Insurance Co to pay Rs 7 cr for diamonds that flew out of the window
26 May, 2014 12:12 PM
The Bombay High Court has directed the United India Insurance Company to pay over Rs 7 crore to a diamond trading firm based in south Mumbai's Panchratna building. Justice Gautam Patel noted in his order that the insurance company "wrongfully rejected" the claim filed by C Mahendra Exports despite the firm having an active insurance policy for Rs 100 crore.

The court further directed the insurance company to pay Rs 15 lakh towards litigation costs along with interest at an annual rate of 5 per cent from 2010.

The claim

C Mahendra Exports lost nearly 2,300 carats of diamonds in a freak accident in September 2001, on the Ganpati Visarjan day. A boiler, in which around 470 carats of diamonds were being cleaned, exploded early in the morning. The firm employees rushed to the room hearing the explosion, and found that the diamonds, along with another batch of over 2300 carats that was placed close to the boiler, had flown out of the window.

The firm said in its claim that the door of the room opened inward, resulting in a single window bearing the brunt of the explosion. The window was protected by an iron grill, galvanized sheets and glass, which was completely shattered. A few diamonds were found in the balcony of the building opposite and a few found scattered in the chowk, taking the total recovery to over 570 carats.

The United India Insurance Company had appointed a second surveyor in this case with a specific purpose to assess a particular portion of the claim, after the main claim was given a go-ahead by the first surveyor (surveyor is a firm appointed by the insurance company to assess a claim made by an insured person/establishment and submit its report to the insurer. Usually, the surveyor's word is taken as final).

In its reply to the National Consumer Commission justifying the claim rejection, the insurance firm said the diamond trading firm "was in breach of warranties, including that the property (diamonds) be secured in locked safes outside business hours and that the premises be fully protected by watchmen." The diamond firm, which had approached the National Consumer Commission after the claim had been rejected, withdrew the complaint and later moved HC.

The high court, however, observed that the fact that there was a blast was undisputed and no amount of lockers or watchmen could have prevented the loss. Criticising the insurance company for accepting the second surveyor's report, the court said, "No insurance company can obtain report after report till it finally gets one that absolves it of liaity."
Source : Mumbai Mirror

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