SUPREME COURT HOLDS CLAIMANT ENTITLED TO INSURANCE COVERAGE FOR LOSS SUSTAINED DUE TO A FIRE ACCIDENT

A two-Judge Bench of the Supreme Court, comprising of Justice A.S. Bopanna and Justice Dipankar Datta, passed a Judgment dated 16.05.2023, in the case of M/s Super Label Mfg. Co. Vs. New India Assurance Company Limited, Civil Appeal No. 3673 of 2015 and allowed the Appellant’s insurance claim against the loss suffered by the Appellant due to a fire accident at its Factory.

Background:

i) In the present case, one, Super Label Mfg. Co. (Appellant) is an actively involved registered partnership firm specializing in the production of high-technology adhesive labels primarily for drug manufacturers. For their business, the Appellant proactively imports sophisticated printing machinery pertaining to various brands including ‘Aquaflex’ from Canada and ‘Gallus-Arsoma’ from Switzerland (Machinery).

ii) As the Machineries were branded and high-valued products, hence, the Appellant obtained a ‘Standard Fire and Special Perils’ Insurance Policy from New India Assurance Company Limited (Insurer). The said Policy provided a comprehensive coverage of Rs. 3,35,30,000/- (Rupees Three Crores Thirty-Five Lakhs and Thirty Thousand only) that was valid from 15.05.2003 to 30.08.2004.

iii) On 28.02.2004, the Appellant’s Factory was struck by a devastating fire outbreak on around 7.50 AM, leading to a significant damage to both the Machinery and other valuable assets.

iv) In pursuit of rightful compensation, the Appellant promptly filed a Claim with the Respondent-Insurer for Rs. 3,02,75,000 and informed M/s Loss Prevention Association of India Ltd., thereby, requesting an investigation.

v) The Respondent-Insurer appointed a Surveyor to assess the loss, who initially admitted the loss to be Rs. 1,81,35,810/- but later limited the reimbursement to Rs. 16,15,606/-.

vi) Aggrieved, the Appellant filed a Consumer Complaint before the National Consumer Disputes Redressal Commission (NCDRC) in CCN-21-2006 claiming the amount of Rs. 5,20,91,724/- from the Respondent-Insurer for the loss sustained by the Appellant owing to the fire accident in its Factory along with compensation.

vii) The NCDRC considered the Surveyor’s Report and concluded that the rusting of the Machinery occurred over a period of time and not solely due to the fire incident. Thus, the NCDRC, vide Order dated 24.02.2015, limited the relief to Rs. 16,19,209/- with interest at 12% per annum.

Supreme Court Observations

Aggrieved, the Appellant filed Civil Appeal No. 3673 of 2015 against the NCDRC Order dated 24.02.2015. The Apex Court passed a Judgment dated 16.05.2023 and made the following observations:

1) That the Surveyor’s Report highlighted the damage caused by fire and water, including extensive rusting of the Appellant’s Machinery. Furthermore, various reports from experts and engineers strengthened the Appellant’s Claim regarding the significant damage caused to the Appellant’s Machinery.

2) That the Insurance Policy included coverage in respect of destruction or damage due to fire. Further, the fire accident in the present case, occurred during the subsistence of the Policy and based on the various experts’ Reports, the said accident caused significant damage to the Appellant’s Machinery and other valuable assets at its Factory and the said damage was beyond repair.

3) Further, the Appellant established that they were using the Machinery prior to the fire accident and that there was no complaint regarding the quality of printed labels from the customers prior to such accident.

4) Furthermore, the Respondent-Insurer failed to produce any evidence to show that the Appellant has used the damaged Machinery after the accident.

5) Hence, based on the experts’ Reports, proper use of Machinery prior to the fire accident, the significant damage caused to the Appellant’s Properties by the fire accident that has rendered the Machineries irreparable and unusable, establish the fact that the damage and rusting of the Machineries, was not as a result of any corrosion that may have happened prior to the accident, but is a result of the fire accident.

Conclusion

Thus, based on the aforesaid observations, the Supreme Court held that the Appellant is entitled to the actual loss suffered, which amounts to Rs. 2,26,61,376/-, less any amount already received from the Respondent-Insurer, with 6% interest per annum from the date of filing of the Complaint before the NCDRC. As a result, the Appeal was allowed and the NCDRC Order dated 24.02.2015 was set aside.

 

Udit Krishna

Associate

The Indian Lawyer