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Author: Chhoti Shahi - I am a Law Graduate from Patna University

Category: Home \ Consumer laws

SURVEYORS- Link between Insurer and Insured
An Insurance Policy is a combination of protection and savings to meet your future needs. In today’s life the worthiness of insurance can not denied by any one. Whenever a person takes an insurance policy, the motive behind this is to secure the future from certain risk on the happening of certain event. We can feel the importance of insurance in our day to day life also. In modern and busy life people want to save their each and everything through the insurance.

As per requirements of an individual, insurance companies provide insurance policy for buildings, machinery and accessories, stock and stock in process for business purpose, furniture for the purpose of business and profession, mobile, transport, home, health etc. against loss an damages arising out of fire and allied perils. Machinery Breakdown policy covers financial loss incurred by the insured due to loss or damage to machinery as a result of accidental electrical and mechanical breakdown. It reimburses the insured for the cost of repairs or replacement of machinery of like nature.

Fire loss of profit insurance covers major fire loss, due to which the business operations get interrupted resulting in reduced turnover and eventually in loss of profits. Plate glass insurance covers against the actual breakage of plain glass of ordinary glazing quality completely and securely fixed. Any equipment operated with electrical power may suffer breakdown spontaneously. Electronic equipment insurance policy covers "All Risks" to cover Computers, Bio medical equipment, X-ray equipment, audio/video equipment etc. Disaster insurance policy provides protection against disasters arising out of earthquake, cyclone, landslide, floods, explosion, fire and so on. Machinery Insurance provides protection against unforeseen and sudden physical damage to the insured machinery. Mobile Cellular Phones and Pager can be covered against the risk of fire, theft Terrorist activity, Riot and Strike.

After looking the list of areas where insurance companies provide insurance policy, we can feel the significant role of the insurance in our life. In fact now days the insurance companies ready to provide insurance policies for all high value items, so one can get money back if something goes wrong. The insurance cover provides compensation equivalent to the cost of replacement of the goods/instrument by a new good/instrument of the same specification and same capacity, including all taxes and duties.

How the insurance company functions?
Suppose a person takes policy for his car against the fire, accident and theft etc. One day the car meets with an accident, the policyholder will lodge a claim with the company for compensation. The insurance company will appoint surveyor to assess the loss in accident. The surveyors will then go and assess the extent of loss. On the basis of the report submitted by the surveyor, the insurance company will liable to settle the claim of insurance. The IRDA (Insurance Regulatory and Development Authority) clearly articulates that a claim will have to be paid within 30 days from the date of receipt. In case the claim wants an investigation then the insurance company has to complete the investigation not later than 6 months from the time of lodging the claim. Moreover, in case a claim is ready for payment but the payment cannot be made due to any reasons then such an amount will earn interest at the rate applicable to a savings bank account.

But some times the insurance companies serve late in settling the claim lodged by the insured and do not follow the rules provided in IRDA (Insurance Regulatory and Development Authority).

As I mentioned above when insured lodge a claim before the insurance company, the insurance company appoints surveyor to assess the loss and damages and then do compare with the claim of insured. After satisfaction, the insurance company initiates to settle the claim. In this whole episode the Surveyors play crucial role between the insured and the insurer. Before going to deal with work of surveyor, it is must to know about the surveyor. Means who can be a surveyor, eligibility and qualifications needed for surveyor etc.

Surveyors are professionals who assess the loss or damage and serve as a link between the insurer and the insured. They usually function only in non life business. Their job is to assess the actual loss and avoid false claims. Surveyors like agents, are not employees but are independent professionals hired by the insurance company.

A person intending to act as a surveyor and loss assessor (S& LA) in respect of general insurance has to apply to the Insurance Regulatory and Development Authority (IRDA) for the grant of license to act as such in:
i. FORM-IRDA-1-AF, if the applicant is an individual; or
ii. FORM-IRDA-3-AF, if the applicant is a firm or company

In particular and without prejudice to the foregoing, the Authority shall satisfy itself that the applicant, in addition to submitting the application complete in all respects:-
 satisfies all the applicable requirements of section 64UM read with section 42D of the Act and rule 56A of the Insurance Rules, 1939;
 possesses such additional technical qualifications as may be specified by the Authority from time to time;
 has furnished evidence of payment of fees for grant of license, depending upon the categorization;
 has undergone a period of practical training, not exceeding 12 months, as contained in Chapter VII of these regulations; and
 furnishes such additional information as may be required by the Authority from time to time.

Insurance risk surveyors carry out surveys of buildings, machinery, transport and other sites or items that need to be insured. A key part of the work is to produce reports, to help an agent who sells insurance, decide on the terms and conditions of insurance policies. Insurance surveyors usually specialize in one of the following areas:
 fire and perils examining plans, construction and fire protection systems to assess the risks to a building and its contents
 accidents and liability assessing the possible risks to employees, customers and visitors to a building or site
 engineering insurance surveying mechanical and industrial plants, machinery and equipment for faults and risks
 burglary and theft inspecting business premises to check how goods are stored and improve security.

The insurance business operates on the principle of indemnity, that is, putting the customer in same position financially in which he was before the loss happened. As there is a tendency on the part of customer, to benefit out of an insurance transaction, the surveyor puts a check on that and assesses the loss. He then gives a report to the insurance company and based on the surveyor’s report the company will settle the claim.

We can believe on the basis of above grounds that the surveyors are the major part of the insurance business. But in today’s scenario it as seen that the insurance company tries to ignore the report submitted by one surveyor and keep on appointing surveyors one after another unless they get favorable report. In many cases it has been observed by the Hon’ble Court that the insured getting harassed from the professional attitude of the insurance company. This amounted to unfair trade practices on part of the insurance company that affect not only to the complainant but also to public in general.

