Fire Insurance Policies Don't Cover Goods Outside Factory Shed, SC Rules; Insurer's Claim Reduction Deemed Reasonable.

The SC ruled that the fire insurance policies did not cover goods outside the factory shed, as specified in the policy terms. The insurer's reduction of the claim amount was deemed reasonable since the uncovered goods were outside the shed. The SC overturned the NCDRC's award of 18% interest and litigation costs, deeming them excessive, and allowed the insurer's appeal while dismissing the complainant's appeal for the full claim.

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Issues Involved:
1. Coverage under the fire insurance policies.
2. Assessment and reduction of the claim amount.
3. Award of interest and litigation costs.

Summary:

1. Coverage under the fire insurance policies:
Both appeals arise from the National Consumer Disputes Redressal Commission's order regarding the claim under two fire policies by M/s Polymat India Pvt. Ltd. The primary issue was whether the fire insurance policies covered goods lying outside the factory shed. The policies described the insured property as "factory-cum-godown and office premises," but the complainant later clarified there was no godown. The complainant requested amendments to include goods outside the shed, but the insurance company only agreed to include the name of Allahabad Bank as a mortgagee. The Supreme Court concluded that the policies only covered goods within the shed, not those outside, as the complainant had answered in the negative to queries about goods stored in the open.

2. Assessment and reduction of the claim amount:
The insurance company reduced the claim amount based on the assessment that certain goods and machinery outside the shed were not covered. The Supreme Court found the insurance company's reasons for reduction reasonable and justified. The surveyor's assessment included amounts for goods outside the shed, which were not covered under the policy terms. The Court emphasized that the contract terms should be interpreted strictly as agreed upon by both parties.

3. Award of interest and litigation costs:
The National Commission had awarded 18% interest per annum and litigation costs of Rs. 10,000/- to the complainant. The Supreme Court found the interest rate excessive, considering the insurance company acted within a reasonable time to settle the claim. Consequently, the Court set aside the interest award and litigation costs. The appeal by National Insurance Company (C.A. No. 6063/1999) was allowed, and the order of the Commission was set aside. The appeal by Polymat India Pvt. Ltd. (C.A. No. 4366/1999) was dismissed, as the complainant was not entitled to the full loss claimed.

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