Insurer was within the policy to close the Kota fire claim, yet owes 70 per cent of the loss, NCDRC rules
The National Commission found the Chitresh Cold Storage complaint within time, held that utmost good faith required Oriental Insurance to offer a non-standard settlement for a genuine but poorly documented loss, and cut the usual 75 per cent to 70 for the lapses of the insured.
A fire that started in a Kota cold storage on 19 February 2005 burned for three to four days and smouldered in the stored goods for more than four months. The surveyor who inspected the wreckage found the loss genuine and assessed it at ₹18,33,948, but the owner never produced the bills and records he kept asking for, and Oriental Insurance closed the file as no claim. The Rajasthan State Commission threw the complaint out as time-barred. On 16 October 2026, nearly 21 years after the fire, the National Consumer Disputes Redressal Commission reversed that finding, held that the insurer's duty of utmost good faith required it to offer the non-standard settlement insurers use for genuine but poorly documented losses, and ordered it to pay ₹12,83,764, 70 per cent of the assessed loss, with 6 per cent interest from 2009.
Four days of fire, four months of smouldering
Chitresh Cold Storage Private Limited, represented by its director Harish Kumar Kotwani, ran a cold store and ice factory at Kota in Rajasthan. It held a Standard Fire and Special Perils policy from Oriental Insurance for 5 April 2004 to 4 April 2005, insuring the building for ₹40,00,000 and plant and machinery for ₹20,53,900, a total of ₹60,53,900.
The surveyor's report, which the National Commission quoted at length, describes what happened on 19 February 2005. The fire began in chamber 1, where kirana goods including chillies were stacked on wooden floors laid at every level. The stock fed the flames, and the glass wool insulation on the walls, roof and floors made the damage worse. Smoke with no outlet filled the building so thickly that firefighters could not get inside, and when they broke openings in the walls to pour in water, the draught fed the fire instead. Heat and smoke travelled into chamber 2, which was empty and being readied for the potato season. The fire brigade eventually let the blaze burn itself out. The main flames were put out by 23 February 2005, but the bags kept smouldering for over four months.
The load-bearing beams and columns of chamber 1 cracked, sagged and in places collapsed, and the local authorities ordered the chamber demolished. Part of its structure fell on the office, store and pump house, and on the condenser coils outside. The machine room, ice factory, transformer and borewell were saved; the cooling coil bunkers, ammonia accumulators, condensers, piping, wiring, wooden flooring and insulation were burnt out. The owner lodged FIR No. 62/2005 at Udyog Nagar police station on 28 February 2005, and the police concluded that a short circuit had caused the fire and that there was no foul play.
Two years of reminders and an empty chair in Kota
The surveyor inspected the site and on 2 March 2005 asked for documents. The owner says it supplied everything, including by a letter of 5 December 2005, and that the surveyor simply kept writing for more. The insurer's account is different. Its surveyor, Arun Gupta, wrote on 10 April 2006 listing what was still outstanding after a meeting with director G.D. Agarwal and the manager: a certified police report, the fire brigade report, the current reinstatement cost of the plant and machinery with supporting papers, repair and replacement estimates with suppliers' quotations, and a valuation of the building with bills for rates and quantities. The claim was closed on 12 July 2006 for non-submission of documents and reopened on 18 August 2006 at the owner's request, on a promise by Agarwal and Kotwani to supply them.
The final survey report of 15 June 2007 recorded seven items still pending. The owner had supplied the police final report but not the FIR itself, and no signed description of how the fire was discovered and fought. For the machinery it had sent two quotations from Friends Refrigeration Manufacturers, dated 25 November 2005 and 20 April 2006, which differed from each other and left some items unpriced; for the building, two differing quotations from J.K. Consultants and Builders without any basis for quantities or rates. There were no original purchase bills, no construction cost bills and no final claim bill. The surveyor fixed a visit to Kota for 8 and 9 June 2007 after confirming twice with Agarwal that he would be there. When he arrived, Agarwal was in Bhopal; Kotwani explained that a relative had died in Mumbai and Agarwal had rushed there. The insurer gave a last opportunity by letter of 26 June 2007 and, after a reply of 23 July, wrote on 26 July 2007 that the claim had been filed as no claim.
The owner wrote to the insurer's Deputy Chief Manager on 20 November 2007 asking for reconsideration. The reply of 27 November 2007 said the case was being processed and that information would follow. None did, and on 5 October 2009 the owner filed Complaint No. 38 of 2009 before the Rajasthan State Commission.
