When it comes to general insurance claims, a surveyor is the one on whose word insurance companies rely while handing out the money.
A surveyor is a qualified professional, who assesses the nature and extent of loss, and insurer processes the claim on the basis of the report that is prepared by him.
However, in a recent case, the National Consumer Commission held that the surveyor’s assessment need not be the final word while settling a claim. Given the extent to which the insurance companies depend on the surveyor’s report, this ruling is significant.
It clearly establishes that companies must look beyond the assessment report, especially in cases of ambiguity.
In April 2005, the owner of Uni Ply Industries insured the stock in his factory for Rs 30 lakh with New India Assurance, for a year. The insurance company issued a one-page policy cover note, but without any terms and conditions. The policyholder renewed the policy for another year in 2006, but before the term ended, a fire broke out in the factory, destroying stock worth Rs 19 lakh, as per the owner’s estimate.
However, the surveyor approved by the Insurance Regulatory and Development Authority (IRDA) assessed the loss at Rs 10 lakh. The insurer made a payment of only Rs 8 lakh to the factory owner by invoking the excess clause. According to this clause, in the event of loss, a predetermined portion is paid by the policyholder.
The factory owner protested, but accepted the Rs 8 lakh settlement as part payment. Later, when he asked the insurance company to pay the balance, his request was rejected on the ground that the matter had been already settled.
So, in 2007, the factory owner filed a case on the ground of deficiency of service with the district commission, which ruled in his favour.
The insurance company’s appeal to the state commission also went in favour of the policyholder.
The New India Assurance then filed a revision petition with the National Commission, questioning the findings of the district and state commissions. The company’s main argument was that it had processed the claim based on the findings of an independent surveyor and hence, there was no deficiency in service.
However, the National Commission held that it was incorrect on the part of the company to treat the payment of Rs 8 lakh as final settlement since the policyholder had accepted it only as partial relief; his signing the discharge Boucher did not end the matter.
The ruling also referred to court precedent, or ‘settled law’, that a surveyor’s assessment could not be treated as the final word.
The Commission held that the company could not invoke the excess clause as it had failed to issue the terms and conditions of the policy to the factory owner. With this ruling, the National Commission has reiterated the roll that a surveyor plays in processing claims.
If the surveyor’s assessment is not in line with the terms of the contract, or all material facts are not considered, it is likely to be set aside. The National Commission’s verdict reinforces this dictum. Or in other words, if there is doubt that surveyor did not consider all material facts while arriving at the loss; the insurance company can’t rely solely on his opinion to settle a claim.The ruling also clearly establishes that if there is uncertainty about the loss amount, the insurance company should not invoke the excess clause.
In the given case, the stock in the factory was burnt beyond recognition and hence, it was difficult to calculate the exact loss. It was, however, observed that the factory stored stocks worth Rs 29 lakh on an average, and the value of the stock that was not damaged was about Rs 10 lakh. So, logically, the value of the damaged stock should have been around Rs 19 lakh. The surveyor, however, reported a loss of Rs 10 lakh, and the insurer reduced it by invoking the excess clause, which was incorrect, stated the commission.
The case also highlighted the importance of terms and conditions in the document. Nearly issuing a cover note of the policy is not enough. If there is any ambiguity in the terms of the policy, interpretation will be against the insurer since it drafts the policy wording. Thus, it is important for an Insurer to ensure that the policy terms and conditions are communicated to the insured and any special conditions/ warranties are clear and free of ambiguity.
A surveyor is a qualified professional, who assesses the nature and extent of loss, and insurer processes the claim on the basis of the report that is prepared by him.
However, in a recent case, the National Consumer Commission held that the surveyor’s assessment need not be the final word while settling a claim. Given the extent to which the insurance companies depend on the surveyor’s report, this ruling is significant.
It clearly establishes that companies must look beyond the assessment report, especially in cases of ambiguity.
In April 2005, the owner of Uni Ply Industries insured the stock in his factory for Rs 30 lakh with New India Assurance, for a year. The insurance company issued a one-page policy cover note, but without any terms and conditions. The policyholder renewed the policy for another year in 2006, but before the term ended, a fire broke out in the factory, destroying stock worth Rs 19 lakh, as per the owner’s estimate.
However, the surveyor approved by the Insurance Regulatory and Development Authority (IRDA) assessed the loss at Rs 10 lakh. The insurer made a payment of only Rs 8 lakh to the factory owner by invoking the excess clause. According to this clause, in the event of loss, a predetermined portion is paid by the policyholder.
The factory owner protested, but accepted the Rs 8 lakh settlement as part payment. Later, when he asked the insurance company to pay the balance, his request was rejected on the ground that the matter had been already settled.
So, in 2007, the factory owner filed a case on the ground of deficiency of service with the district commission, which ruled in his favour.
The insurance company’s appeal to the state commission also went in favour of the policyholder.
The New India Assurance then filed a revision petition with the National Commission, questioning the findings of the district and state commissions. The company’s main argument was that it had processed the claim based on the findings of an independent surveyor and hence, there was no deficiency in service.
However, the National Commission held that it was incorrect on the part of the company to treat the payment of Rs 8 lakh as final settlement since the policyholder had accepted it only as partial relief; his signing the discharge Boucher did not end the matter.
The ruling also referred to court precedent, or ‘settled law’, that a surveyor’s assessment could not be treated as the final word.
The Commission held that the company could not invoke the excess clause as it had failed to issue the terms and conditions of the policy to the factory owner. With this ruling, the National Commission has reiterated the roll that a surveyor plays in processing claims.
If the surveyor’s assessment is not in line with the terms of the contract, or all material facts are not considered, it is likely to be set aside. The National Commission’s verdict reinforces this dictum. Or in other words, if there is doubt that surveyor did not consider all material facts while arriving at the loss; the insurance company can’t rely solely on his opinion to settle a claim.The ruling also clearly establishes that if there is uncertainty about the loss amount, the insurance company should not invoke the excess clause.
In the given case, the stock in the factory was burnt beyond recognition and hence, it was difficult to calculate the exact loss. It was, however, observed that the factory stored stocks worth Rs 29 lakh on an average, and the value of the stock that was not damaged was about Rs 10 lakh. So, logically, the value of the damaged stock should have been around Rs 19 lakh. The surveyor, however, reported a loss of Rs 10 lakh, and the insurer reduced it by invoking the excess clause, which was incorrect, stated the commission.
The case also highlighted the importance of terms and conditions in the document. Nearly issuing a cover note of the policy is not enough. If there is any ambiguity in the terms of the policy, interpretation will be against the insurer since it drafts the policy wording. Thus, it is important for an Insurer to ensure that the policy terms and conditions are communicated to the insured and any special conditions/ warranties are clear and free of ambiguity.
No comments:
Post a Comment