Insurance Claim Triumph: Court Rejects "Willful Negligence" Defense in Fire Damage Case.


09 December 2024 Consumer Protection Act >> Consumer Rights  

In a significant ruling for policyholders, a consumer court has ordered The Oriental Insurance Company Ltd. to pay Rs. 2,22,56,768 to Rashi Steel & Power Limited, overturning the insurer's decision to repudiate a claim arising from a fire at the company's pellet plant. The dispute centered around the interpretation of "willful negligence" within an Erection All Risk Policy, highlighting the complexities of insurance claims and the burden of proof placed on insurers.

Rashi Steel & Power Limited had purchased two Derrick Sizers from the United States and obtained an insurance policy covering their erection at a plant in Bilaspur. During the policy's validity, a fire occurred, causing substantial damage to the machinery. The insurance company, after appointing surveyors, repudiated the claim, citing "willful negligence" on the part of the insured due to the non-removal of shipping brackets from the machines, which they claimed led to an electrical short circuit.


 

 

The crux of the matter revolved around whether the insured's actions constituted "willful negligence," a term with specific legal implications. The court emphasized that "willful negligence" requires an element of intent and awareness of the potential consequences, going beyond mere negligence. It highlighted the distinction between "gross negligence" and "willful negligence," asserting that simple negligence does not automatically disqualify an insured from receiving compensation.

The court scrutinized the insurance company's claim, noting that Rashi Steel & Power Limited had engaged a specialized third-party company for the installation of the machinery. While the non-removal of the shipping brackets was acknowledged, the court found that the insurance company failed to prove that this omission was a deliberate act of "willful negligence." Crucially, the court stressed that the onus of proving "willful negligence" lies with the insurer, a burden that was not adequately discharged in this case.

Furthermore, the court addressed the insurer's argument regarding the non-submission of necessary documents by the insured. It found that the insured had, in fact, responded to all queries and provided the requested information, contradicting the insurer's claim.

Another key point of contention was the insured’s claim that they were not provided the general exclusion clause of the policy. The court found that this claim was without merit, as the policy documents clearly referenced the existence of such clauses.

Drawing upon established legal precedents, the court underscored that insurance policies are designed to protect against the consequences of negligence, and exceptions are to be interpreted strictly against the insurer. The judgment reinforces the principle that insurers cannot evade liability by merely alleging "willful negligence" without providing substantial evidence of intentional misconduct.

Ultimately, the court ruled in favor of Rashi Steel & Power Limited, directing The Oriental Insurance Company Ltd. to pay the assessed loss of Rs. 2,22,56,768, along with interest, underscoring the importance of clear policy terms and the need for insurers to substantiate claims of "willful negligence" with concrete evidence.


  Section 21, CONSUMER PROTECTION ACT - 2019  

  Consumer Protection Act, 1986