Calcutta High Court: In an writ petition challenging the repudiation of the insurance claim by the respondent as being arbitrary, a single-judge bench comprising of Sabyasachi Bhattacharyya*, J., held that the repudiation of the petitioner’s claim by the respondent was arbitrary, considering the elaborate process involving an independent expert’s report and a subsequent Addendum Report by the surveyor, both of which were accepted by the respondent. The Court partially allowed the writ petition, and setting aside the repudiation, directed the insurer to re-evaluate the claim, considering specified reports and providing a reasoned decision by 29-02-2024.
Factual Matrix
The petitioner, West Bengal Power Development Corporation Limited, a Public Sector Undertaking of the Government of West Bengal, possessed a Mega/Industrial All Risk Insurance Policy with the respondent, New India Assurance Company Limited, covering its thermal power plant in Bakreswar, West Bengal. In August 2017, the plant experienced vibrations, leading to its shutdown in August 2018 for inspection. Subsequent examinations revealed damage to the Generator Rotor. The petitioner lodged an insurance claim for Rs. 32,70,96,000/- in September 2018. The respondent’s appointed surveyor initially deemed the claim inadmissible but later assessed a gross loss of Rs. 32,53,26,000/-. Disagreement ensued, and two sets of “Root Cause Analysis” (RCA) Reports were obtained, both indicating sudden and accidental damage. The initial surveyor’s report stated inadmissibility, but an independent agency, TCR Advanced Engineering, later supported the claim. The respondent, after multiple assessments, eventually admitted the loss payable as Rs. 30,50,15,562/- by an email dated 20-09-2021. However, in a cryptic email on 24-01-2022, the respondent decided to maintain its earlier repudiation, prompting the petitioner to file the present writ petition challenging the decision.
Moot Point
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Whether the repudiation of the insurance claim by the respondent is arbitrary and without justification?
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Whether the writ petition maintainable under Article 226 of the Constitution of India for the enforcement of an insurance claim?
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Whether the repudiation valid in light of Regulations 15(8) and 15(9) of Insurance Regulatory and Development Authority of India (IRDAI), Protection of Policy Holders’ Interest Regulations, 2017?
Parties’ Contentions
The petitioner argued that the repudiation was arbitrary and against settled principles after the surveyor’s report was rectified and a fresh report issued. It was contended that the insurance company must establish, with cogent evidence, the applicability of an exclusion clause in case of claim repudiation. The petitioner cited precedents emphasising the insurer’s duty to provide reasons and the maintainability of writ petitions for insurance claims.
The respondent contended that the surveyor’s report is not binding, and the insurer can independently decide on the claim. The respondent highlighted the technical issues, suggesting a systematic and continuous process of wear-and-tear rather than a sudden breakdown. The respondent cited precedents, including those stating the non-binding nature of surveyor reports, are invoked. It was argued that the dispute involves factual issues requiring evidence and cross-examination, unsuitable for resolution through a writ petition
Court’s Assessment
The Court examined IRDAI regulations, emphasising the insurer’s obligation to settle or reject a claim within specified timelines. The Court criticised the insurer’s post-facto justification for repudiation, emphasising the acceptance of the expert and surveyor reports. The Court held that the repudiation lacked justification, considering the elaborate process of expert opinion and the subsequent acceptance of the claim by the surveyor. The Court held that the repudiation of the petitioner’s claim by the respondent was arbitrary.
The Court acknowledged the non-binding nature of the surveyor’s report but emphasised that the insurer cannot repudiate without providing cogent reasons, especially after reopening the claim and obtaining additional expert opinions. The Court held that the insurer failed to provide adequate reasons and applied the initial surveyor’s report without proper authority.
The Court upheld the maintainability of the writ petition under Article 226, given the challenge on grounds of arbitrariness and palpable illegality in the repudiation process. While recognizing the limitations of the Court in deciding technical details, the Court set aside the impugned repudiation and directed the insurer to reevaluate the claim, considering the second Addendum Report and the expert report. The Court instructed the respondent to communicate the reasoned decision to the petitioner by 29-02-2024. The Court refrained from deciding on the technical merits of the claim, leaving it to the insurer’s expertise.
Court’s Decision
The Court partially allowed the writ petition, emphasising on the insurer’s obligation to provide reasoned justifications for claim repudiation. It also directed a fresh assessment of the claim based on the accepted reports. The Court refrained from delving into the merits of the claim and no order was issued regarding costs.
[W.B. Power Development Corpn. Ltd. v. New India Assurance Co. Ltd., 2024 SCC OnLine Cal 855, order dated 29-01-2024]
*Judgment by Justice Sabyasachi Bhattacharyya
Advocates who appeared in this case :
Mr. Suddhasatva Banerjee, Mr. Chayan Gupta, Mr. Shoham Sanyal and Mr. Aviroop Mitra, Counsel for the Appellant
Mr. S.N. Ganguly, Mr. Siddhartha Goswami and Mr. Vivekananda Das, Counsel for the Respondent
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