The said issue has been discussed by the apex court in different matters like Kochar Woollen Mills Pvt. Ltd and another Vs United India Insurance Co. Ltd and Others, 2007 CTJ 701 (CP) (NCDRC). In this complaint the complainant was engaged in manufacture of shoddy woolen fabrics using shoddy woolen yarn as the raw material. The complainant took one fire policy from the respondent company. During the period of insurance, a major fire broke out at the premises of the complainant. Complainant lodged a claim application before the respondent. The respondent (insurance company) appointed one surveyor namely M/s Mehta and Padamsey Surveyors Pvt. Ltd., New Delhi. The surveyor submitted their report after assessing the loss and damages of the insured premises. The insurance company not responded for some time even after submitting the survey report by the surveyor. The insurance company again appointed one Chartered accountant namely Shri Rajesh Nakra as surveyor. The second surveyor submitted his report that the complainant did not cooperate with the surveyor, therefore the surveyor was not able to submit his complete report. In that situation the insurance company again appointed third surveyor namely M/s J. N. Sharma, Chartered Accountant, New Delhi. Lastly the insurance company became agreed to settle the 60% of the claim.

The complainant filed one complaint before the State Commission against the same but dissatisfied by the order of State Commission he moved an appeal before the National Commission.

The issues considered by the National Commission:
1. Are the respondent (insurance company) justified in appointing the third surveyor without finding any other defects in the report of first surveyor.
2. Is the insurance company liable for deficiency in services on their part

The Hon’ble National Commission held that the report of the first surveyor was based on the all records maintained by the complainant. And the second and third reporter had not submitted their report, whereas it was easy for them to submit their report on the basis of verifications of the first surveyor, but they did not do this. Therefore the respondent is liable for deficiency in services as they have made delay in settling the claim.

Further, the National Commission also held that the Insurance Company can not appoint one surveyor after another without assigning specific reason for not accepting the report of the previous surveyors

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The similar view has been taken by the Hon’ble State Commission in Ramesh Aggarwal Vs Branch Manager, The Oriental Insurance Co. Ltd. 2007 (2) CPR 204. In this complaint the complainant had taken an insurance policy for his vehicle. Vehicle was burnt during the insurance period. The complainant lodged claim before the insurance company for an amount of Rs. 6, 00,000/-. The insurance company appointed the first surveyor but not agreed on the report submitted by them. Then again the insurance company appointed second surveyor for assessing the loss and damages. The insurance company became ready to settle the matter on 3, 64,000/-. Aggrieved from this the complainant filed complaint before the District Forum but the same was rejected.

The complainant moved an appeal before the State Commission. The Hon’ble Commission held that the practice of the insurance company in appointing one and other surveyor is not justifiable. Insurance Company can not throw away the report of the surveyors and keep on appointing surveyors one after another, till insurance Company can get favorable report. Accordingly the impugned order set aside and appeal allowed.

In some cases even it has been observed that the insurance Company compels the insured to settle the claim according to the choice of the insurance company. It all depends on the survey report submitted by the surveyor before the insurance company. In Mullangie Spintex Pvt. Ltd. Vs New India Assurance Co. Ltd., 2007 (2) CPR 87 (NCDRC), the complainant filed complaint that the insurance company is pressurizing him to settle the matter on amount based on report of 2nd surveyor. The complainant had taken policy from the respondent to insured the machinery of the plants. Due to fire all machinery became worthless. The complainant moved application for claim before the insurance company. The insurance company ignored the report presented by the first surveyor who had personally visited the burnt premises. The insurance company appointed second surveyor and compelled the insured to give the consent on the amount based on the report of 2nd surveyor which was based on incomplete and false evidence.

The National Commission held that how the surveyors of the insurance Company can ruin the insured industry or the firm by underestimating the loss suffered due to contemplated peril and how insurance company can coerce the insured to accept it in full and final settlement. Both things are deficiency in service and unfair trade practice.

In Hundilal Jain Cold Storage and Ice Factory P. Ltd. Vs Oriental Insurance Co. Ltd. (2005) II CPJ 17 (NC), National Commission held that the practice of appointing of surveyor one after another is unjustified.

Conclusion:
The Insurance Company does not allow the claim lodged by the insured without assessing the loss and damages. Therefore the assessment of loss is required to settle the same. But the practice of insurance company to get favorable survey report by the appointment of one after another should be restrained. The view discussed by the apex court in different matter must come into force that the Insurance Company can not take advantages from the favorable survey report by retaining one after another surveyor.

As per sub-section (3) and (4) of Section 64UM of the Insurance Act, 1938, the insurer cannot appoint second surveyor just as a matter of course. If the report of the surveyor or loss assessor is not acceptable to the insurer it must specify reasons but it is not free to appoint second surveyor. Appointment by the insurer of a second surveyor itself would be a reflection on the conduct of the first surveyor. Surveyor or loss assessor is duty bound to give a correct report. If the insurer-Insurance Co. finds that surveyor or loss assessor has not considered certain relevant points or has considered irrelevant points or for any other account it has reservation about the report, it can certainly require the surveyor or loss assessor to give his views and then come to its own conclusion, but insurer cannot certainly appoint a second surveyor-cum loss assessor to counter or even contradict or rebut the report of the first surveyor.



Authors contact info - articles The  author can be reached at: 
binitashahi@legalserviceindia.com

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Date of Publication: 4 Oct 2007

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