Construction Company Fights Insurance Denial, Wins Bridge Claim.
20 June 2024
Consumer Protection Act >> Consumer Rights
A construction company in India has successfully challenged the denial of an insurance claim for flood damage to two temporary bridges. The case highlights the importance of clear interpretation of insurance policy terms and how courts can consider broader evidence in such disputes.
The Case:
The construction company, insured under a "Contractors All Risk Insurance Policy," suffered bridge damage during a flood. They filed a claim, but the insurance company denied it due to two reasons:
1. Underinsurance: The insurance company argued the company wasn't fully insured (underinsured) and reduced the payout accordingly.
2. Excess Clause: The policy had an "excess clause" requiring the insured to shoulder a specific amount for each claim. The insurer applied this clause twice, once for each damaged bridge (represented by two claim forms).
The Dispute:
The construction company disagreed with the insurance company's interpretation of the policy. They argued:
- The flood was a single event, causing damage to two bridges, not two separate incidents.
- Filing separate claim forms shouldn't impact how the excess clause applies.
- The underinsurance calculation should consider the escalation clause mentioned in their construction contract, not a general index used by the insurer.
Court's Ruling:
The court sided with the construction company on both points. Here's the court's reasoning:
- Analyzing the flood data and surveyor's report, the court concluded it was one flood event causing damage in stages.
- Filing separate forms was a formality requested by the surveyor and didn't change the event's nature.
- The court allowed the underinsurance adjustment based on the escalation clause in the construction contract, reflecting actual project costs.
The Outcome:
The insurance company was ordered to pay the claim amount with interest, though at a slightly reduced interest rate compared to what the construction company initially requested.