Courts Cannot Relax Terms and Conditions of Insurance Policy
The article is on National Consumer Disputes Redressal Commission New Delhi First Appeal No. 12 of 2016 M/s. Dharmanandan Diamonds Pvt. Ltd. Vs. Senior Divisional Manager, The New India Assurance Co. Ltd.
Facts
The facts of the case are that the complainant, M/s.Dharmanandan Dismonds Pvt. Ltd., gave diamonds to one commission agent, Mr. ArjanbhaiMangukia, on the basis of issuing a “Janghad slip” on June 10, 2002. However, on June 11, 2002, the police notified the family that Mr. Arjanbhai Mangukia had been slain and that he did not have the diamonds. The complaint was filed with the police on June 11, 2002. The Insurance Company was also notified of the occurrence on 12.6.2002. Because the police failed to file a FIR, a criminal complaint was filed with the Additional Chief Metropolitan Magistrate. The Insurance Company received a claim for INR 78,62,388/-. The insurance company hired a surveyor, who determined that the loss was worth INR 55,19,316/-.
On July 19, 2007, the Insurance Company denied the claim for the following reasons:
- The lack of a safe at the Broker’s premises constitutes a significant breach of promise, since the loss might have been avoided if the diamond packets had been maintained in a conventional safe.
- The policy did not reflect the change of address. Because the entrustment was done from a new location, which was not protected by the policy, this is critical for the loss.
A COMPLAINT HAS BEEN FILED WITH THE STATE COMMISSION
After that, the complainant filed Consumer Complaint No. 40 of 2007 with the State Commission. The Insurance Company fought the case on the same grounds that the repudiation letter was sent. The State Commission, on the other hand, upheld the complaint and issued the following order:
- The complaint of the complainant is partially upheld.
- The Insurance Company is now directed to pay the petitioner Rs.55,19,316/- (fifty five lacs) In other words, $19316 with a 9% interest rate from the date of repudiation.
- The opposing insurance company is also directed to pay Rs.5000 as part of the complaint costs.”
NATIONAL CONSUMER DISPUTES RESOLUTION FORUM COMPLAINT
Both parties filed appeals against the State Commission’s ruling dated 30.10.2015 in complaint No.40/2007.
THE NCDRF
I listened to both parties’ expert counsel and looked through the record. For clarity, the parties are referred to as the complaint and the opposing party. According to the skilled counsel representing the opposing party/insurance company, commission brokers are protected by Section II of the policy, which includes the following warranty:-
“If the value of insured property with any of the people listed in Section II of the schedule exceeds Rs.2 lacs, it must be stored in a steel cupboard’s inbuilt locker. However, if the item is worth more than Rs.10 lacs, it must be kept in a conventional safe.” The covered property was supposed to be stored in a standard manufacture safe lock, according to the aforesaid warranty. The commission agent was assassinated at his Mumbai home, and the insured item was never recovered. It signifies the insured property was not maintained secure as required by the guarantee agreement.
The learned counsel further claimed that it was incorrect to state that the commission agent was required to deliver the insured goods by the same day’s evening.
“10. Arjanbhai used to travel regularly in the morning from Surat to Mumbai and use to stay in Mumbai from Monday to Saturday and for his stay he rented one small Mezanine compartment, 306, 3rd Floor, Building No.42/276, Nanubhai Desai Marg, SuttarGali, Mumbai-4 and he used to stay there alone from Monday to Saturday and used to eat at different lodges and on Friday or Saturday evening he used to eat at different lodges THE FORUM noted that the complainant said in paragraph 6 of the complaint that the commission agent removes the diamond and returns it the same day by nightfall.
These two allegations in the lawsuit are in direct opposition to one another. Mr. Arjanbhai Mangukia, the commission agent, was living at the complainant’s apartment in Mumbai for five days and returning to Surat on weekends, according to the complaint. As a result, the commission agent could not have returned and returned the insured property on the same day. As a result, if the case property was to be maintained at the house of the commission agent in Mumbai for an extended period of time, it was necessary to be placed in the safe as per the warranty clause. Because this guarantee has been plainly broken, the claim is not valid.
Despite the fact that the surveyor has analysed the damage, he has made no observations about the warranty clause. Clearly, the surveyor has omitted his warranty statement on purpose or mistakenly, and so the fact of the surveyor’s loss estimate cannot be construed in favour of the complainant.
DECISION OF NCDRF
According to NCDRC, it appears that the State commission agreed with the complainant’s assertion that the warranty condition was impractical and could not be observed because the commission agent’s main job was to show the diamonds to prospective buyers, and thus it was not possible to keep the diamonds in a standard safe all of the time. The argument did not hold water in this case, according to the court, because the diamonds were delivered to the commission agent in Surat, from where the precious stones were transported to Mumbai, where the agent was scheduled to stay for a week.
Clearly, when the diamonds were to be kept at a residence, they were required to be kept in a locked safe of standard make as per the warranty condition of the policy, but there was no safe at the Mumbai premises of the deceased agent, it adds, “We are of the considered opinion that the warranty mentioned in the policy has been breached and therefore, the insurance claim is not payable,” by the insurance company, and the insurance company has rightfully repudiated the claim.
As you may be aware, warranties in an insurance policy are made up of terms and conditions that must be met in order for both parties to be bound by the insurance contract. It is critical to follow and fulfil warranties, since any failure to do so may result in the insurance company terminating or avoiding the contract. A warranty in an insurance policy is the insured party’s assurance that statements affecting the contract’s validity are accurate. A promissory guarantee is a declaration that refers to future events or facts that will remain true during the policy’s term.
A guarantee in which the insured agrees to do or not do something, or to meet a certain condition, and in which he confirms or denies the reality of a certain set of facts. A warranty is either an assurance by the assured that a certain action will be done or will not be done, or that a certain condition will be met, or it is a declaration that confirms or denies the reality of a certain state of facts. A warranty is a condition antecedent to the policy, and whether or not it is relevant to the risk, it must be met with the utmost precision unless waived.
