Cessation of work must be voluntary

Richardson & Cruddas had taken an insurance policy from National Insurance to cover the risks involved in the erection of electricity transmission lines between Durgapur and Jamshedpur, covering a distance of about 160 km. The policy was first taken in 1988 and then renewed from time to time with an enhancement of the coverage sum.

On September 6, 1992, some miscreants stole the conductors from a section of the transmission line. Another similar theft occurred on October 2, 1992. This caused substantial loss to the company. A first-information report (FIR) was lodged with the police.

The insurer was also intimated as the policy at the relevant time was for a cover of Rs 57 million for which a premium of Rs 299,073 was paid. National Insurance, which appointed a Commercial Investigation Bureau as its Surveyor, assessed the loss at Rs  600,959. The survey report issued on September 12, 1995, observed that the theft had resulted in cessation of work. The surveyor opined that the claim would not be payable as the policy excluded total or partial cessation of work.

After receiving the survey report, National Insurance kept silent for about three years and then sent a letter dated April 20, 1998, repudiating the claim on the ground that the theft had occurred during cessation of work which was excluded under the policy.

The complaint was filed under the Consumer Protection Act. The Nagpur District Forum held that the claim was wrongly repudiated and ordered the insurer to settle it by paying Rs 600,959 as assessed by the surveyor, along with nine per cent interest and costs of Rs 2,000. National Insurance challenged the order before the Maharashtra State Commission which dismissed its appeal. The insurer, then, questioned the order by filing a revision petition.

The National Commission observed that the sole question to be adjudicated was whether stoppage of work due to theft of parts could be termed as cessation of work. The Commission interpreted that cessation would mean closure of work, and would not include work being temporarily held up due to theft of certain parts or equipment. It held that both the surveyor as well as the insurance company had misinterpreted the exclusion clause to avoid paying the claim.

Accordingly, by its order of June 8, 2018, delivered by the Bench of Justice D K Jain and M Shreesha, the National Commission dismissed the insurer's revision and held that the claim was payable. It castigated the company for flouting the time limit prescribed by the Insurance Regulatory and Development Authority of India and taking three years to repudiate the claim even after receipt of the survey report. The Commission also questioned the logic of the insurer in protracting the case over two round of litigations covering two decades for a paltry claim. The Commission stated that the claim ought to have been graciously settled, as per the earlier judgments, rather than waste money on litigation which might cost more than the amount claimed.
(The author is a consumer activist)

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