The West Bengal State Consumer Commission has clarified that a Jeweller's Block Insurance Policy does not extend coverage to financial losses arising from non-payment of sale proceeds by a business intermediary. This ruling reinforces the distinction between property damage and commercial credit risk in insurance law.
Background & Facts
The Dispute
The complainant, LGW Limited, a manufacturer and seller of jewellery and precious metal products, held a Jeweller's Block Insurance Policy (No. 311700/48/2017/4682) with The Oriental Insurance Co. Ltd. and its Senior Divisional Manager for the period 27.07.2016 to 26.07.2017, upon payment of a premium of Rs. 2,07,882/-. The policy was intended to indemnify physical loss or damage to insured jewellery. The dispute arose after LGW Limited suffered a financial loss of Rs. 31,86,177/- due to non-receipt of sale proceeds from M/s Getit Infoservices Pvt. Ltd., an online broker operating the portals askme.com and askmebazar.com.
Key Facts
- LGW Limited displayed its jewellery products on Getit Infoservices’ online platforms
- Customers made payments directly to Getit Infoservices, not to LGW Limited
- LGW Limited packaged and dispatched ordered items via Getit Infoservices’ logistics network
- Getit Infoservices was obligated to deduct commission and logistics charges and remit the balance sale proceeds to LGW Limited
- Total sales through the portals amounted to Rs. 32,96,906/-
- Only Rs. 1,10,729/- was remitted by Getit Infoservices; the balance of Rs. 31,86,177/- remained unpaid
- LGW Limited sent multiple requests for payment, all of which went unaddressed
- Criminal proceedings for cheating and breach of trust were initiated against Getit Infoservices before a Magistrate
- LGW Limited filed an insurance claim under the Jeweller’s Block Policy, asserting that the loss occurred while goods were in the custody of the broker
- The insurer investigated and repudiated the claim on 15.01.2018, citing absence of physical loss or damage to insured property
- The complaint was filed before the State Consumer Commission on 18.04.2018
- M/s Getit Infoservices Pvt. Ltd. was impleaded as Opposite Party No. 3 on 02.08.2022
Procedural History
- 27.07.2016: Jeweller’s Block Insurance Policy issued for one year
- 15.01.2018: Insurer repudiated claim citing non-covered peril
- 18.04.2018: Consumer Complaint No. SC/19/CC/708/2018 filed before State Consumer Commission
- 02.08.2022: Commission ordered impleadment of M/s Getit Infoservices Pvt. Ltd. as Opposite Party No. 3
- 25.06.2026: Final order passed by the Commission
The Parties' Positions
Complainant (LGW Limited): Argued that the policy covered goods in the custody of brokers, and that failure by Getit Infoservices to remit proceeds or return goods constituted a covered loss. Contended that the insurer’s investigation was delayed and lacked evidentiary basis. Asserted that criminal proceedings against the broker proved dishonest conduct warranting liberal interpretation of the policy.
Respondents (Oriental Insurance Co. Ltd. and its Senior Divisional Manager): Contended that the policy indemnified only physical loss, theft, or damage to insured jewellery. Argued that the loss was purely financial - non-payment of sale proceeds - and therefore a commercial risk outside the policy’s scope. Highlighted absence of evidence showing physical loss of any specific item, no customer complaints of non-delivery, and no reconciliation of inventory.
Relief Sought
The complainant sought: (i) reimbursement of Rs. 31,86,177/- as claimed loss; (ii) interest at 12% per annum from the date of repudiation; and (iii) compensation of Rs. 5,00,000/- for mental agony and harassment.
The Legal Issue
The central question was whether a financial loss arising from non-payment of sale proceeds by a business intermediary constitutes a covered peril under a Jeweller’s Block Insurance Policy, or whether such loss falls outside the scope of property indemnity and into the domain of commercial credit risk.
Arguments Presented
For the Appellant/Petitioner
The complainant relied on the policy’s clause covering goods in the custody of brokers and argued that the broker’s failure to remit proceeds or return goods amounted to a loss of insured property. It cited National Insurance Co. Ltd. v. Harsolia Motors & Ors. to establish its status as a consumer under the Consumer Protection Act, 1986. It further contended that the insurer’s investigation was conducted long after the broker’s platform collapsed, rendering it unreliable. The complainant emphasized that the criminal complaint against the broker demonstrated dishonesty, warranting a broad interpretation of the policy in its favour.
