Case Note & Summary
The dispute arose from a fire accident on 12.12.1998 that destroyed the '20 Hi Cold Rolling Mill' of the insured, M/s Bhushan Steel and Strips Ltd (later Tata Steel Ltd). The insured had a comprehensive insurance policy with New India Assurance Company Ltd (NIACL) covering machinery and equipment, including a Reinstatement Value Clause. The insured claimed Rs.35.08 crores. NIACL appointed surveyors who submitted a final report on 11.12.2001 assessing loss at Rs.19.55 crores on replacement basis and Rs.13.51 crores on depreciation basis, initially recommending 32% depreciation. However, after NIACL's letter dated 12.11.2002, the surveyors revised depreciation to 60%, reducing the net liability to Rs.7.88 crores. NIACL had already paid Rs.4,92,80,905/- as interim payment. The insured did not reinstate the 20 Hi mill but installed a different 6 Hi Cold Rolling Mill and sought full reinstatement value. The NCDRC partly allowed the complaint, fixing depreciation at 32% and awarding Rs.13,51,27,000/- with interest. Both parties appealed to the Supreme Court. The Supreme Court held that the insured failed to reinstate the damaged property within the extended time, thus the Reinstatement Value Clause became inoperative. Consequently, the claim was to be settled on market value/depreciation basis. The court restored the surveyors' final assessment of 60% depreciation, reducing the award to Rs.7.88 crores (already paid), and set aside the NCDRC's order. The appeals by the insured were dismissed.
Headnote
A) Insurance Law - Reinstatement Value Clause - Interpretation - The Reinstatement Value Clause in an insurance policy requires the insured to replace or reinstate the damaged property within 12 months (or extended period) to claim full replacement cost; otherwise, the claim is settled on market value/depreciation basis. The court held that the insured's failure to reinstate the 20 Hi Cold Rolling Mill and installation of a different 6 Hi mill disentitled it to reinstatement value. (Paras 17-18, 20-21) B) Insurance Law - Depreciation - Surveyor's Report - The surveyors initially recommended 32% depreciation but revised to 60% after insurer's letter. The NCDRC's rejection of the revised rate was erroneous as the insured did not reinstate the property. The Supreme Court restored the 60% depreciation as per the final survey report. (Paras 14, 22-23) C) Consumer Protection Act, 1986 - Consumer Dispute - Insurance Claim - The NCDRC partly allowed the complaint awarding Rs.13,51,27,000/- with interest. The Supreme Court set aside the order and directed payment of Rs.7,88,00,000/- (already paid) plus interest on the balance, if any, as per the policy. (Paras 4, 24)
Issue of Consideration
Whether the NCDRC was correct in fixing depreciation at 32% instead of 60% as assessed by the surveyors, and whether the Insured was entitled to reinstatement value despite not reinstating the damaged property.
Final Decision
The Supreme Court allowed the appeal of NIACL (Civil Appeal No. 2759 of 2009) and set aside the NCDRC order dated 05.08.2008 and the rectification order dated 29.08.2008. The court held that the insured is entitled to Rs.7,88,00,000/- (already paid) and any balance with interest as per policy terms. The appeals by the insured (SLP(C) No. 10001 of 2009 and Civil Appeal Nos. 5242-5243 of 2009) were dismissed.
Law Points
- Reinstatement Value Clause
- Depreciation
- Insurance Claim
- Consumer Protection Act
- 1986
- Surveyor's Report
- Indemnity
