1. This appeal filed by the complainant/consumer is directed
against the order dated 29.09.2014 passed by the National
Consumer Disputes Redressal Commission (for short ‘the National
Commission’), New Delhi, disposing of the revision petition filed by
the parties and also against the order dated 22.02.2016 disposing
of the review petition filed by the appellant.
2. Briefly stated the facts of the case are that the appellant had
first purchased a householder insurance policy from the Oriental
Insurance Company (‘the Insurance Company’ for short) on
23.12.2000. This policy was renewed till 22.12.2005. As per this
policy the coverage of articles/items in the house of the appellant
was “as per list”. It is not disputed that thereafter the Insurance
Company discontinued “as per list” policies and instead started
issuing policies for consolidated amounts. The original policy had
expired on 22.12.2005 and fresh policy as per new scheme was
taken out on 19.01.2006 and this was renewed from time to time.
The last renewal was from 19.01.2007 to 18.01.2008.
3. The appellant had gone to the United Kingdom. Some time,
between 27.01.2008 to 30.01.2008, a burglary took place inside the
premises of the appellant, and he was informed about the same by
a neighbor on 31.01.2008. The appellant requested his nephew to
inform the Insurance Company and an FIR was also registered with
the Mehrauli Police Station in South Delhi. The Insurance
Company was also informed about the burglary on 31.01.2008 or
on the next day. The police could not trace out the crime.
4. The Insurance Company first offered a sum of Rs. 3,500/- to
the appellant sometime in November, 2008 which he refused to
accept. He, thereafter, met certain higher officials of the Insurance
Company and an amount of Rs.29,920/- was offered to him. Being
dissatisfied, the appellant filed a claim before the District Consumer
Disputes Redressal Forum (for short ‘the District Forum’), which
was disposed of by the District Forum on the ground that the
articles mentioned therein were not mentioned in the list.
Thereafter, the appellant filed an appeal before the State Consumer
Disputes Redressal Commission (for short ‘the State Commission’)
which was allowed on 15.01.2014 and he was awarded a sum of
5. Revision petitions were filed both by the appellant claiming
interest and compensation and by the Insurance Company against
the order of the State Commission. The main ground in the petition
filed by the Insurance Company was that a large number of items
which had been claimed to be stolen were not insured and there
was a lot of under-insurance. The National Commission held that
once the appellant had supplied a list of articles for the first policy,
if there was any change he should have filed a fresh list and since a
large number of articles were not mentioned in the list the claimant
was only entitled to an amount of Rs.21,000/- towards the value of
stolen gold articles; Rs.5,929/- towards the depreciated
value of Citizen watch; Rs.7,000/- for repair of door latches etc.;
and Rs.16,000/- towards the value of stolen clothes after making
appropriate deduction for under-insurance of clothing. The
complainant was also awarded compensation of Rs.5,000/- towards
the cost of litigation etc. The appellant filed an SLP before this
Court and he was granted liberty to file a review petition before the
National Commission mainly on the ground that the policy of
2008-2009 was not considered by the National Commission.
6. The National Commission in the review petition took into
consideration the fact that the new insurance policy did not require
a list of items to be given. It, thereafter, awarded amounts under
various heads as follows:-
i) Jewellery and valuables – Claimant claimed that the
jewellery lost was worth Rs.1,84,150/- but the insurance package
was only for Rs.1,00,500/-. The National Commission ordered the
Insurance Company to pay the amount after making adjustment for
ii) Two cutlery sets in silver valuing Rs.31,000/- – The
National Commission held that these items were not insured and
did not fall under the heading of ‘kitchenware/crockery/cutlery
iii) Clothing – The insured value of clothing was
Rs.55,000/- and the claimant claimed Rs.87,000/-. The National
Commission directed payment of this amount after making
adjustment for under-insurance.
iv) Electrical/Mechanical appliances – The appellant
claimed a sum of Rs.66,000/- for loss of electrical and mechanical
appliances, as against the coverage of Rs.1,82,500/-. This claim
was rejected on the ground that the claimant failed to produce bills
of invoices towards this amount.
v) Miscellaneous items – The appellant claimed
Rs.28,000/- for loss of miscellaneous items including watches
valuing Rs.20,000/- as against the coverage of Rs.41,000/-. He
has been awarded only Rs.8,000/- and the claim for watches of
Rs.20,000/- has been rejected on the ground that he failed to
produce purchase invoices.
vi) Repair of locks, doors, latches, safe etc. – The appellant
was awarded Rs.7,000/- for repair of locks, doors, latches, safe etc.,
as claimed by him.
vii) The claimant was also awarded compensation of
Rs.10,000/- and interest @ 9% per annum.
7. Aggrieved, the appellant is before this Court.
8. The only legal issue which arises for consideration is “what is
under-insurance – and the effect thereof?”. Under-insurance
basically means that the insured has taken out an insurance policy
in which he has valued the insured items for a sum which is less
than the actual value of the insured item. In a country like India
this is normally done to pay a lesser premium. This is, in fact,
harmful to the policy holder and not to the Insurance Company
because even if the entire insured property is lost, the policy holder
will only get the maximum sum for which the property has been
insured and not a paisa more than the sum insured. To give an
example, in case a person takes out the householder policy covering
fire insurance and gives the value of the structure of his house and
goods stored therein at Rs.50,00,000/- even though the value of the
same is Rs.1,00,00,000/- then even if the entire house and goods
are completely lost in a fire, he cannot get an amount above
Rs.50,00,000/- even though the value may be more.
