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Jaiprakash Associates Ltd. V. ICICI Lombard General Insurance Co. Ltd. - (National Consumer Disputes Redressal Commission) (16 Dec 2016)

Insurance coverage cannot be available for a vague or indefinite period

MANU/CF/0730/2016

Consumer

Government of Andhra Pradesh awarded work of Investigation, Design and Execution of Tunnel -1 & Tunnel - 2, including Head Regulator at entrance of portal of Tunnel - 1 of Srisailam Left Bank Canal Tunnel Scheme of AMR project from NSRSP Reservoir, to Complainant Company. Case of Complainant is that project site and surrounding areas having been hit by heavy and incessant rains, it got completely sub-merged with water causing substantial damage to its property including Tunnel Boring Machines, (TBMs) which were under erection at that time on inlet of tunnel. Intimation of loss having been given to insurer, Cunningham Lindsey International Pvt. Ltd. were appointed as surveyors for assessing loss. Surveyors however informed Complainant that, existing CAR policy did not cover TBMs since cover for TBMs was granted only for a period of three months, which expired on 08th September, 2009. Complainant however, maintained that, damage to TBMs was covered under existing CAR policy. Insurer informed Complainant that, coverage of erection of two TBMs was available only for a period of three months and therefore, they had asked surveyors to proceed with assessment accordingly. Being aggrieved from stand taken by OP, as far as damage to TBMs is concerned, Complainant has approached this Commission seeking payment of Rs. 118.2634 Crores alongwith interest @ 18% per annum besides punitive damages and the cost of litigation. According to OP, insured value of Rs. 1925 Crores represented only value of project to be executed by Complainant for Government of Andhra Pradesh and did not include TBMs employed by Complainant for execution of work.

Extracts from insurance policy showed that, as far as material damage was concerned, insurance policy covered only tunneling work which Complainant was to execute for Government of Andhra Pradesh at Srisailam in Mahabubnagar and tools, plant equipment and machinery which Complainant was to use for execution of said work and which was not to form a part of executed work, was not insured, when said policy was issued. Complainant, on completion of the work was required to remove the TBMs from the site of the project. In fact, it was not necessary for the complainant to erect the TBMs for executing the tunneling work awarded to it and it was at liberty to adopt an alternative method so long as the said method was environment and ecology friendly. Therefore, I have no hesitation in holding that as far as the policy when it was issued to the complainant is concerned, it did not cover the material damage to the TBMs which the complainant was to use at the site of the project for completing the work awarded to it.

Section 64U of the Insurance Act, 1938 provides for establishment of a Committee to be called Tariff Advisory Committee to control and regulate rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business. Thus, statutory tariff did not permit coverage of TBMs under CAR policy and an independent cover in respect of said coverage was required to be taken at time the policy came to be issued to Complainant. Letter of insurer, was in conformity with provision of tariff, which insurer was required to abide by. He however, was fair enough to concede that if such a coverage is made available under policy issued by insurer, tariff will not come in way of insured seeking re-imbursement for loss or damage to insured equipment. However, if original policy did not cover TBMs but insurer later on extended coverage to them, it would be liable to reimburse Complainant for loss or damage suffered by it provided of course that, coverage was available at time the loss or damage actually happened.

An insurance coverage cannot be available for a vague or indefinite period. In fact, an insurance policy may itself be held to be void, if period of insurance is found to be vague, indefinite or uncertain. Supreme Court in Vikram Greentech India Limited & Anr. Vs. New India Assurance Company Limited MANU/SC/0519/2009: (2009) 5 SCC 599 laid down four essentials of a contract of insurance including duration of the risk. It was also held by Supreme Court that since insurer undertakes to indemnify loss suffered by insured on account of the risks covered by the insurance policy, its terms have to be strictly construed to determine the extent of liability of the insurer.

Coverage of TBMs was confirmed by insurer pursuant to e-mails sent by Complainant and said e-mails clearly indicated that, Complainant was seeking coverage of TBMs for a period of three months from date of commencement of erection. Therefore, it was not necessary for insurer to specify period of coverage while issuing confirmation. Date of commencement of the construction was expressly conveyed by the complainant to the insurer. Damage to TBMs happened more than three months after its erection had commenced. Since, insurance cover in respect of TBMs was available only for a period of three months from date of commencement of their erection, Complainant cannot seek re-imbursement of its loss on account of damage to TBMs, from insurer.

Relevant : Vikram Greentech (I) Ltd. and Anr. vs. New India Assurance Co. Ltd. MANU/SC/0519/2009

Tags : COVERAGE   INSURANCE   DAMAGES  

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