Can insurer reject claim on ‘assumptions’? Delhi consumer body orders Rs 17.75 lakh payout for lost jewellery

Findings

• The insurance company rejected Sharma’s claim based on “assumptions and presumptions”.
• Once the policy was issued after due verification, the insurer cannot subsequently question the valuation, ownership, or existence of the jewellery only after the loss has occurred.
• It is undisputed that at the time of issuance of the policy, the respondent (Sharma) had complied with all the formalities.
• The company issued the policy only after acceptance of the valuation report submitted by a certified valuer towards the said gold articles.
• Denial of the claim cannot be based on conjectures or subjective perceptions.
• The surveyor as well as the company have not disputed the valuation report at any stage.
• At the time of taking the policy, Sharma had disclosed that the bills of the jewellery were lost or misplaced.
• The company ought to have raised any doubt at the time of issuance of the policy towards the ownership of jewellery and absence of purchase bills.
•  Raising doubts regarding the value or existence of the jewellery after the loss is clearly unjustified.
• It is necessary to refer to the Section III of the insurance policy, which deals with “All Risks of Jewellery and Valuables” wherein the said policy specifically covers loss caused by accident or misfortune.
• The company rejected the claim questioning the ownership of jewellery, absence of purchase bills, alleged improbability of travel and alleged lack of reasonable care.
• However, it failed to file any cogent document or evidence to substantiate the aforesaid grounds of rejection of the claim
• The observation of the surveyor that Sharma failed to establish the “logic or reasonability” of carrying the jewellery is merely an opinion based on presumption and assumption.
• The surveyor has not disputed the valuation, existence of the policy or the occurrence of loss.
• Denial of the claim cannot be based on conjectures or subjective perceptions.
• The complainant had promptly lodged a police report on January 7, 2010.
• He had intimated the insurer on January 8, 2010, complying with the material terms of the policy.
• The delay in appointment of the surveyor and subsequent investigation could not be a ground to deny the claim.

Decision

• Concluding that the insurer had rejected the claim purely on assumptions and presumptions, without any cogent documentary evidence, the commission held that such rejection was arbitrary.
• The rejection amounted to a deficiency in service under the Consumer Protection Act.
• The appeal filed by Oriental Insurance Company Limited was dismissed, and the district commission’s order directing settlement of the claim with interest and compensation in favour of the complainant was upheld.
• The commission found “no reason to interfere” with the well-reasoned order of the district commission and dismissed the appeal with no order as to costs.

Background

• Sharma took a ‘Householder Insurance Policy’ from the insurance company for the period between December 24, 2009 and December 23, 2010.
• The policy covered household items including gold jewellery valued at Rs 18.37 lakh based on a valuation report furnished by an approved valuer and accepted by the insurer.
• On January 7, 2010, while travelling on his scooter, Sharma lost a pouch containing his wife’s jewellery and immediately lodged a non-cognisable report (NCR) with the police and informed the insurer on the following day.
• The insurer appointed a surveyor, who assessed the loss at Rs 17.75 lakh but expressed doubts about the circumstances of the loss.
• Relying on these doubts, the insurer repudiated the claim on April 15, 2010.
• The company cited alleged lack of reasonable care, absence of purchase bills, and improbability of the incident.
• Aggrieved, Sharma approached the district consumer forum, which on September 12, 2014, allowed the complaint and held the insurer guilty of deficiency in service.
• The district forum directed payment of Rs 17.75 lakh with 9 per cent interest from the date of rejection, along with Rs 50,000 as compensation and litigation costs, with a higher interest for delayed compliance.
• The insurer challenged this order before the state commission.

Arguments

• The insurer company argued that Sharma failed to exercise reasonable care by carrying valuable jewellery in his pocket while travelling alone.
• The company contended that the circumstances of the alleged loss were suspicious and improbable, particularly the stated travel route.
• It submitted that the respondent failed to produce purchase bills to establish ownership of the jewellery.
• Relying on the surveyor’s report dated March 18, 2010, the insurer submitted that although the quantum of loss was assessed, the manner of loss could not be logically corroborated.
• It was argued that the loss did not fall within the policy coverage and that no deficiency in service could be attributed to the insurer.