Upholding an order passed by the state commission, the national consumer disputes redressal commission (NCDRC) directed Liberty Videocon General Insurance Co Ltd to pay Rs24.18 lakh, including the insured declared value (IDV) of the BMW 5 series car, compensation for mental agony and harassment and cost of litigation to the customer. In this case, the apex consumer forum discussed an important issue of constructive total loss (CTL) and IDV of a vehicle.
In an order
, the NCDRC bench of justice AP Sahi (president) and Dr Sadhna Shanker (member) says, "We are of the view that the cost of repair of the vehicle certainly exceeds 75% of the IDV of the vehicle on the basis of the workshop's estimate and therefore we see it as a total constructive loss which the insurance company is liable to indemnify."
The case concerns an insurance policy obtained by Chandigarh-based Sulakshna Devi for her BMW 5 Series 520 car from Liberty Videocon General Insurance from 28 February 2015 to 27 February 2016. The insured declared value or IDV of the car was mentioned as Rs22.68 lakh in the policy.
On 23 August 2015, the car lodged in a waterlogged ditch in the middle of the road due to heavy rain and low visibility. Sulakshna Devi informed the insurance company about the incident. Subsequently, the driver and the surveyor, appointed by the insurer, visited the accident site. After completing a spot survey, the surveyor recommended shifting the car to Krishna Automobiles, the authorised BMW service centre in Chandigarh.
Following an assessment of the vehicle on 4 September 2015, Krishna Automobiles generated a repair estimate valuing it at Rs22.13 lakh.
The surveyor submitted a comprehensive preliminary survey report on 29 October 2015 and clarified that, owing to the vehicle's age of over five years, depreciation was factored in as stipulated in section I of the insurance policy, resulting in an assessment of liability amounting to Rs8.33 lakh. On 6 November 2015, the surveyor issued an addendum report to elucidate parts excluded from the initial loss assessment. According to the surveyor's assessment, the total repair estimate was Rs18.62 lakh.
Liberty Videocon General Insurance refuted it, asserting that the surveyor's report or the addendum report lacked adequate detail and further clarified that they had already corresponded with the relevant regional transport office (RTO) to verify the authenticity of Ashwani Kumar's driving licence the driver involved in the incident.
On 2 November 2015, Sulakshna Devi received a letter from the insurance company informing that the licensing authority had been unable to verify the driver's licence. Additionally, it stated that the repair liability of the insurance company amounted to only Rs8.33 lakh and requested Sulakshna Devi to have the vehicle repaired and submit the repair bills for further claim processing.
Sulakshna Devi requested the insurer to re-assess their determination, as they argued that repairing the vehicle was not a reasonable or justifiable course of action, given its total loss status. She urged the insurer to release the entire IDV of the car. On account of the delays caused by the insurer in settling the claim, she says, the authorised service centre insisted on parking charges at a daily rate of Rs500 from 15 September 2015.
On 1 December 2015, Liberty Videocon General Insurance sent a letter asking Sulakshna Devi to get her BMW repaired and submit bills of repairs to process the subject claim further or accept a settlement of Rs5.80 lakh on a cash-loss basis. However, apart from the letter, the insurance company never formally repudiated the claim.
Sulakshna Devi filed a complaint before the Chandigarh state consumer disputes redressal commission.
During the hearing, citing general regulation 8 of the Indian Motor Tariff (IMT), which governs the terms and conditions of the insurance policy, the insurer pointed out that a vehicle may only be categorised as a total loss if the repair costs exceed 75% of the insured value. "In this instance, the surveyor's assessment of Rs8.33 lakh falls below 75% of the insured vehicle's value, which stood at Rs22.68 lakh. Therefore, the vehicle could not be classified as a constructive total loss."
Further, the insurer says it preserved its right to repudiate the claim in the event that Ashwani Kumar's driving licence was found to be counterfeit or invalid on the date of the accident.
After hearing both parties and appreciating the facts of the case, the state commission partly admitted the complaint and asked Liberty Videocon General Insurance to pay Rs22.68 lakh to Sulakshna Devi along with interest at 9%pa (per annum) from 9 December 2015. It also directed the insurer to pay Rs1 lakh as compensation for mental agony and physical harassment and Rs50,000 as the cost of litigation to Sulakshna Devi.
"Since, admittedly, the car in question is lying with Krishna Automobiles, the same can be collected by the insurer from it after paying the amount of indemnification to Sulakshna Devi as well as parking charges, if any, to the authorised dealer. Sulakshna Devi should execute the requisite documents in favour of the insurance company for the transfer of the vehicle in question, in their name, to vest them with the ownership thereof, within one month of receipt of the amount of indemnification," the state commission says.
Aggrieved by the order, Liberty Videocon General Insurance approached NCDRC.
The bench of justice Sahi and Dr Shanker observed that the root of the issue in the present appeal lies in whether there was CTL of the subject vehicle. The criteria for considering a vehicle as a CTL is that the insured vehicle shall be treated as a CTL if the aggregate cost of retrieval and/or repair of the vehicle, subject to terms and conditions of the policy, exceeds 75% of the IDV of the vehicle.
It says, "The estimate provided by the surveyor has assessed the repair cost to be Rs8.33 lakh, which comes out to be about 36.75%. However, the said estimate of the surveyor was after adjusting depreciation value. If the depreciation amount is excluded, then the estimate will come to Rs17.51 lakh, which would be about 77.22%. The concept of depreciation is the adjustment of notional value which deducts the value of an asset over its life. However, in the present appeals, the actual cost that would have to be paid for repairs would be about 77.22%, of which the insurance company by its own estimate, was willing to pay only 36.75%."
"It cannot be denied that the vehicle has suffered CTL as per the definition, even if the insurance company adjusts for depreciation. It is a matter of fact that the vehicle would require extensive repairs. The insurance company cannot, by way of depreciation, deprive the insured of his rightful claim as the actual cost of repair that would have to be paid is not subject to depreciation, i.e. the workshop would require the same amount irrespective of the age of the vehicle," NCDRC added.
While dismissing the appeal filed by Liberty Videocon General Insurance, the bench stated that the state commission's order does not suffer from any illegality.
(First Appeal No1155 of 2016 Date: 8 November 2023)