Sikka Papers Ltd vs National Insurance Co. Ltd. & Ors

2. The facts from which the controversy arises are these:

3. On December 25, 1999, the said generating set broke down and it could not start again despite efforts. The concerned officers of the insurer were intimated in this regard by the complainant and they were requested for arranging immediate survey of the insured generating set. The first surveyor appointed by the insurer is said to have completed his inspection on December 26, 1999 and advised the complainant to send the engine to the authorized repairers viz., Cumins Diesel Sale and Service (India) Limited, Pune. On December 30, 1999, another surveyor is said to have inspected the diesel generating set and identified the damages and the complainant with the consent of the 2 insurer, sent the diesel generating set for repairs to authorized repairers at Pune. The authorized repairers gave the estimate of expenses of repairs to the tune of Rs.27,00,395/- and repaired the diesel generating set. The complainant is said to have paid Rs. 25,00,000/- to the repairers.

4. The case of the complainant is that all bills acquired and directed by the insurer and their appointed surveyors and as required by the policy were handed over to the insurer and the complainant was told that the actual expenses incurred by them in the repairs of the diesel generating set as well as reinstatement charges would be paid but later on they agreed to reimburse Rs.8,07,110/- only. Constrained thereby, the complainant approached the National Commission and claimed a sum of Rs.25,00,000/- towards repairs of diesel generating set; Rs.10,00,000/- for mental harassment and damages along with interest and costs. The complainant alleged that the insurer failed to discharge their obligations under the insurance policy and with mala fide intention to defeat and delay its legitimate claim, adopted all unwarranted and illegal devices.

5. The insurer resisted the complaint and set up the plea that claim of Rs.8,07,110/- was accepted as per the surveyor's report dated May 15, 2000; the surveyor considered the damage 3 caused as a result of the accident to the various parts of the diesel generating set and wherever he found that replacement was required, he provided for the same. The insurer stated that the surveyor assessed the damages on the basis of only those items which were affected in accidental damage and the balance items not following the scope of the policy were disallowed. It was the case of the insurer that the parts which did not suffer any damage as a result of accident were not liable to be replaced at the expense of the insurer. The insurer also averred that the surveyor in its report dated May 15, 2000 after considering the damage caused to the diesel generating set has allowed amounts for carrying out the necessary replacement of parts damaged in accident after deducting the depreciation. The deduction at the rate of 25.71% as under-insurance was also sought to be justified. The insurer denied the claim towards mental harassment.

No deduction shall be made for depreciation in respect of parts replaced except those with limited life but the value of any salvage will be taken into account if the cost of repairs as detailed herein above equals or exceeds the actual value of the 8 machinery insured immediately before the occurrence of the damage the settlement shall be made on the basis provided for in (b) below.

b)......................................... ........................................... ........................................... ........................................... ........................................... If the sum insured is less than the amount required to be insured as per Provision 1 hereinabove the Company will pay only in such proportion as the sum insured bears to the amount required to be insured. Every item is more than one shall be subject to this condition separately.

11. It has been argued on behalf of the complainant that the insured must be reimbursed for the entire repairs costs incurred by it in repair of diesel generating set since as per insurance policy, the insurer was responsible for the payment of any sort of loss or reinstatement or repair and indemnify the insured in all respects. Relying upon the policy, it was submitted that it was the duty of the insurer to pay the necessary expenses incurred to restore the damaged generating set to its former state and the cost of dismantling and erection etc. We find it difficult to accept the aforestated contention since it overlooks the General Exceptions incorporated in the policy that provide that the insurer shall not be liable under the policy in respect of deterioration of or wearing away or wearing out of machine caused by or naturally resulting from normal use or exposure. In other words, the policy 9 does not provide for protection against wear and tear that the machinery had undergone and that the insured may have chosen to replace. The provision of `sum insured' viz., the cost of replacement of insured property by new property of the same kind and same capacity is subject to the exception that repair or replacement shall not extend to the machinery or parts which have undergone normal wear and tear due to its use and exposure. In terms of the Machinery Insurance Policy taken by the insured, the insurer is required to reimburse the insured to the extent of moneys spent on repairs or replacement of the machinery to the kind of position that it was before the incident of damage.

(vide Page 1, Sr.No.1 of Subject invoice) Add 4% Work contract Tax Rs. 55,235.83

Rs.14,36,131.35 The subjects Kit -Crank Shaft is comprising of set Main Bearings & connecting Rod Bearings, the reasonable total value for them is taken at Rs.1,35,131.35. Less Reasonable cost for set of main bearings & Connecting rod bearings Rs. 1,35,131.35

Rs.13,01,000/-

Thus , bifurcation of costs are as under:-

Less additional policy excess for the Crank shaft as per endorsement ..20% Rs. 2,60,200 12

Net Loss Rs.10,40,800 B) Assessment for set of main bearings & connecting rod bearings:-

15. The parts which had suffered due to wear and tear on account of constant use, although replaced could not form part of 13 claim for reimbursement under the terms of policy and, therefore, surveyor in its report dated May 15, 2000 cannot be said to have wrongly rejected such claim. It is true that surveyor's report is not the last word but then there must be legitimate reasons for departing from such report. In our view, the complainant has failed to show any reason justifying rejection of surveyor's report dated May 15, 2000.

re : question (two)

The expression "average" is explained thus:

18. We are, thus, of the view that the National Commission did not commit any error in accepting the Surveyor's report dated May 15, 2000 as the assessment made there-under is proper and in accordance with the provisions of the policy. 15

19. By way of footnote, we may observe that claim of Rs.10,00,000/- made by the complainant for mental harassment is wholly misconceived and untenable. The complainant is a company and, therefore, claim for mental harassment is not legally permissible. It is only the natural person who can claim damages for mental harassment and not the corporate entity.

20. In all, we find that the consideration of the matter by the National Commission does not suffer from any legal flaw justifying interference by us.

21. Appeal is, accordingly, dismissed with no order as to costs.

......................J (D.K. Jain) ......................J (R.M. Lodha) New Delhi, May 29, 2009 16