Case Note & Summary
The appellant, Saurashtra Chemicals Ltd. (now Saurashtra Chemicals Division of Nirma Ltd.), purchased a standard fire and special perils policy from the respondent, National Insurance Co. Ltd., covering stock of coal and lignite stored in its factory compound. An additional premium of Rs. 59,200/- was paid to cover the risk of loss due to spontaneous combustion. The factory remained closed from 17.02.2006 to 09.08.2006 and reopened on 10.08.2006. Between 11.08.2006 and 20.08.2006, some stock was diminished or destroyed due to spontaneous combustion. Intimation was sent to the insurer on 12.09.2006. A surveyor was appointed on 18.09.2006, who submitted a report on 11.04.2007 assessing total loss at Rs. 63,43,679/-. The claim was repudiated on 27.07.2007 on the ground that spontaneous combustion did not result in fire, and thus the loss was not covered. The appellant approached the National Consumer Disputes Redressal Commission (NCDRC) seeking the claim amount, compensation, and interest. The NCDRC dismissed the complaint solely on the ground that the appellant had violated Clause 6(i) of the General Conditions of Policy, which required intimation within 15 days of the loss. The NCDRC did not accept the insurer's other grounds regarding coverage and factory closure. The Supreme Court considered two issues: whether the insurer waived the condition of timely intimation by appointing a surveyor, and whether the delay could be raised as a defence when not mentioned in the repudiation letter. The Court held that by appointing a surveyor without caveat and not mentioning delay in the repudiation letter, the insurer waived its right to rely on Clause 6(i). The Court distinguished the three-judge bench decision in Sonell Clocks and Gifts Ltd. v. New India Assurance Company Ltd., noting that the facts of Galada Power and Telecommunication Ltd. v. United India Insurance Company Ltd. were similar to the present case. The Court set aside the NCDRC order and remanded the matter for fresh consideration on merits, directing the NCDRC to decide the complaint afresh in accordance with law.
Headnote
A) Insurance Law - Waiver of Condition - Appointment of Surveyor - The insurer appointed a surveyor without any caveat or qualification after receiving intimation of loss. The surveyor assessed the loss. The repudiation letter did not mention any delay in intimation. Held that by appointing a surveyor and not raising the issue of delay in the repudiation letter, the insurer waived its right to rely on Clause 6(i) requiring intimation within 15 days. (Paras 13-18) B) Insurance Law - Repudiation Letter - Grounds of Defence - The repudiation letter only stated that spontaneous combustion did not result in fire and hence no liability. It did not refer to any delay in intimation. Held that the insurer cannot subsequently raise a new ground of defence not mentioned in the repudiation letter. (Paras 15-18) C) Insurance Law - Spontaneous Combustion - Coverage - The policy covered loss due to spontaneous combustion upon payment of additional premium. The surveyor assessed loss at Rs. 63,43,679/-. The NCDRC had rejected the claim solely on the ground of delayed intimation. The Supreme Court set aside the order and remanded the matter for fresh consideration on merits. (Paras 1-4, 19)
Issue of Consideration
Whether the respondent-insurer had waived the condition relating to delay in intimation and lodging of the claim by appointing a surveyor; and whether in the absence of any mention of delay in intimation in the repudiation letter, the same could be taken as a defence before the NCDRC.
Final Decision
The Supreme Court allowed the appeal, set aside the order of the NCDRC, and remanded the matter to the NCDRC for fresh consideration on merits in accordance with law.
Law Points
- waiver of contractual condition by conduct
- appointment of surveyor as waiver of delay in intimation
- repudiation letter must specify grounds for defence
- insurance policy interpretation
- spontaneous combustion coverage