9. If all the insured goods are lost then there is no problem. The
insured is entitled to the amount for which the goods were insured
even if that be less than the actual value of the goods. In case a
person gets a painting insured for Rs.1,00,000/- though the value
of the same is Rs.10,00,000/-, if the painting is lost the insured is
entitled to Rs.1,00,000/- only. If all the insured goods falling under
one head are stolen or lost then the insurance company cannot
apply the principle of averaging out because, though the loss may
be Rs.10,00,000/-, the claimant will get only one Rs.1,00,000/-as
per the value assessed and the insurance premium paid by him.
10. The Insurance Company can however apply the principle of
averaging out when all the goods are not destroyed. Supposing the
entire house was insured for Rs.50,00,000/-, but on valuation it is
found that the value of the structure and the goods was
Rs.1,00,00,000/- and if the policy holder claims that he has
suffered loss of Rs.40,00,000/- then he will be entitled to only
Rs.20,00,000/-, by applying the principle of averaging out. What
this means is that if the value of the goods is more than the sum for
which they are insured then it is presumed that the policy holder
has not taken out insurance policy for the un-insured value of the
goods. The claim is allowed by applying the principle of averaging
out, i.e. the insured is paid an amount proportionate to the extent
of insurance as compared to the actual value of the goods insured.
11. To clarify the matter further, we may give another example.
Supposing, the insurer owns two paintings of Rs.5,00,000/- each
but pays premium for insurance cover of Rs.1,00,000/- for both the
paintings. If one painting is lost, even though the value of the
painting may Rs.5,00,000/- he will not get Rs.1,00,000/- but will
get only Rs.50,000/-, as proportionate amount. Therefore, when a
group of items is insured under one heading and only some of the
items and not all items are lost/stolen then the principle of
under-insurance will apply. However, if all or most of the items of
value covered under the policy are stolen, then the insurance
company is bound to pay the value of the goods insured.
12. Applying this principle we may now deal with this case.
i) Jewellery and valuables – The entire jewellery and
valuables were insured for Rs.1,00,500/- but the claimant claimed
that the value of jewellery stolen was Rs.1,84,150/-. In this case
the entire jewellery was stolen. Therefore, the averaging out clause
will not apply and the claimant is entitled to a sum of Rs.1,00,500/-
under this head.
ii) Silver cutlery sets – The case of the claimant is that
these were insured under the head of ‘kitchenware/crockery/
cutlery’ items. According to him, the value of these sets is
Rs.31,000/-. Obviously kitchenware/crockery/cutlery will include
many other items lying in the kitchen and in the dining room.
Silver cutlery sets would normally fall under the head ‘jewellery and
valuables’ and since the claimant has been awarded the maximum
amount payable under that head, now he cannot divert the claim
for silver cutlery to the head ‘kitchenware/crockery/cutlery’. This
Court can take judicial notice of the fact that in any middle class
household kitchenware/crockery/cutlery would value more than
Rs.18,000/-. It is obvious that silver cutlery valuing Rs.31,000/-
could not be insured under the head kitchenware/crockery/cutlery’
which was valued only for Rs.18,000/-. Therefore, the National
Commission was right in holding that there was no coverage for this
iii) Clothing – The appellant claims that he has suffered a
loss of Rs.87,000/- , as against the coverage of Rs.55,000/-.
However, on perusing the statement of the appellant himself we find
that he has shown Rs.87,000/- to be the value of only six items of
clothing. There must have been many other items of clothing in the
house and when all the clothing has been insured under one
heading, it will include clothing items of all types, both expensive
and in-expensive. Admittedly, all items of clothing were not stolen
and, therefore, in this case the principle of under-insurance will
have to apply and the National Commission was right in directing
that the payment be made after applying principle of
iv) Electrical/Mechanical appliances – The coverage
under this head was Rs.1,82,500/- and the claimant claimed only
Rs.66,000/- and he gave the details of the items. This claim has
been rejected only on the ground that he had not produced invoices
of the same. The case of the appellant was that those items were
gifted by his son. The items such as CD changer, video camera,
DVD player, Camera etc. could be found in any middle class
household. It is not the case of the Insurance Company that these
items were not stolen. The claim should not have been rejected
only on the ground that invoices were not produced. The affidavit
of the appellant clearly indicates both the nature of the items lost
and the value thereof. This is supported by corroborative evidence
of the list of items given to the police. Once the insurance company
itself changed its policy from ‘as per list policies’ to ‘policies for
consolidated amounts’, then an insured is not expected to give the
item-wise details along with the valuation. We may also add that if
the insurance company desires that item-wise valuation should be
given for items over and above a certain value then it is the duty of
the insurance company to advise the insured at the time of issuing
the first policy of insurance and at the time of each renewal. The
insurance company must at the time of accepting the premium
advise the policy holder properly. The insurance company cannot
accept the premium without asking for any details and later deny
its liability on the ground that such details were not given.
Therefore, we accept the claim of the claimant and he is entitled to
Rs.66,000/- under this head.
v) Miscellaneous items – On the same reasoning as
given for electrical/mechanical appliances we accept the claim of
the appellant of Rs.20,000/- for loss of four watches and, therefore,
he is entitled to Rs.28,000/- under this head.
vi) Repair of locks, doors, latches, safe etc. – The claimant
has already been awarded Rs.7,000/-under this head.
13. In addition thereto, we are of the view that the claimant
should be awarded Rs.25,000/-towards compensation and
litigations expenses etc. On the aforesaid amounts the appellant
shall be entitled to an interest @12% per annum w.e.f. 01.01.2009
till payment. The Insurance Company shall be entitled to
adjust/deduct the amounts already paid/deposited by it.
14. The appeal is disposed of in the above terms. Pending
applications, if any, shall also stand disposed of.
15. The Registry is directed to send a certified copy of this
judgment to the appellant, who appeared in person.
(Madan B. Lokur)
January 10, 2018
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