Why the complaint was not time-barred
The State Commission, by its order of 25 January 2016, dismissed the complaint as barred by Section 24A of the Consumer Protection Act, 1986. It held that the letter of 26 July 2007 was a final repudiation, not a conditional closure, so the two-year clock ran from that date and had expired before the complaint was filed. The November 2007 letters, it said, merely sought reconsideration of a claim already rejected. It also accepted the insurer's reliance on Condition 6(ii) of the policy, under which a rejected claim is deemed abandoned if not made the subject of a suit within twelve months, holding on the authority of Patel Roadways v. Birla Yamaha that a consumer complaint is a suit for this purpose. It added that the owner had failed to produce the documents, so the denial was not a deficiency in service.
The owner appealed on 26 February 2016. Among its grounds: the head office letter of 27 November 2007 showed the claim was still under process; the insurer's own letters of 24 January 2006 and 31 May 2007 acknowledged that the documents had been supplied; the survey report had taken more than two and a half years against the six-month ceiling in the IRDA Regulations, 2002; and the surveyor had in fact assessed the loss at ₹18,33,948, which made the allegation of non-submission false.
The appeal sat with the National Commission for ten years. In orders of 7 May and 15 September 2025 the bench went through the surveyor's paragraphs 4.16 and 4.18 and directed counsel S.N. Bohra to prepare a chart showing which documents had been demanded, which supplied and why the rest, said to have burned in the fire, could not be produced. It framed three questions: limitation, whether the no claim closure was sustainable, and whether the insurer's conduct was a deficiency in service.
On limitation, President Justice A.P. Sahi and Member Bharatkumar Pandya, who wrote the judgment, disagreed with the State Commission. The closure of 26 July 2007 was for mere want of documents, not strictly a repudiation, and in effect invited the owner to comply. The owner had written within two years of it, and the insurer had replied that the matter was under consideration. Those exchanges were not still-born, the Commission held; they extended the limitation period to two years from the insurer's last communication on 27 November 2007, that is, to 26 November 2009. The complaint filed on 5 October 2009 was in time, and the State Commission had taken an “unduly very strict approach”. Because the fire was 21 years old, the appeal had been pending a decade and the survey report was the only evidence on merits before either forum, the bench decided the merits itself rather than send the case back.
Within the policy, but short of utmost good faith
The Commission did not spare the owner. On the record, it said, the insured had been “evidently lethargic and even reluctant” to produce documents, and about 15 months after the loss still had not supplied the most basic material for assessing it. The only explanation offered was that estimates had been given and the rest of the original records had burned. On a strict reading of the policy conditions, the Commission held, closing the claim as no claim could not be faulted, and the insurer's action involved strictly no deficiency in service.
What changed the outcome was the survey report itself. Read as a whole, it left no doubt, to the surveyor or to the bench, that a substantial loss of insured property had occurred in a fire that was not disputed and in which the police had found no wrongdoing by the owner. The surveyor had matched the owner's estimates against what he physically observed, prepared detailed annexures and assessed the loss conservatively. Against a claim of nearly ₹90 lakh and a sum insured of about ₹60 lakh, he put the building loss at ₹45,07,665, less 26 per cent depreciation, salvage of 2.5 per cent and underinsurance of 55.11 per cent, giving ₹14,59,948; and the plant and machinery loss at ₹31,08,200, less depreciation at 6.67 per cent a year for 13 years capped at 75 per cent, ₹3,50,000 salvage and underinsurance, giving ₹3,88,999. After a ₹5,000 deduction under the electrical exclusion clause and the ₹10,000 policy excess, the net assessed loss was ₹18,33,948. He did not recommend repudiation.
Over and above the policy conditions, the Commission said, sits the principle of uberrima fides, which binds both sides of an insurance contract at all times. Where the loss is bona fide and well evidenced, even if not well established by the insured because of deficient documents, where the surveyor has assessed it, and where the only obstacle is a technical breach of a policy condition, insurers generally apply a non-standard settlement at 75 per cent of the assessed loss. The bench held that this case qualified, for three reasons: there was no doubt about the genuineness and extent of the fire and the loss; the surveyor's assessment was detailed, conservative and realistic; and the surveyor had not recommended repudiation, which showed he was satisfied about the quantum despite the missing papers. The insurer's obligation of “hand-holding of the insured in difficult times of evident loss” could not be overlooked. Failing to exercise that discretion was a deficiency in service.
The bench then docked the owner for its own conduct. It was conscious, it said, that invoking good faith against the insurer must not excuse the insured, whose failures had justified the closure in the first place, and that proving the quantity, value and quantum of the loss to the surveyor is the duty of the insured. To mark that, it fixed the payout at 70 per cent of the assessed loss rather than the usual 75.
Order
Oriental Insurance must pay Chitresh Cold Storage ₹12,83,764, being 70 per cent of the surveyor's assessment of ₹18,33,948, with simple interest at 6 per cent from 5 October 2009, the date of the complaint, until payment. Payment is to be made before 16 January 2027; on any amount still unpaid after that date, interest rises to 7 per cent. The appeal was partly allowed.