Supreme Court holds fire accidental, directs insurer to pay claim and clarifies coverage for "FFF" with interest at 6%
A Bench of Justices Dipankar Datta and Manmohan heard cross‑appeals arising out of an award of the National Consumer Disputes Redressal Commission (NCDRC) which had partly allowed a consumer complaint by M/s Orion Conmerx Pvt. Ltd. against National Insurance Co. Ltd. The appeals concerned repudiation of a fire claim relating to loss of stock, building, plant and machinery, electrical fittings and items described as “FFF” (furniture, fittings and fixtures), and the quantum and basis of assessment by surveyors.
The Court held that the incident was an accidental fire and that the insurer’s repudiation was unsustainable; it found that the insured had substantiated loss of stock with contemporaneous business records and that the policies covered “FFF”. The Court reiterated established principles governing fire insurance and emphasised that the precise cause of fire was immaterial where there was no allegation that the insured instigated the loss. The Court, in its reasoning, observed: The Court further noted that the policy’s “Description of Risk” expressly provided for “FFF” and held that “FFF” “can only mean furniture, fixtures and fittings.” The appeal by the insurance company was dismissed and the appeal by the insured was allowed; the Court modified interest to simple interest at 6% per annum from three months after the incident until payment.
Background
The dispute arose from a fire at the insured’s manufacturing unit on 25 September 2010. The insured lodged a claim of approximately Rs.3.30 crore across six heads; the surveyor assessed loss at Rs.61,39,539 and the insurer repudiated liability in part, relying on the final surveyor’s conclusion that the physical evidence “precluded the possibility of an accidental ignition of electrical origin” and that multiple sources of fire were indicated. The insured produced preliminary and final surveyor reports, a police investigation report, bank stock audit reports, architect estimates (M/s AURA), a chartered accountant’s loss report (M/s Tarun Gandhi & Co.), cost sheets, production logs, purchase orders and cancelled orders, and extensive contemporaneous stock statements.
The insurer argued that the final surveyor’s report excluded accidental ignition and that the insured failed to produce unit‑wise base documents to substantiate claimed quantities and values; the insurer also contended that several items (notably FFF) were not covered and that surveyor calculations should have adjusted for depreciation, salvage and profit elements. The insured countered that the bank auditor and statutory stock records showed large stock values, that samples excluded by the bank nonetheless had value to the insured, and that the cost sheets and production movements supported the claimed loss; it maintained that the final surveyor had not meaningfully examined the 5,855 pages of documents supplied and had applied arbitrary unit valuations.
The NCDRC had found that the surveyor “had not proved that the fire was not accidental” and accepted documentary evidence to assess loss, awarding Rs.61,39,539 with interest. On appeal, the Supreme Court analysed principles of fire insurance, reiterated that the contract is one of indemnity and that the cause of fire matters only where fraud or instigation is alleged, and applied precedent on construction of policy language and surveyor reports. The Court held that the final surveyor’s negative conclusion on accident lacked reasoning, that the insured had adduced admissible contemporaneous records to substantiate stock loss, and that the policy language covered “FFF”. The Court dismissed the insurer’s appeal, allowed the insured’s appeal, and granted interest at 6% per annum from three months after the incident until payment.
Case No.: Civil Appeal Nos. 3806 of 2020 & 3855 of 2020 Case Title: Orion Conmerx Pvt. Ltd. v. National Insurance Co. Ltd. Appearances: For the Petitioner(s): Mr. Ramesh Singh, Senior Counsel (for M/s Orion Conmerx Pvt. Ltd.) For the Respondent(s): Ms. Shantha Devi Raman, Counsel (for National Insurance Co. Ltd.)