Insurer must pay declared value for total loss

Ravish Singh purchased a second‑hand sport utility vehicle (SUV) and got the registration and insurance documents transferred to his name. Iffco Tokio General Insurance charged a premium amounting to ~1,19,915 for the declared value of the vehicle of ~29,31,140, as recorded in the insurance policy, which was valid from March 30, 2017, to March 29, 2018. Also, add‑on coverage was obtained for an additional premium of ~35,906.46 for depreciation waiver, and ~20,954 for new vehicle replacement coverage.

The terms of the policy specifically provided that in the event of a total loss, the claim would be settled by paying the difference between the declared value and the ex‑showroom price of a new vehicle of the same make, model, features, and specifications. If such a new vehicle was unavailable, then the claim would be settled on total loss basis instead of replacement basis.

The vehicle met with an accident on November 6, 2017. The surveyor appointed by the insurance company reported that the damage was so severe that it would not be possible to repair the vehicle. The insurer, however, refused to pay the replacement cost, despite being served with a legal notice.

Singh filed a complaint before the Haryana State Commission in which he sought ~87,79,662 as the replacement value of a new BMW-X5 vehicle. He also claimed interest compensation and costs. The insurer contested the case, contending that the same model was out of production and no longer available, but it had found the online price to be ~23 lakh. After deducting ~1 lakh towards salvage and ~2,000 under the excess clause, it offered to settle the claim by paying ~21,98,000.

The State Commission observed that both Singh and Iffco Tokio had failed to prove the market price stated by them. It held that the vehicle could not be replaced as it was no longer available, and there was no evidence to prove that its last market price was ~87,79,662, as contended by Singh, or ~23 lakh, as contended by Iffco Tokio. In the absence of the last available market price, the Commission held that the claim would have to be settled on the basis of the declared value of ~29,31,140 as stated in the policy, subject to a deduction of ~1 lakh for salvage, and ~2,000 for policy excess. Interest at 9 per cent was awarded along with a compensation of ~50,000 for mental harassment and ~20,000 towards litigation expenses. If compliance of the order was delayed beyond 45 days, the interest rate would stand hiked to 15 per cent for the period of delay.

Both Ravish Singh and Iffco Tokio challenged the order in appeal. The National Commission observed that the manufacturer had discontinued the production of BMW X5 SUV vehicles, so the claim would have to be settled as a total loss by considering the last available showroom price of the same model. The Commission agreed with the State Commission's observation that neither Singh nor Iffco Tokio had been able to prove that the price mentioned by them was the last market price. So, it concurred with the State Commission's decision that the claim would have to be settled on the basis of the declared value stated in the policy.

Accordingly, by its order of August 9, 2021, delivered by Justice R.K. Agrawal for the bench along with S.M. Kantikar, the National Commission dismissed both the appeals and upheld the State Commission’s order.

The National Commission agreed with the state commission’s view that neither party had managed to prove that the price mentioned by them was the last market price