For the Respondent/State
The insurer argued that the policy was strictly for indemnity against physical loss, damage, or theft of insured jewellery - not for guaranteeing payment by third parties. It relied on the principle that insurance contracts must be interpreted according to their plain terms and that extending coverage to trade debts would transform property insurance into credit insurance, which was never intended. The insurer highlighted the absence of any evidence proving physical loss of specific items, no customer complaints, and no logistics records indicating non-delivery. It further contended that the proximate cause of loss was the broker’s failure to pay, not any peril covered under the policy.
The Court's Analysis
The Commission began by affirming that LGW Limited qualified as a consumer under the Consumer Protection Act, 1986, following the precedent in National Insurance Co. Ltd. v. Harsolia Motors & Ors., which held that commercial entities purchasing insurance for risk mitigation, not profit generation, fall within the definition of consumer.
However, the Commission turned to the core issue: the nature of the loss. It observed that while the policy may cover goods in the custody of brokers, the complainant failed to establish that any identifiable insured property was lost, stolen, or damaged while in the broker’s custody. The claim was quantified entirely on unpaid sale proceeds, not on missing inventory.
"The figure of Rs.31,86,177/- has been arrived at by deducting the amount received from the Broker Company from the aggregate value of online orders. This method of computation itself reveals the true nature of the claim. What the complainant seeks to recover is the outstanding sale value of goods and not the value of any specific insured property proved to have been physically lost."
The Commission emphasized that loss of goods and loss of sale proceeds are legally distinct. The former may attract insurance coverage; the latter is a claim for debt or damages against the defaulting party. The complainant produced no inventory reconciliation, no delivery records, no customer complaints, and no evidence of non-delivery or disappearance of specific items.
The Commission further noted that the proximate and dominant cause of loss was the broker’s failure to remit funds - a commercial risk - not a peril like theft, fire, or transit damage. Insurance law requires identification of the proximate cause, and here, it was clearly non-payment, not physical loss.
"Acceptance of the complainant's contention would lead to consequences inconsistent with the nature of a Jeweller's Block Policy. Every default by a commission agent, franchisee, online marketplace, consignee or business intermediary would then become recoverable from the insurer, irrespective of whether any physical loss of insured property occurred."
The Commission concluded that the insurer’s repudiation was neither arbitrary nor mala fide. The investigation was based on available facts, and the insurer was under no obligation to indemnify a commercial default.
The Verdict
The complaint was dismissed in its entirety. The Commission held that the loss claimed by LGW Limited does not fall within the coverage of the Jeweller’s Block Insurance Policy, and the insurer’s repudiation of the claim does not constitute deficiency in service. No reimbursement of Rs. 31,86,177/-, no interest, and no compensation were awarded. The complainant’s remedy, if any, lies against M/s Getit Infoservices Pvt. Ltd. in appropriate civil or criminal proceedings.
What This Means For Similar Cases
Loss of Sale Proceeds Is Not an Insured Peril
- Practitioners must advise clients that insurance policies covering goods in transit or custody do not extend to non-payment by intermediaries
- Claims based on unpaid invoices or delayed remittances must be pursued as contractual or criminal matters, not insurance claims
- Policyholders should consider separate trade credit insurance for receivables risk
Burden of Proof Lies with the Insured to Establish Physical Loss
- Insured parties must produce concrete evidence: inventory logs, delivery receipts, customer affidavits, logistics reports
- Quantifying loss by subtracting received amounts from total sales is insufficient without proof of physical disappearance
- Absence of reconciliation or documentation will defeat claims even if the intermediary is dishonest
Proximate Cause Doctrine Is Central to Insurance Claims
- Courts will examine the dominant and effective cause of loss - not the incidental or remote cause
- Financial defaults by third parties are commercial risks, not insured perils unless explicitly covered
- Insurers are not guarantors of business partners’ solvency or honesty
