Insurance Company Penalised For Denying Claim On Technical Grounds

New Delhi, Oct 26 (KNN) The State Consumer Disputes Redressal Commission, Delhi has ruled against New India Assurance Company for deficiency in service, emphasising that insurers should not reject legitimate claims on technical grounds.

The bench, comprising Judicial Member Ms Pinki and Member Ms Bimla Kumari, found the insurer liable for failing to promptly correct address details in a policy and subsequently denying a claim.

The case emerged when an export company, which had obtained multiple insurance policies including Rs. 1 Crore coverage for stock, faced difficulties after a fire incident. 

The policy contained incorrect premises details, showing the location as first floor in Gurgaon instead of ground floor in New Delhi. 

Despite the complainant's early notification of these errors and receiving a partial endorsement for location correction, complications arose when filing a claim following an electrical short circuit fire that also injured three workers.

Although the insurance company's surveyor assessed the damage at Rs. 73,57,656 after six months, the insurer ultimately rejected the claim citing address discrepancies. 

This decision came despite the complainant's prompt notification to authorities and full cooperation in providing requested documentation.

In its ruling, the Commission rejected the insurance company's contention that the complainant wasn't a 'consumer' due to commercial usage, referencing the Harsolia Motors v. National Insurance Co. Ltd. case. 

The Commission determined the matter suitable for summary proceedings as it primarily involved a pre-assessed claim amount.

Drawing on evidence from Delhi Fire Service reports and the surveyor's confirmation of the incident location, the Commission found the insurer's failure to correct policy details constituted a deficiency in service. 

Citing the Supreme Court's precedent in Oriental Insurance Co. Ltd. v. M/S Ozma Shipping Company & Anr., which warns against rejecting genuine claims on technicalities, the Commission ordered the insurer to pay the assessed amount of Rs. 73,57,656 with 6 per cent interest, plus Rs. 1,00,000 as compensation for mental agony and Rs. 50,000/- for legal costs.

(KNN Bureau)