The basement of the building is also an integral part of the insured premises SCO and consequently, the stocks lying therein are also covered under the policy.
Once the policy itself defines “building" to include the basement, the insurer cannot subsequently contend that the basement stood excluded merely because it was not separately mentioned in the schedule.
While observing this, the State Consumer Disputes Redressal Commission UT Chandigarh has directed an insurance company to pay a claim amount of Rs 1,93,79,529 to a firm, M/s Bittu Fashioners 26, for the loss occurred due to a fire incident in the basement. The commission has also directed to pay Rs 35,000 litigation cost to the complainant.
The commission has passed the order while deciding an appeal filed by M/s Bittu Fashioners 26, Chandigarh, against the order of the District Consumer Disputes Redressal Commission U.T., which rejected the claim for loss caused due to fire.
M/s Bittu Fashioners 26 said that M/s Chola MS General Insurance Company Ltd issued a Policy covering stock worth Rs 5 crores and furniture and fixtures worth Rs 1 crore, for a total sum insured of Rs 6 crores on payment of a premium of Rs 49,996/.
On February 27, 2023, a fire broke out in the basement of adjoining SCO Sector-26, Chandigarh, due to a short circuit, which spread to the ground floor and affected the complainant’s adjoining premises. In the course of fire-fighting operations, extensive water and smoke entered the insured premises, causing substantial damage to stocks and articles lying in the basement and 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 has challenged the order on the ground that the District Commission erroneously held that the basement was not covered under the insurance policy merely because the term “basement” was not expressly mentioned therein, 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 order of the district commission. The state commission said that once the policy itself defines “building" to include the basement, the insurer cannot 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. Therefore, when the policy expressly declares that a building includes its basement, the schedule cannot be interpreted in isolation so as to render the inclusion of the basement outside and redundant.
The commission has directed the insurance company to pay an amount of Rs 1,93,79,529 to the complainant along with interest @9% per annum from the date of loss. The commission has also directed to pay Rs 35,000 as litigation costs to the complainant.
