Summary
Machinery insured under a Standard Fire and Special Perils policy was destroyed in a 2009 fire, and the insurer repudiated the claim. The surveyor had assessed the loss at Rs. 29,17,500 on reinstatement value and Rs. 12,60,000 on depreciated value. The State Commission awarded the reinstatement value, but the NCDRC reduced the award to the depreciated value. The Supreme Court restored the State Commission's award. Under Clause 9 of Section 2 of the policy, where the insurer does not or cannot reinstate the property, it must pay the sum needed to reinstate or repair it to its former condition. The surveyor's reinstatement assessment is relevant evidence of that sum. The insured was not entitled to the cost of new machinery.
Issues
- Whether, on a true interpretation of Clause 9 of Section 2 of a fire insurance policy, the insured is entitled to the reinstatement value or only the depreciated value of plant and machinery damaged by fire where the insurer did not reinstate the property.
Provisions considered
- Section 2, Clause 9, Standard Fire and Special Perils PolicyThe clause gives the insurer an option to reinstate instead of paying, and where it is unable to reinstate or repair, obliges it to pay the sum requisite to reinstate or repair the property to its former condition. (¶¶ 5.1, 5.2)
Held
- The case falls under the second part of Clause 9, the insurer being unable to reinstate or repair, so the insured is entitled to the sum required to reinstate the property, for which the surveyor's reinstatement assessment of Rs. 29,17,500 is relevant evidence; the NCDRC misread the clause in awarding depreciated value. (¶ 5.2)
- The insured's claim of Rs. 76,64,000 representing the value of new machinery was rightly rejected by both fora. (¶ 5.2)
Result
Civil Appeal No. 83 of 2023 allowed; the NCDRC judgment dated 20.02.2019 in First Appeal No. 207 of 2015 set aside and the State Commission's order restored, the insured being entitled to Rs. 29,17,500 with interest at 7% from 10.11.2014 till payment; no costs.