Is the Precise Cause of Fire Material for Indemnity under a Fire Insurance Policy When No Fraud or Instigation by the Insured Is Alleged?

Summary

Practical Impact

What’s New / What Lawyers Should Note

• Precise cause of fire need not be proved once accidental fire is established and insured is not its instigator.
• “FFF” in fire policies unambiguously covers furniture, fixtures and fittings; exclusion must be explicit.
• Contemporaneous business records (cost sheets, bank-audit stock valuations, production logs, cancelled-order details) are admissible under Sections 34 & 65(g), Evidence Act, and must be accepted unless disproven.
• A surveyor cannot arbitrarily apply a uniform per-unit value or ignore depreciation/salvage without specifying methodology.
• Enhanced interest of 6% p.a. from three months after the incident is due where no agreement on interest exists.

Summary of Legal Reasoning

1. Principles of Fire Insurance
   • Policy is contract of indemnity; must indemnify for accidental fire unless insured instigated it or exclusion applies.
2. Cause-of-Fire Materiality
   • Following New India Assurance v. Mudit Roadways, the precise ignition source is immaterial if no fraud or instigation by insured.
3. Policy Coverage Interpretation
   • Coverage clauses construed broadly for insured; “FFF” necessarily means furniture, fixtures & fittings. Exclusions read narrowly.
4. Proof of Loss and Surveyor’s Role
   • Insured discharged burden via contemporaneous records; final surveyor’s failure to examine or reason qualifies as arbitrary.
5. Valuation Principles
   • Net loss (exclusive of profit element), proper depreciation and zero salvage for charred leather goods; surveyor must specify age and rates if depreciation claimed.

Arguments by the Parties

Insurance Company (Appellant)

• Final Surveyor concluded multiple fire seats and ruled out accidental origin; insured led no forensic evidence to rebut.
• “FFF” not covered under policies; insured’s architect and accountant reports were unsubstantiated estimates without physical inspection or rate/unit details.
• Insured failed to plead basis for ₹3.30 crore claim; no documentary breakdown of units damaged.
• Surveyor’s net assessment of ₹44 lakhs was correct; National Commission should have applied net rather than gross loss.

Insured (Respondent)

• Preliminary Surveyor and police report recorded fire as accidental (short circuit); final Surveyor’s non-accidental finding was inconclusive and ignored ventilation factors.
• Contemporaneous Canara Bank audit (₹24.46 crores of stock), cost sheets, stock movement logs, production records, cancelled-order details prove stock loss of ₹2.45 crores.
• Policy No.360901/11/10/3400000092 provides “FFF” coverage for furniture, fixtures & fittings (₹54 lakhs).
• Final Surveyor’s uniform ₹450 per unit valuation was arbitrary; depreciation and salvage wrongly applied.
• In absence of agreement on interest, insured entitled to enhanced interest from three months after the incident.

Factual Background

Orion Conmerx’s premises suffered a fire on 25 September 2010. The insured filed a consumer complaint before the National Commission, relying on preliminary and final surveyor reports, bank audit valuations, architect and chartered-accountant reports to quantify loss. The National Commission held fire accidental, allowed part of the claim (₹61,39,539) excluding “FFF,” and directed 9% interest. Both insurer and insured appealed.

Statutory Analysis

• Fire Insurance Policy Clauses: Contract to indemnify accidental fire; perils cover “Fire,” “Lightning,” “Explosion/Implosion”; no requirement to prove precise ignition source if no exclusion or fraud.
• Indian Evidence Act, 1872: Sections 34 (relevant facts form part of same transaction), 65(g) (admissibility of documents of regularly conducted business as primary evidence).

Alert Indicators

• ✔ Precedent Followed
• 🚨 Coverage Expansion – “FFF” coverage reaffirmed