A contractor's all-risk policy not only covers the contract work but also even the workmen, as recently held by the Maharashtra State Commission in the case of Sharad Construction v/s Royal Sundaram.
Sharad Construction was engaged by Bennett, Coleman & Co (BCC) as its contractor to construct a printing press at Ahmedabad. Some of the material was to be supplied by BCC, while certain items were to be procured by the contractor. The contractor obtained a Contractor's All Risk Policy (CAR) from Royal Sundaram Insurance, for Rs 2.5 crore.
On November 8, 2004, while construction work was on, the casting concrete slab collapsed. Beside material damage, eight workers died. The next of were paid Rs 2 lakh each, totalling Rs 16 lakh. The total loss came to Rs 65.22 lakh, for which an insurance claim was lodged.
The insurance company appointed a surveyor, who assessed the loss at Rs 11.03 lakh. The surveyor disallowed the claim for material supplied by BCC and the compensation paid to the next of kin.
The insurance company disbursed Rs 11.03 lakh as assessed by the surveyor. The contractor did not sign the settlement voucher, and instead filed a consumer complaint for the remaining amount, along with interest, compensation and costs.
The insurance company contested the complaint. It raised an objection that BCC, as the principal, had not been joined as a party to the complaint. The company argued acceptance of the amount disbursed would lead to an inference that the amount had been accepted in full and final settlement, and no further amount could be claimed. It was also argued that the policy did not cover the material supplied by BCC, or cover liability or workmen who died in the accident.
The Maharashtra State Commission observed the proposal for the policy had been signed by the contractor alone and hence, BCC as the principal was not a necessary party. The Commission held the contracter was entitled to file the complaint. On merits, the Commission agreed with the insurance company that the material supplied by BCC was not included in the risk covered. Hence, the loss for this material was not payable. The loss in respect of the remaining material had been settled by payment of Rs 11.03 lakh. So, the only issue in question would be whether the claim for the death of the workmen was covered or not, and if covered - to what extent.
The insurance company argued that third - party risk up to Rs 5 lakh covered under the policy would insure visitors or others passing by who might suffer an accident, and not extend to the contractor's own workmen. The Commission observed there was a difference between the legal liability to compensate under the Workmen's Compensation Act, and the contractual liability to pay compensation. The Commission held the amount paid to the next of kin of the workmen was payable under the policy. However, though an amount of Rs 16 lakh had been paid to the eight workmen, the risk covered under the policy was only Rs 5 lakh. The Commission held the amount paid as compensation to the workmen would have to be reimbursed. But would be restricted to the sum insured of Rs 5 lakh.
Accordingly, by its order of March, 9, 2016, delivered by Narendra Kawde for the bench with P B Joshi, the Maharashtra State Commission ordered the insurance company to pay Rs 5 lakh with nine per cent interest from May 9, 2006, onwards. A period of 45 days was given for compliance, or it would carry 12 per cent interest for the period of delay.
In addition, Rs 20,000 was awarded as litigation costs. Thus, compensation payable for accident to workmen is reimbursable under a CAR policy.
The author is a consumer activist
