Insurance firm directed to pay 11.29 crore for delay in settling fire claim

A consumer forum has held an insurance company guilty of deficiency in service for inordinate delay and arbitrary repudiation of a fire insurance claim and directed it to pay ₹11.29 crore with interest to an India–Japan joint venture enterprise whose factory was gutted in a fire.

The complainant Mipalloy Nomura Plating Company LLP, Sriperumbudur, a copper and copper-alloy plating, recoating and refurbishment unit catering to steel plants, had taken a fire, and allied perils insurance policy with a sum insured of ₹28 crore with Liberty General Insurance Company Limited.

The firm had been renewing the policy since 2014 without any previous claims. A major fire broke out at the company’s premises on April 10, 2019. The incident was immediately reported to the fire department and the insurer, and an FIR was registered the next day.

Preliminary loss reports and claim documents were submitted within the stipulated time, with the total claim amounting to ₹19.07 crore. The cause of the fire was later confirmed by the surveyor and forensic reports as an electrical short circuit.

The complainant alleged that the insurer delayed the investigation and failed to provide a complete survey report, denying even the mandatory interim payment under IRDA regulations. A revised final survey report was received only in October 2022, nearly three years after the incident.

The claim was repudiated by email in January 2023, but no formal communication or payment followed, forcing the company to approach the High Court to obtain documents.

The insurer argued that the complainant had violated safety norms, pointing out the absence of automatic sprinklers and alleged non-compliance with factory safety rules. However, the forum noted that the factory had fire hydrants, alarms, extinguishers, trained staff and a valid fire licence, and that automatic sprinklers were not mandatory.

Sanjay Pinto, counsel for the complainant, said, “This landmark ruling should serve as a wake-up call to insurers. In cases of fire insurance, the law is well settled that as long as the policy holder is not the instigator of the fire, the claim must be paid.”

The Additional District Consumer Commission, Chennai (North) directed the insurer to jointly or severally pay ₹11.29 crore with 6% interest from November 7, 2024, along with ₹5 lakh as compensation for mental agony and deficiency in service, and ₹10,000 as litigation costs. The amount is to be paid within 45 days, after which interest at 9% per annum will apply.