Whether it is a natural calamity like a flood or an earthquake or an accidental fire, when an insured makes a claim for indemnification of loss suffered, it is the responsibility of the insurer to correctly assess the damage and make good the loss. Consumer courts have repeatedly told insurance companies that they have to indemnify the loss fully, after all, that is the purpose of an insurance policy.

Yet, if one sees the large number of cases that come up before the consumer courts, insurance companies try not to indemnify the loss fully and in this, they are often aided by surveyors. Here is a case where the apex consumer court has set aside the quantum of loss assessed by the surveyors, made its own calculations on the basis of evidence produced by the insured and asked the insurance companies to pay. The apex consumer court’s detailed assessment of the loss suffered by the consumer and its order in this regard should help many a consumer get justice vis-a-vis insurance companies.

The case pertains to the loss suffered by an edible-oil mill on account of a fire that destroyed plant, machinery and oil stocks on August 6, 1993.

Even though the police, the fire brigade and the engineers from the Andhra Pradesh State Electricity Board concluded that the fire was caused on account of an electrical short circuit, the two insurance companies whose policies the consumer had taken, rejected the claim of the insured on the basis of their surveyors’ reports, which said that the cause of the fire may not be an electrical short circuit and could be due to the ‘complicity of the insured’.

However, on examining the evidence before it, the apex consumer court held that there was no justification for the reports of the surveyors. So it directed the National Insurance to pay the complainant Rs 4,10,000 towards damages to plant and machinery. It also directed National Insurance and United Insurance to pay Rs 11,50,520 and Rs 5,75,260 respectively to indemnify loss suffered on account of destruction of stocks. The apex consumer court also said that they should carry nine per cent interest, calculated from six months after the fire till the date of payment. (Sudhakar Traders vs National Insurance and Another, op no 118 of 1997)

There is a lesson in this for insurance companies: be honest and fair in your assessment of loss. Or else, the consumer courts will force you to be so.