Insurer can't alter loss assessed by surveyor

The National Commission concluded a surveyor's report must be given due importance unless there are valid reasons for disagreeing with it

Shivalik Container, a private limited company, was a manufacturer and seller of corrugated boards and boxes to various industrial houses. It had its factory in five sheds. Of these one was used to store raw materials and semi-finished goods, while the remaining four had manufacturing equipment and machinery.

The company had always been meticulous about maintaining insurance coverage right from its inception in 1997. It had two policies from Oriental Insurance. While both covered buildings, plant and machinery, and stocks, one of the policies also covered “other contents”.

A major fire broke out on December 9, 2010, resulting in extensive damage to the property. The company informed both the authorities and the insurer and also lodged a claim. The insurer initially appointed a preliminary surveyor. Subsequently, a final surveyor was appointed who submitted his report, assessing the loss at Rs 1.48 crore for one unit and Rs 3 crore for another unit, totaling Rs 4.48 crore. The surveyor also recommended an immediate interim release of Rs 1 crore “on account”. The surveyor subsequently reassessed the loss and pegged it at Rs 3.9 crore.

The insured gave its consent, agreeing to accept the revised amount, so that there would not be any delay in disbursing the claim amount. However, the insurer did not settle the claim. Instead, a year later, it paid only Rs 2,66,43,836 as full and final settlement of the claim. The insured then asked for details of how the offered amount was calculated. As it found the insurer’s explanation unsatisfactory, it withdrew its consent. It also pointed out that the delay and non-settlement of the claim had resulted in further loss of Rs 1.7 crore.

The insured filed a complaint before the National Commission for a direction to settle the claim. It also claimed compensation and costs. The insurer contested the case, contending that the claim was exaggerated. It argued that the surveyor had ignored well established practical checks, and so its report was not acceptable. It also stated that dismantling charges for removal of damaged machinery are not payable, and argued that the imported Chinese machinery had become obsolete. It justified its decision to offer Rs 2,66,43,836 as claim with these arguments.

The National Commission observed that the law mandates that a claim exceeding Rs 20,000 must be assessed only by a surveyor licensed by the Insurance Regulatory and Development Authority of India (Irdai). If the insurer does not agree with the surveyor, it can call for an explanation or clarification regarding the survey report, but cannot unilaterally appoint another surveyor. If it feels the need for a second surveyor, it must approach the Irdai. Only the regulator has the power to appoint another surveyor. The Commission observed that an insurer is not licensed to play the role of a surveyor and it is illegal on an insurer’s part to reassess the claim.

The Commission concluded a surveyor's report must be given due importance unless there are valid reasons for disagreeing with it. In case of the latter, the prescribed procedure must be followed of approaching the IRDAI, giving proper reasons, and requesting the appointment of a second surveyor. The Commission concluded that it would go by the surveyor’s final recommendation assessing the loss at Rs 3,90,69,066.

Accordingly, by its order of November 17, 2021, delivered by Justice Deepa Sharma for the bench along with Subhash Chandra, the National Commission ordered the claim to be settled at Rs 3,90,69,066 along with 9 per cent interest from the date of filing of the complaint. In addition, Rs 1 lakh was awarded as litigation costs.

The writer is a consumer activist