THE NEW INDIA ASSURANCE CO. LTD. versus SRI BUCHIYYAMMA RICE MILL & ANR.

Citation: [2020] 3 S.C.R. 549 · Decided: 21-01-2020 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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THE NEW INDIA ASSURANCE CO. LTD.
v.
SRI BUCHIYYAMMA RICE MILL & ANR.
(Civil Appeal No. 504 of 2020)
JANUARY 21, 2020
[DR. DHANANJAYA Y CHANDRACHUD
AND AJAY RASTOGI, JJ.]
Insurance:
Insurance claim – Case of the insured was that while the rice
mill (insured property) was in operation, a lorry collided with the
boiler unit which resulted in collapse of the boiler unit causing
damage estimated at Rs. 76 lakhs – Preliminary survey was
conducted within a week which suggested appointment of structural
expert – Thereafter Structural Expert was appointed who in his report
opined that the accident was as a result of exceeding the load
carrying capacity and due to breach in storage capacity of the
system and not due to the reason as stated by the insured –
Investigation was also conducted which agreed with the previous
report – Thereafter surveyor licenced by IRDA was appointed, who
in his final survey report opined that structure had collapsed due to
overload – Insurance claim repudiated – Complaint before State
Consumer Commission was dismissed – In appeal, National Consumer
Commission awarded insurance claim holding that delayed
submission of reports was in breach of provisions of s.9 of IRDA
Regulations, 2002 – Appeal to Supreme Court – Held: Though under
Section 64- UM(2) of Insurance Act, it is not open to insurer to
appoint a succession of surveyors with a view to obtain a tailor-
made report – There is no absolute prohibition on the insurer
appointing more than one surveyor – In the present case all the
reports maintained a consistent line of reasoning with regard to
nature and genesis of the incident – There exists no malafide on part
of the insurer – National Commission has not acted reasonably in
overturning the well considered decision of State Commission –
Insurance Act, 1938 – s. 64-UM(2) – Insurance Regulatory and
Development Authority of India (Protection of Policy holders’
Interest) Regulations, 2002 – Regulation 9.
[2020] 3 S.C.R. 549
549
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SUPREME COURT REPORTS
[2020] 3 S.C.R.
Allowing the appeal, the Court
HELD: 1. The impugned judgment of the NCDRC has
incorrectly analysed the basis by the insurer for the appointment
of surveyors for the purpose of inspection and assessment. The
record indicates that immediately upon receipt of an intimation
of the incident, the insurer initially appointed a surveyor to submit
a preliminary survey report. The inspection was carried out on
19 April 2005 close on the heels of the incident. The report of
the preliminary surveyor found serious anomalies in the claim of
the insured in regard to the genesis of the incident. It was on the
suggestion of the surveyor that the appellant obtained an opinion
from a structural expert. The insurer thereafter proceeded to
obtain the opinion of an investigator on 8 December 2006, and
eventually, a final survey report was submitted on 29 June 2007.
The purpose of the final survey was to determine, on the basis of
the material which had emerged during the course of an inspection
the cause of the incident, and to assess the extent of damage and
loss. [Para 12][558-D-F]
2. While determining whether the appointment of a second
or successive surveyor is justified, one must take into
consideration the necessity of doing so and it must be weighed in
the context of relevant facts and circumstances including the
deficiencies or omissions in the report of the first surveyor. Each
case must be independently considered based on relevant facts
and circumstances. There ought to be cogent reasons for
appointing a second surveyor. [Para 14][560-D-E]
3. The report of a surveyor must be given due importance
and that there should be sufficient grounds for explaining a
disagreement with an assessment made by a report of the
surveyor. Yet at the same time, under Section 64-UM(2) of the
Insurance Act 1938, it is not open to the insurer to merely  appoint
a  succession  of  surveyors  with  a  view  to  obtain  a tailor-made
report. It is open to the insurer to appoint another surveyor for
valid reasons bearing on the deficiencies found in the survey
report and the reasons which must be indicated by the insurer.
There is no absolute prohibition on the insurer appointing more
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than one surveyor. In the present case the process which was
followed by the insurer was not designed to obtain a report which
would adopt a position adverse to the claim of the insured. There
exist no mala fides on part of the insure

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