The Delhi State Consumer Disputes Redressal Commission has reaffirmed that insurers cannot arbitrarily appoint a second surveyor to repudiate claims, upholding a District Commission order that found United India Insurance Co. Ltd. guilty of deficiency in service for rejecting a theft claim without valid justification under Section 64-UM of the Insurance Act, 1938.
Background & Facts
The Dispute
The complainant, Mr. Ajay Sharma, resident of 508, Krishna Gali, Katra Neel, Chandni Chowk, Delhi-110006, filed a consumer complaint against United India Insurance Co. Ltd. (OP-1) alleging deficiency in service. The dispute arose from the repudiation of his theft claim for a Skoda Laura vehicle (Registration No. DL-1CQ-2400) insured under Policy No. 0402813117P109209077, valid from 28.09.2017 to 27.09.2018, with an Insured Declared Value (IDV) of Rs. 11,00,000.
Key Facts
- The insured vehicle was stolen on 18.02.2018 from Gandhi Nagar, Pushta Shyam Block, Shahdara, Delhi.
- Mr. Sharma immediately registered e-FIR No. 005437 dated 18.02.2018 with the Crime Branch.
- The claim was lodged with United India Insurance Co. Ltd., which initiated investigations through:
- First investigator: Mr. Balbir Singh Bahel (D-37, Old Gupta Colony, Near Vijay Nagar, Delhi-110009), who submitted his report on 02.04.2018, assessing the loss at Rs. 10,99,000.
- Second investigator: M/s X-Cops Investigation Allied Services (A-7, Middle Circle, Connaught Place, New Delhi-110001), appointed after 5 months, who submitted a report on 04.09.2018, declaring the claim non-genuine due to alleged misrepresentation.
- The insurer demanded additional documents via letter dated 15.05.2018 and WhatsApp message dated 23.05.2018, including purchase receipt, proof of payment, previous policies, and ITRs. Mr. Sharma responded via letters dated 25.05.2018, 11.06.2018, and 23.07.2018.
- The claim was repudiated via letter dated 08.04.2019 on grounds of false documents and misrepresentation.
Procedural History
- 29.12.2023: Complaint filed before District Consumer Disputes Redressal Commission-VI, New Delhi (Complaint No. not specified).
- 28.11.2023: District Commission passed judgment, holding the insurer guilty of deficiency in service and directing:
- Payment of IDV of Rs. 10,99,000 with 7% p.a. interest from 08.04.2019 till realization.
- Compensation of Rs. 50,000 for mental agony.
- Litigation costs of Rs. 25,000, with 9% p.a. interest on non-payment.
- 12.05.2026: Appeal heard by Delhi State Consumer Disputes Redressal Commission.
- 27.07.2026: Appeal dismissed, upholding the District Commission’s order.
The Parties' Positions
Appellant (United India Insurance Co. Ltd.):
- Contended the claim was rightly repudiated based on the second investigator’s report, which found misrepresentation and false documents.
- Argued the vehicle’s IDV was inflated (actual value alleged as Rs. 5.5 lakh) and the complainant failed to prove lawful ownership or insurable interest.
- Asserted the District Commission erred in relying on the first investigator’s report and ignoring the second.
Respondent (Mr. Ajay Sharma):
- Denied allegations of fraud or misrepresentation, stating he was the registered owner and had paid the premium.
- Argued the insurer failed to justify the appointment of a second investigator and could not dispute the IDV after accepting it at the time of policy issuance.
- Cited Section 64-UM of the Insurance Act, 1938, and judgments like National Insurance Company Ltd. vs. Shesh Rao (2009 NCJ 436) and Dharmender Goel vs. Oriental Insurance Co. Ltd. (IV (2011) CPJ 63 (SC)) to support his case.
Relief Sought
The appellant sought to set aside the District Commission’s order dated 28.11.2023, while the respondent prayed for dismissal of the appeal with costs.
The Legal Issue
The central question was whether the insurer could justify the appointment of a second surveyor to repudiate a claim under Section 64-UM of the Insurance Act, 1938, and whether the District Commission erred in holding the insurer guilty of deficiency in service for arbitrarily rejecting the claim based on the second investigator’s report.
