Compensate for damage due to natural calamity

Regency Aqua Electro and Motel Resorts, a limited company, had started a hydroelectricity power project called Hanumanganga Small Hydro Power Project. The plant was set up on the bank of Hanumanganga, a tributary of River Yamuna, around 175 kilometres from Dehradun.

The plant was covered under a Standard Fire and Special Perils Policy issued by United India Insurance Company. The coverage was for a sum of ~30 crore and the policy period was from January 7, 2010 to January 6, 2011. Additional coverage of ~20 lakh was purchased for the risk of removal of debris. The premium for this policy was ~2,00,400.

The company also purchased a policy to cover loss of profit. This policy had a sum insured of ~7.4 crore for which a premium of ~81,622 was charged.

A sudden grid failure occurred on April 26,

2010 due to lack of water in the pipe. It was found that this occurred because the desilting tank had collapsed, and water had inundated the area.

Both the police and United India Insurance were informed about the incident. The surveyor who was appointed carried out multiple inspections and assessed the damage to be worth ~22,32,900, and the consequential loss of profit to be ~53,92,218.

United India then appointed an investigator who opined that the incident had occurred due to a defect in the construction of the tank, which could not be construed as a peril under the policy. Even after obtaining this opinion, the insurer neither repudiated nor settled the claim.

The insured ultimately filed a consumer complaint, which United India contested. It raised a technical objection that the complaint was barred by limitation. It also sought dismissal of the complaint on the ground that even though the policy contained a bank clause, the bank was not impleaded as a party. Another objection was that a single complaint cannot be filed for two separate policies. On merit, the insurer argued that the report of the Meteorological Department did not contain any data on weather conditions that could have caused the tank to collapse.

The National Commission observed that limitation would run from the date of repudiation of the claim. But when the claim was kept hanging without being settled or rejected, the cause of action would be a continuing one. So, it concluded that the complaint was not time barred.

Regarding the maintainability of a single complaint for claims under two different policies, the National Commission observed that the parties were identical, and the claim under the second policy regarding loss of profit would depend on the outcome of the decision vis-à-vis the other policy. So, the Commission concluded that a single complaint was permissible.

Regarding the failure to implead the bank as a party to the case, the Commission observed that the dispute was regarding non-settlement of the claim for which the bank was not a necessary party. If the claim was held to be payable, the bank’s dues would have to be cleared first and then the remaining amount would be payable to the insured.

On merits, the Commission observed that the tehsildar’s report established that there was heavy melting of snow, which resulted in the discharge of water in the river, which in turn led to the tank’s collapse. This would be covered as a peril under the policy. It held the claim to be payable.

Accordingly, by its order of October 5, 2021 delivered by Justice Ram Surat Ram Maurya, the National Commission ordered the insurer to settle the claim along with 9 per cent interest.

The Hanumanganga Small Hydro Power Project was covered under a Standard Fire and Special Perils Policy. The coverage was for a sum of ~30 crore. Additional coverage of ~20 lakh was purchased for the risk of removal of debris