Treat loss as total, release 95% of Rs 25 lakh insured, HC asks insurance companies

Srinagar: Observing that the situation prevailing in Kashmir in the wake of floods demands immediate solution, the J&K High Court Friday directed insurance companies to treat “loss as total” in wake of health advisory and pay 95 percent of insured amount for policies below Rs 25 lakh and 95 per cent for above it as interim relief.
“We feel that policy in respect of shopkeepers needs to be effectively implemented. Under the caption ‘Stock Losses’ it has been contemplated that cases with sum insured is upto Rs 25 (lakhs), then after making 5 percent deduction towards dead or obsolete stocks is to be considered as basis for settlement,” a division bench of Chief Justice M M Kumar and Justice Ali Mohammad Magrey said.
The insured, it said, is to be given an option to accept sum insured less by 5 percent. In other words, the court elucidated that 95 percent of the sum insured has to be disbursed in case policy involving Rs 25 lakhs or less.
“In respect of the policies with sum insured above Rs 25 lakhs, 50 percent of the assured amount shall be released after receiving undertaking from insured and also filing of the undertaking by officer concerned of the insurance company,” the bench said.
The court was hearing a petition filed by Kashmir Chamber of Commerce and Industry (KCCI).
The bench also directed the insurance companies not to treat any case as partial loss merely because 5-10 percent of the stocks could have been salvaged whereas 90 percent of the same was in water.
“We feel that further categorization is required to be kept in view while implementing the policy which involves sum insured beyond Rs 25 lakhs.” (One of the clauses) may not be applicable to shopkeepers who have stocks of eatables food items, cloths, shoes, readymade garments, hosiery, cosmetics and the provision stores.”
The reason for the approach, court said, is that in Lal Chowk, Residency Road, Hari Singh High Street, Karan Nagar, Batwara, Shivpora and Batamaloo, large number of shops must have filed claims, and in all these areas the water was upto 18 feet.
“There is a possibility of insurance company raising the argument that where the water has gone upto 8 feet, then it may be treated as a case of partial loss, but we are afraid that it cannot be kept under the carpet of partial loss for the reason that Director Health Services, Kashmir, has issued health advisory for the public.”
In one of the advisory issued, the court said, it has been said that people should avoid any food that has come in contact with flood water or stored in refrigerators that may have turned off because of power failure. Similar precautions, it said, have been made applicable to drinks with further advice to use only clean drinking water for making any drinks like lemonade, lassi etc.
“It is possible for insurance company to bring a claim under caption ‘partial loss’ because in a provision store if the water has gone up to 6 feet then 2/3 shelves touching the roof might not have come in contact with water, but no citizen would like to consume the eatables which according to the insurance company might have been saved in order to bring the claim under partial losses,” the court observed and directed that in such cases, the case should be treated as a total loss and the payment should be accordingly made.
“In case of other articles also the health advisory has been issued. It is to the effect that any food which is in contact with flood water should be discarded, and it has been further advised to discard any object that may have absorbed flood water because that cannot be easily cleaned.”
It further direct that the policy decision taken by GIPSA (General Insurers’ [Public Sector] Association of India) in its meeting on September 17 should be strictly complied with by the companies associated with it.
In the meeting, it was discussed that it is social responsibility of all the insurers to settle all the claims arising out of J&K Floods/natural calamities at the earliest and they decided to relax certain norms. For the purpose of expeditious settlement of claims, they decided that branch manager will have the authority of Scale-III and Divisional Manager that of Scale-IV. They decided that delay in reporting of claims and submission of documents by insured for these losses shall be condoned by claim settling authorities.
In case there is situation not covered, they decided that to empower Regional Incharge to take suitable decision in the spirit of special dispensation provided hereunder.
“All the insurance companies shall hold a joint meeting with the office bearers of Kashmir Chamber of Commerce in order to reach an amicable solution of claims and the result of the meeting be placed before the court on the next date of hearing,” the court said.
The directions issued, bench said, would apply the shopkeepers who have stock of food, eatables, hosiery, shoes, chemists, cosmetics, provision stores and similar. “The directions shall also be followed Bajaj Allianz General insurance Company end 1CICI Lombard General Insurance Company.”
The bench also directed criminal prosecution against anyone making false claim regarding the loss.
It also requested Executive Chairperson, J&K Legal Services Authority (J&KSALSA) to address the grievances of the insured in tune with scheme formulated by National Legal Services Authority (NALSA) and adopted by Jammu & Kashmir State Legal Services Authority.
The court directed concerned parties to file the compliance of the direction on September 29 and posted the case day later.