Insurance Claim- Chain Of Events Leads To The Conclusion That Fire Accident Caused Damage: SC Holds Claimant Entitled To More Than Rs 2 Crore

While emphasizing on the fact of the present nature to arrive at the conclusion as to whether the corrosion could happen within a time period of 4 to 5 hours and in that regard, the NCDRC considering that aspect based only on the definition of corrosion in general terms is not justified, the Supreme Court held that the Appellant would be entitled to the amount of Rs.2,26,61,376/- minus the sum of Rs.16,19,209/- which was earlier offered by the Insurance Company and was received without prejudice during the pendency of the proceedings, with interest if any that has been received.

Noticing that except for the MTDC assuming that the corrosion has happened over a period of time, all other reports suggest that the corrosion has happened due to the spraying of water to extinguish the fire, a Two Judge Bench of Justice AS Bopanna and Justice Dipankar Datta observed that the chain of events will lead to the conclusion the fire accident has caused the damage.

AP & J Chambers appeared for the Appellant, whereas, Advocate Varinder Kumar Sharma appeared for the Respondent.

Going by the background of the case, the Appellant, engaged in printing high technology adhesive labels to be used mainly by drug manufacturers, had imported ‘Aquaflex’ brand of machinery from Canada and ‘GallusArsoma’ from Switzerland, which are sophisticated printing machinery. In order to insure the said machinery against any damage and loss, the Appellant had secured a ‘Standard Fire and Special Perils’ Policy from the Respondent insurance company for a total cover of Rs. Three crores Thirty-five lakhs thirty thousand. Since there was fire mishap in the factory and certain portions got destroyed, the Appellant filed a claim with the Respondent.

The surveyor appointed by Respondent limited the reimbursement to Rs.16,15,606/- which was declined by the Appellant, who then filed a consumer complaint before the National Consumer Disputes Redressal Commission (NCDRC) claiming a sum of Rs.5,20,91,724/-. The NCDRC concluded that the rusting to the machinery had taken place over several years and not due to one incident of fire and the water sprayed for its extinguishment. In that view, the NCDRC limited the relief to what was apportioned by the Respondent’s surveyor. Hence, present appeal.

After considering the submissions, the Apex Court noted that the entire consideration made by the Respondent before admitting only a portion of the claim and the ultimate consideration made by the NCDRC appears to be on the narrow issue regarding the corrosion of the machinery and in that regard as to whether the corrosion can happen within a short duration of 4 to 5 hours.

Thus, the Bench observed that such consideration in the instant facts was misdirected and therefore resulted in the wrong conclusion.

The Bench also admitted that the fire accident had occurred during the subsistence of the policy and that such accident was accidental and had caused damage to the property of the appellants including to the machinery in question.

“The photographs relating to the machines along with report of the surveyor would indicate that there is rusting on the machinery. The fact that the said machinery is highly sophisticated imported machinery for precision printing cannot be disputed. In such situation, when, due to such accidental fire and to extinguish such fire the assistance of the fire brigade was called for and even as per the report of the surveyor the fire brigade had sprayed water and such other fire extinguishing material over the machinery which was placed in the room which caught fire and the fire brigade has made effort between 8.15 am to 10.30 am, the damage to the machinery has occurred”, added the Bench.

At the same time, the Apex Court that the Respondent has not tendered any evidence to indicate that the same machinery in fact is being used by the Appellants subsequent to the fire accident either in the same manner in which it was being used prior to the fire accident or being used after repairs.

Accordingly, the Bench partly allowed the appeal and concluded that the claim limited by the Appellant at this juncture is the actual loss suffered by the Appellant.

Cause title: M/s Super Label Mfg. Co. vs. New India Assurance Company Limited

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