1 gold chain and 5 diamond sets, the State Commission rightfully valued these items at Rs. 9,87,425/-.

Consequently, the Jewel Shop's contention to allow claims for items beyond those listed in the FIR was rejected. Reliance was placed on DLF Homes Panchkula Pvt. Ltd. vs D S Dhanda, [CA nos. 4910-4941 of 2019], where it was held that there cannot be multiple compensations for a single act of default. Therefore, the Jewel Shop's claim for Rs. 20 Lakhs as compensation for mental agony was also rejected by the NCDRC.

The NCDRC also noted that the Insurance Company appointed 2 surveyors for the claim, apart from a loss assessor. It was held that even though it is mandated to appoint a surveyor in insurance claims exceeding Rs. 20,000/-, insurance companies cannot indiscriminately appoint surveyors solely for the object of a favourable report. It was observed that the Insurance Company relied on the report prepared by the second surveyor and failed to give any reason for his appointment. This violated IRDA Regulation No. 64. Therefore, the Insurance Company's repudiation based on the second surveyor's report was deemed unsustainable.

In light of these observations, the order pronounced by the State Commission was upheld and the appeal was dismissed.

Case Title: National Insurance Co. Ltd. vs Timeless Jewels

Case No.: First Appeal No. 1600 of 2017

Advocate for the Appellants: Ms Neerja Sachdeva

Advocate for the Respondents: Mr MK Dua and Mr Inderjit Kaushal