The Supreme Court has upheld an insurance company's decision to repudiate a fire insurance claim, ruling that the policyholder had willfully made false declarations. According to LiveLaw, the court set aside an order by the National Consumer Disputes Redressal Commission (NCDRC) that had awarded compensation to Hemkund Duplex and Board Pvt. Ltd. The apex court found that the insurer, New India Assurance Company Ltd., was entitled to reject the claim in its entirety because the insured violated specific policy conditions by inflating inventory values.
The court noted that the NCDRC had erred in dismissing detailed surveyor reports and investigative agency findings. These reports demonstrated that the affected shed contained unusable dead scrap rather than the usable raw material claimed. The books of account showed imaginary yields and arbitrary consumption to create non-existent stock, while efforts to minimize fire loss were found to be non-genuine. The Supreme Court held that when an insured person relies on such false declarations, the insurer is lawfully entitled to repudiate the claim without further ado.
In a related ruling on the evidentiary value of surveyor reports, the court clarified that while a preliminary surveyor's assessment is a prerequisite for settling large claims, it is not conclusive. However, insurers cannot appoint a second surveyor without cogent reasons. In this instance, the appointment of an investigative agency was permissible because the preliminary surveyor observed serious abnormalities requiring meticulous investigation to rule out arson. The court stated that consumer fora cannot ignore joint surveyor reports containing detailed empirical data, as doing so causes a miscarriage of justice.
The court also addressed the legal presumption of accidental fire, stating that this principle does not apply where there is reasonable suspicion of instigation by the insured. Physical verification contradicting massive structural damage, combined with pre-demolition of material and delaying tactics by the insured, meant the claim could not be allowed merely by presuming the fire was accidental. The court relied on previous precedents to support the view that gross lack of bona fide fire-minimization efforts negates the presumption of accident.