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Jammu & Kashmir High Court Upholds Consumer Commission's Ruling in Insurance Dispute

Oriental Insurance Ordered to Pay Full Claim Despite Ex-Gratia Relief

In a significant judgment, the High Court of Jammu & Kashmir and Ladakh dismissed an appeal by Oriental Insurance Company challenging an order by the J&K State Consumer Disputes Redressal Commission. The case revolved around an insurance claim for damages suffered by M/S Shalimar Wine Shop during riots in Kishtwar in August 2013. The High Court upheld the Commission’s decision, directing Oriental Insurance to pay the full insured amount of ₹19,11,153.66 with 10% interest, despite the respondent having received ex-gratia relief from the government.

Case Background

• The Incident: In August 2013, riots in Kishtwar caused extensive damage to the wine shop owned by Anil Kohli, proprietor of M/S Shalimar Wine Shop. The losses were covered under an insurance policy issued by Oriental Insurance for ₹22 lakh, valid from January 11, 2013, to January 10, 2014.
• Surveyor Reports:
  • The initial surveyor assessed the total damage at ₹29,24,212.96.
  • After deductions, the net loss was reported as ₹19,11,153.66.
• Dispute: Oriental Insurance approved only ₹15,61,153, deducting ₹3,50,000 received as ex-gratia relief from the government. The respondent contested this deduction, leading to a complaint before the Consumer Commission.

Consumer Commission Ruling

The J&K State Consumer Disputes Redressal Commission ruled in favor of the respondent, directing Oriental Insurance to:

1. Pay ₹19,11,153.66 with 10% annual interest from the claim date until realization.
2. Reimburse ₹10,000 as litigation costs.

High Court Appeal

Oriental Insurance filed an appeal in the High Court, arguing that:

1. The ex-gratia relief of ₹3,50,000 should be deducted from the insured amount.
2. The Commission's award exceeded the insurer's liability under the policy.

Key Findings by the High Court

Liability Beyond Ex-Gratia:

• The court emphasized that ex-gratia relief is a discretionary payment by the government with no connection to the insurer's legal obligation.
• The insurer cannot deduct this amount from the insured claim, as it was provided by the government to aid the victim, not to relieve the insurer.

Binding Nature of Insurance Contract:

• Oriental Insurance had accepted premiums for the ₹22 lakh policy and was thus bound to honor the insured amount, irrespective of external reliefs received by the insured.
• The total damage assessed (₹29,24,212.96) exceeded the policy limit, further substantiating the respondent’s entitlement to the full insured amount.

Legal Precedents:

• The court referred to the Supreme Court's ruling in Sudesh Dogra vs Union of India, which clarified that ex-gratia relief is not connected to legal liabilities.
• It also cited Division Bench rulings from the High Court, affirming that insurers cannot deduct ex-gratia payments from claims.

Surveyor’s Report:

• The insurer had not disputed the findings of its appointed surveyors, who assessed net damages at ₹19,11,153.66.
• The court held that Oriental Insurance was obligated to pay this amount as per the surveyor’s assessment.

Judgment

The High Court dismissed Oriental Insurance’s appeal, stating: