Insurance company can't reduce claim of insured who got government relief: Jammu & Kashmir High Court

An insurance company cannot reduce the amount payable to an insured claimant on the ground that the claimant had received some monetary relief from the government for losses, the Jammu and Kashmir High Court recently held [Oriental Insurance Company v. M/S Shalimar Wine Shop].

A Bench of Chief Justice Tashi Rabstan and Justice MA Chowdhary said it is not an insurance company's business to see whether an insured claimant has been paid some sort of relief from another source or not.

"The Insurance Company is bound to pay the claim against the sum insured. It is not the business of Insurance Company to see whether the person suffering damages has been paid some sort of relief from other source or not," the Court ruled.

The Court made the observation in a case where Oriental Insurance had reduced the amount payable to an insured claimant on the ground that he had received some monetary relief from the government for damages to his shop.

By way of background, one Anil Kohli had taken an insurance policy from Oriental Insurance company to insure his wine shop, Shalimar Wine Shop. The policy was to cover losses up to ₹22 lakh.

In 2013, the shop was heavily damaged amid riots and violence in Jammu and Kashmir's Kishtwar. As part of relief efforts, the Government of Jammu and Kashmir granted ₹3.5 lakh to the shop owner.

The total damage suffered to the shop was estimated to be ₹29.24 lakh. The shop's owner filed a claim with Oriental Insurance to get compensation for these losses.

After the insurance company's survey, the total claim payable was assessed to be around ₹19.11 lakh. However, the insurance company was only willing to pay ₹15.61 lakh since the government had already given the shop owner ₹3.5 lakhs as ex gratia relief.

Aggrieved, the insurance claimant moved the Jammu and Kashmir Consumer Disputes Redressal Commission in Jammu, which granted him relief and ordered Oriental Insurance to pay ₹19.11 lakh along with litigation expenses of ₹10,000.

This ruling was challenged by the insurance company before the High Court.

The High Court rejected the insurance company's appeal. The Court noted that the actual damage to the wine shop exceeded even the insured amount of ₹22 lakh. Viewed from this standpoint as well, the Court opined that Oriental Insurance could not deny its obligation to pay ₹19.11 lakh without any further reduction merely because the government has paid ₹3.5 lakh as ex gratia relief.

"It does not lie in the mouth of Insurance Company to deny the claim to the insured upto the sum insured once it has taken the premium," the Court said.

Accordingly, the High Court dismissed the appeal filed by Oriental Insurance and upheld the award passed by the Jammu and Kashmir State Consumer Disputes Redressal Commission at Jammu.

Advocate DS Chouhan appeared for Oriental Insurance.

Advocate Rajesh Kumar appeared for the proprietor of the insured wine shop.

[Read Order]