NIACL Triumphs: Supreme Court Validates Insurance Claim Rejection in Tata Steel Case

Case Title – New India Assurance Company Ltd. Vs. M/s. Tata Steel Ltd. 2024 INSC 356

Case Number – SLP (C) No. 10001 of 2009, C.A. No. 5242-5243 of 2009

Dated on – 30^th April, 2024

Quorum – Justice K. V. Viswanathan

FACTS OF THE CASE

In the case of New India Assurance Company Ltd. Vs. M/s. Tata Steel Ltd. 2024 INSC 356, the insured had an insurance policy with the New India Assurance Company Limited (NIACL) covering their complete machinery of the mill, paying a premium of Rupees 62,09,655/-. On the 12^th of December,1998, the 20 Hi Cold Rolling Mill was destroyed by a fire causing them a claimed loss of Rupees 35.08 Crores. NIACL was informed instantly, and surveyors were appointed. On dated 29^th January,1999, a claim of Rupees 35.08 Crores was filed, based on the replacement quotations. On dated 24^th March, 1999, NIACL transferred Rupees 4,92,80,905/. Rupees 29.60 crores were spent by the insured on a new 6 Hi Cold Rolling Mill to restart the operations. The insured agreed to accept an amount of Rupees 20.9 crores as a final settlement to avoid any detains. The NIACL further did not release the remaining balance resulting in the institution of a consumer complaint Case No. 233 of 2000 on the dated 30^th May, 2000. NIACL appointed surveyors instantly post the fire and made interim payments on the basis of their reports. The final Joint Surveyors’ Report assessed the losses at Rupees 19.55 Crores and Rupees 13.51 crores for replacement and depreciation respectively on dated 11^th December,2001. NIACL claimed that the insured informed them about the new 6 Hi Cold Mill on dated 27^th March, 2002 which was in contrast to the claim for the reestablishment of the 20 Hi Cold Rolling Mill. The Claim was duly settled by the NIACL at Rupees 7.88 Crores, citing that the replacement mill was of lesser capacity.

CONTENTIONS OF THE APPELLANT

1. The Appellant, through their counsel, in the said case contented that the subsistence of the reestablishment value clause in the insurance policy, which stated that the method of the indemnity should be the cost of replacing or reestablishing the damaged property with a property of the same type, but not superior or more comprehensive than the insured property when new and that this clause compels the insured to reestablish the damaged property within 12 months or within an extended period, or else, the clause stands futile.
2. The Appellant, through their counsel, in the said case contented that the insured failed to take requisite steps for the reestablishment despite abundant opportunities provided by the NIACL and that the delay on the part of the insured in providing necessary information and taking action for the purpose of reestablishment. They contended that the delay on the part of the insured in providing requisite information and taking actions related to reestablishment. Further, the damaged property’s repair was delayed.
3. The Appellant, through their counsel, in the said case contented that the National Consumer Disputes Redressal Commission (NCDRC) faultily neglected their affidavit vindicating the calculation of depreciation at 60% and that there were no standard guidelines for depreciation calculation and that their conduct, including seeking a revised calculation from the surveyors, was apt as per the situation.

CONTENTIONS OF THE RESPONDENT

1. The Respondent, through their counsel, in the said case contented that existence of the reestablishment value clause in the policy document issued by the NIACL, asserting it was never received by them and that the Clause 9 of the policy conditions, which pertains to reestablishment, should be read in combination with any such clause.
2. The Respondent, through their counsel, in the said case contented that the clause 9 of the policy applies when reestablished or repair is not possible, as assessed by the surveyor and cited the judgment in the Oswal Plastic Industries.
3. The Respondent, through their counsel, in the said case contented that the depreciation should be calculated either on the sum insured or on the cost of a new locally sourced 20 Hi Cold Rolling Machine and that the NIACL failed to provide competent reasons for directing apart from the recommendation of the surveyors for 32% depreciation and that the doctrine of contra proferentem should be applied in their favour. 

LEGAL PROVISIONS

1. Section 64 UM (2) of the Insurance Act, 1938 prescribes that the surveyors and loss assessors must follow the code of conduct for their duties, responsibilities, and other professional requirements as specified by the regulations made under the Act.
2. Regulation 9(3) of the Insurance Regulatory and Development Authority of India (Protection of Policyholders’ Interest) Regulations, 2002 prescribes that if an insurer receives an incomplete survey report, they must ask the surveyor to provide an additional report on specific issues. The insurer must also notify the insured about the delay that may occur in the claim assessment if the insured doesn’t provide all the required information or doesn’t cooperate with the surveyor.

ISSUES 

1. The main issue of the case revolved around whether the claim of Tata Steel for the loss incurred due to the circumstance of the fire incident covered under the insurance policy with NIACL?
2. Whether the NIACL rightfully rejected the claim on the basis of the exclusion and conditions of the policy?

COURT ANALYSIS AND JUDGMENT

The court in the case of New India Assurance Company Ltd. Vs. M/s. Tata Steel Ltd. 2024 INSC 356, scrutinized the terms and conditions of the insurance policy between the Appellant and the Respondent to determine the coverage for the loss incurred. The court inspected the specified provisions, exclusions, and conditions of the insurance policy to ascertain if the Respondents’ claim came under the ambit of coverage. The court took into consideration any evidence or documentations provided by both the parties concerning the terms and conditions of the insurance policy. The court discovered that the claim of the Tata Steel comes within the ambit of policy exclusion or conditions, upholding the rejection of the claim of NIACL. The judgment of the court provided a conclusive resolution to the dispute between the parties regarding the insurance coverage for the loss from the fire incident.

The court thus in this case, allowed the appeal of the NIACL and set aside the order of the NCDRC. The court observed that the claim was rightly settled by the NIACL letter dated 3^rd January,2003 which determined the loss amount payable at Rupees 7.88 crores after applying 60% depreciation. The court dismissed the appeal instituted by the Insured-Respondent.

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Judgement Reviewed by – Sruti Sikha Maharana

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