Dharwad Consumer Commission Orders National Insurance to Pay Rs 1.18 Crore for Fire Claim Denial
In a significant ruling that underscores consumer protection in insurance matters, the Dharwad District Consumer Disputes Redressal Commission has directed the National Insurance Company to pay substantial compensation and imposed penalties for deficient service. The case involved the wrongful denial of an insurance claim filed by a textile shop owner from Savadatti in Belagavi district, highlighting the importance of timely claim settlement in insurance policies.
Background of the Insurance Policy and Fire Incident
The complainant, Trilokchand Prajapati, proprietor of Maruti Textile, had secured an insurance policy for his garment shop with National Insurance Company by paying an annual premium of Rs 1,23,186. This policy provided comprehensive coverage, including Rs 1.3 crore for fire damage and an additional Rs 10 lakh for furniture and fixtures, ensuring financial protection against unforeseen events.
During the validity of this policy, a devastating fire accident occurred due to a short circuit, completely gutting the shop and causing estimated losses of around Rs 1.4 crore. The incident not only destroyed the business premises but also posed severe financial hardship for the shop owner, who relied on the insurance coverage for recovery.
Claim Process and Insurance Company's Response
Immediately after the fire incident, the shop owner took prompt action by lodging a police complaint and informing the insurance company as required. Following the insurer's instructions, he diligently submitted all necessary documents for claim settlement, demonstrating compliance with procedural requirements.
The insurance company appointed a surveyor who inspected the site and assessed the loss at Rs 1,18,38,312. The surveyor assured the complainant that this amount would be paid within ten days, raising expectations for a swift resolution. However, despite this assessment and repeated follow-ups by the shop owner, the insurance company failed to release the claim amount, leading to prolonged hardship and financial distress.
Legal Proceedings and Commission's Findings
Aggrieved by the delay and alleged harassment, Prajapati approached the Dharwad District Consumer Commission on January 3, 2025, filing a complaint under the Consumer Protection Act for deficiency in service. The Commission, headed by chairman Eshappa Bhute with member Vishalakshi A Bolashetty, conducted a detailed examination of the case.
After reviewing key documents such as the police report, panchnama, insurance policy, and the surveyor's assessment, the Commission held that the complainant was a legitimate consumer and that the fire incident occurred during the active policy period. The Commission emphasized that insurance is fundamentally meant to provide financial protection during unforeseen events, and the insurer's failure to honor a valid claim constituted a clear deficiency in service.
Commission's Ruling and Compensation Details
In its ruling, the Commission ordered National Insurance Company to pay the assessed claim amount of Rs 1,18,38,312 to the complainant within one month. Additionally, the insurer was directed to pay 8% annual interest on this amount, calculated from the date of filing the complaint until full realization, ensuring fair compensation for the delay.
To address the mental agony and financial loss suffered by the shop owner, the Commission imposed a penalty of Rs 1 lakh as compensation. Furthermore, Rs 10,000 was awarded towards litigation costs, recognizing the expenses incurred during the legal process. This comprehensive ruling aims to provide relief and uphold consumer rights in insurance disputes.
This case serves as a reminder for insurance companies to adhere to their commitments and for consumers to assert their rights under the Consumer Protection Act. The Dharwad Consumer Commission's decision reinforces the legal framework protecting policyholders from unfair practices and ensuring timely claim settlements.
