The basement of a building is an integral part of the insured premises and stocks lying therein are also covered under an insurance policy, the State Consumer Disputes Redressal Commission, UT Chandigarh, has observed while directing an insurance company to pay Rs 1,93,79,529 to a firm for losses caused in a fire incident.
The commission has also directed the insurer to pay Rs 35,000 as litigation costs to the complainant.
The order was passed while deciding an appeal filed by Bittu Fashioners 26, Chandigarh, against the order of the District Consumer Disputes Redressal Commission, UT Chandigarh, which had rejected its claim for losses caused by the fire.
Bittu Fashioners 26 stated that Chola MS General Insurance Company Ltd had issued an insurance policy covering stock worth Rs 5 crore and furniture and fixtures worth Rs 1 crore, for a total sum insured of Rs 6 crore, on payment of a premium of Rs 49,996.
On February 27, 2023, a fire broke out in the basement of an adjoining SCO in Sector 26, Chandigarh, due to a short circuit. The fire spread to the ground floor and affected the complainant’s adjoining premises.
During firefighting operations, extensive water and smoke entered the insured premises, causing substantial damage to stocks and articles lying in the basement and on the ground floor. The loss was immediately intimated to the insurer, which appointed a surveyor. Despite full cooperation by the complainant, the surveyor allegedly disallowed the basement loss on the ground that the basement was not covered under the policy.
A complaint filed before the District Consumer Commission was also dismissed. The appellant challenged the order on the ground that the District Commission had erroneously held that the basement was not covered under the insurance policy merely because the term “basement” was not expressly mentioned, without appreciating that coverage could also be inferred from the facts, circumstances and policy terms.
After hearing the arguments, the State Commission set aside the District Commission’s order. The commission, comprising presiding member Padma Pandey and member Rajesh K Arya, observed that once the policy itself defined a “building” to include the basement, the insurer could not subsequently contend that the basement stood excluded merely because it was not separately mentioned in the schedule.
“It is a settled principle of insurance law that the policy must be read as a whole and effect must be given to every clause thereof,” the commission observed.
It further held that when the policy expressly declared that a building included its basement, the schedule could not be interpreted in isolation so as to render the inclusion of the basement redundant.
The commission directed the insurance company to pay Rs 1,93,79,529 to the complainant along with interest at the rate of 9 per cent per annum from the date of loss. It also directed the insurer to pay Rs 35,000 towards litigation costs.
