Fire accident: Consumer Commission asks insurer to pay Rs 25 cr to chemical company

Mumbai: National Consumer Disputes Redressal Commission has asked an insurance company to pay around Rs. 25.87 crore to a chemical manufacturing company in whose factory a fire in June 2015 had caused huge loss.

It has also been directed to pay Rs 10 lakh towards litigation costs. The company Mangalam Organics Limited had approached the Commission as it had lodged a claim of over Rs 29 crore, New India Assurance Company had settled its claim at Rs 10.09 crore. This, though the surveyor appointed by the insurance company had assessed the loss at over Rs 18 crore. Mangalam had challenged the surveyor’s report and alleged discrepancies.

The company which is engaged in the manufacture of terpene and resin products had a major fire accident on 22 June 2015 in its factory due to a short circuit. The fire erupted at the resin plant of the factory and noticing that it had reached the common utilities connected to its camphor plant, the company had to drain out the stock in its reactors, columns and pipelines to prevent an explosion in the other plant. If it had not drained the stock the camphor plant would have caught fire and resulted in a loss of around Rs 80 to Rs 100 crore.

The insurance company had in a written statement before the commission contested the complaint and said that the claim falls under the exclusion clause of the policy. It said further that Rs 8 crore towards the camphor plant was not payable as it was not affected by the fire but due to shutdown of the common boiler used for both the plants. It being a consequential loss comes under exclusion, it said. Its advocate argued that a clause of the general exclusions excluded loss due to among other factors – short circuit.

Commission President RK Agarwal and member Dr SM Kantikar said in their judgment that the general exclusion cannot be applied in the case as the damage had been caused by a massive fire and it cannot be a case of applying a simple ground of short-circuit. It said that Mangalam was fully justified in lodging the claim and the insurance company was not justified in limiting the claim to Rs 10 crore. Needless to mention that the surveyor had assessed the loss at Rs 18 crore which was not accepted by the insurance company, it said. It further said Mangalam had pointed out discrepancies in the surveyor report.

The stand of the insurance company that it was not liable to pay for the loss caused due to stock drained out cannot be accepted, the commission said and reasoned that if this step was not taken by it, the insurer would have had to pay a much higher damage if the blaze had spread and the camphor plant had caught fire. Declaring it deficient in service, it said, they are reminded of a famous saying “Penny wise pound foolish”.

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