The State Consumer Disputes Redressal Commission, UT Chandigarh, has ruled that the basement of a building is an integral part of the insured premises, and stocks stored there are covered under an insurance policy. The commission directed Chola MS General Insurance Company Ltd to pay Rs 1,93,79,529 to Bittu Fashioners 26 for losses caused by a fire incident, along with 9% annual interest from the date of loss and Rs 35,000 in litigation costs.
Background of the Case
Bittu Fashioners 26, based in Chandigarh, had obtained an insurance policy from Chola MS General Insurance Company Ltd covering stock worth Rs 5 crore and furniture and fixtures worth Rs 1 crore, for a total sum insured of Rs 6 crore, after paying a premium of Rs 49,996. On February 27, 2023, a fire broke out in the basement of an adjoining SCO in Sector 26, Chandigarh, due to a short circuit. The fire spread to the ground floor and affected the complainant's premises. During firefighting operations, extensive water and smoke entered the insured premises, causing substantial damage to stocks and articles in the basement and ground floor.
Initial Rejection and Appeal
The loss was immediately reported to the insurer, which appointed a surveyor. Despite the complainant's full cooperation, the surveyor disallowed the basement loss, claiming it was not covered under the policy. A complaint before the District Consumer Disputes Redressal Commission, UT Chandigarh, was dismissed. The appellant challenged this order, arguing that the District Commission erroneously held the basement was not covered merely because the term “basement” was not expressly mentioned, without considering that coverage could be inferred from the policy terms and circumstances.
State Commission's Observations
The State Commission, comprising presiding member Padma Pandey and member Rajesh K Arya, set aside the District Commission's order. It observed that once the policy defined a “building” to include the basement, the insurer could not later argue that the basement was excluded simply because it was not separately mentioned in the schedule. The commission noted, “It is a settled principle of insurance law that the policy must be read as a whole and effect must be given to every clause thereof.” It further held that when the policy expressly declared that a building included its basement, the schedule could not be interpreted in isolation to render the inclusion of the basement redundant.
Compensation and Costs
The commission directed the insurance company to pay Rs 1,93,79,529 to the complainant along with 9% annual interest from the date of loss. Additionally, the insurer was ordered to pay Rs 35,000 towards litigation costs. This ruling reinforces the principle that basements are integral parts of insured buildings and that insurance policies must be interpreted holistically.