Arguments Presented
For the Appellant
- The claim was repudiated based on the second investigator’s report, which found the claim non-genuine due to misrepresentation and false documents.
- The vehicle’s IDV was allegedly inflated, and the complainant failed to establish ownership or insurable interest.
- The District Commission erred in relying on the first investigator’s report and ignoring the second, which was appointed due to serious doubts about the claim’s genuineness.
For the Respondent
- The insurer failed to justify the appointment of a second investigator and could not dispute the IDV after accepting it at the time of policy issuance.
- The allegations of fraud and misrepresentation were baseless and unsupported by cogent evidence.
- The District Commission correctly applied Section 64-UM of the Insurance Act, 1938, and relied on binding precedents to hold the insurer guilty of deficiency in service.
The Court's Analysis
The Commission examined whether the insurer’s appointment of a second investigator was justified under Section 64-UM of the Insurance Act, 1938. It noted that the provision mandates that insurers cannot appoint a second surveyor as a matter of course. If the first surveyor’s report is unacceptable, the insurer must specify reasons but cannot unilaterally appoint a second surveyor to contradict the first.
"The appointment by the insurer of a second surveyor itself would be a reflection on the conduct of the first surveyor. A surveyor or a loss assessor is duty-bound to give a correct report. If the insurer finds that a surveyor has not considered certain relevant points or has considered irrelevant points, it can certainly require the surveyor to give his views and then come to its own conclusion, but the insurer cannot appoint a second surveyor to counter or contradict the report of the first surveyor."
The Commission also relied on the National Commission’s judgment in United India Insurance Co. Ltd. vs. M/s Qcurewel Packaging Pvt. Ltd. (Revision Petition No. 2124 of 2017, decided on 16.10.2023), which held that the appointment of a second surveyor must be justified by the facts and circumstances of the case. In this instance, the insurer failed to provide any valid reason for discarding the first investigator’s report.
Furthermore, the Commission concurred with the District Commission’s finding that the insurer could not dispute the IDV after accepting it at the time of policy issuance and collecting the premium. This principle was reinforced by the judgments in National Insurance Company Ltd. vs. Shesh Rao (2009 NCJ 436) and Dharmender Goel vs. Oriental Insurance Co. Ltd. (IV (2011) CPJ 63 (SC)).
The Verdict
The Delhi State Consumer Disputes Redressal Commission dismissed the appeal, upholding the District Commission’s order dated 28.11.2023. The insurer was directed to:
- Pay the complainant the IDV of Rs. 10,99,000 with 7% p.a. interest from 08.04.2019 till realization.
- Pay Rs. 50,000 as compensation for mental agony.
- Pay Rs. 25,000 as litigation costs, with 9% p.a. interest on non-payment.
What This Means For Similar Cases
Arbitrary Second Surveyor Appointments Are Invalid
Insurers cannot appoint a second surveyor to contradict the first without valid justification. Practitioners must:
- Challenge the appointment of a second surveyor if no cogent reasons are provided for discarding the first report.
- Rely on Section 64-UM of the Insurance Act, 1938 to argue that the insurer’s right to settle claims cannot be abridged by arbitrary surveyor appointments.
IDV Cannot Be Disputed Post-Policy Issuance
Once an insurer accepts the IDV at the time of policy issuance and collects the premium, it cannot later dispute the value without cogent evidence. Practitioners should:
- Argue that the insurer is estopped from challenging the IDV after accepting it.
- Cite precedents like National Insurance Company Ltd. vs. Shesh Rao and Dharmender Goel vs. Oriental Insurance Co. Ltd. to support this contention.
Deficiency in Service for Unjustified Repudiation
Repudiating a claim based on an unjustified second surveyor report amounts to deficiency in service. Practitioners can:
- Seek compensation for mental agony and litigation costs if the insurer’s repudiation is arbitrary.
- Use this judgment to argue that insurers must adhere to IRDA guidelines and Section 64-UM of the Insurance Act, 1938.
