Sri Pathy Assoceates Private Limited Vs The Branch Manager, National Insurance Co. Ltd. & 2 Ors.

Bharatkumar Pandya, Member

1. This complaint involves allegation of deficiency in service of insurance company with regard to repudiation of two insurance claims under Contractors All Risk Insurance Policy issued by OP M/s National Insurance Co.

2. The complainant is a contractor firm which was awarded contract for construction of breakwater and its approaches for fishing harbor by Government of Tamil Nadu at Thengapattinam at Kanyakumari for a total contractor value of Rs.27,62,60,930/-. The contract involved construction/erection of breakwater having, broadly, a ‘core’ to be fortified by primary armor of specially shaped and patented technology ‘CORE-LOC’ units, and, secondary armor of specified shape, size and weights of specified sourced stones and with laying of ‘berm’ at the base. As a part of the contract work, the complainant was also required to use CORE-LOC, a patented product of M/s Concrete Layer Innovations (CLI). As per agreement, the project was to be executed as per the design, terms and conditions and to be monitored by the Fisheries Department of Government of Tamil Nadu and under technical assistance from CLI. The design for the breakwater project was made by the Fisheries Department after technical study of the site and as per the recommendation of the Indian National Centre for Ocean Information Service. The complainant entered into agreement with the Fisheries Department as also with the CLI for execution of the work which commenced on 03.04.2010. The complainant invited for quotation from the insurer after submitting all requisite documents, design papers and agreements for grant of appropriate Contractors All Risk Insurance policy (CARP). Accordingly, the National Insurance Co. (OP) issued the policy for the policy period 12.05.2010 to 11.08.2013 for sum assured of Rs.27,62,60,930/- for which the premium was to be paid in eight instalments of Rs.95,643/-. As per the risk coverage in the policy, the Contractors All Risk insurance was covered for the period 12.05.2010 to 11.08.2012. The maintenance work was covered for the period 12.08.2012 to 11.08.2013.

3. The first instance of damage/loss intimated by the insured was due to “heavy storm accompanied by very high waves” which occurred between 11.08.2010 to 19.08.2010 and which as per the insured’s communication to the insurer dated 19.08.2010, was to the tune of Rs.75 lakhs. That particular claim however, is not the subject matter of the present complaint. The second damage and third damage and claims are subject matter of the present complaint. The second damage “due to heavy storm accompanied by very high waves” occurred on 25.02.2011 as a consequence of which, the contract work was totally stopped. (page 145-146 of the complaint). As per communication to the insurance company dated 26.02.2011, the construction of main breakwater had reached upto 480 meter on 25.02.2011. Because of the damage caused by the heavy storm, the breakwater beyond 325 mtrs.(i.e. about 155 meter) got damaged /dislocated resulting into loss to the tune of Rs.1,09,98,690/-. Similarly, the third loss of around Rs.75 lakhs occurred due to heavy storm/waves during the period of 20.06.2011 to 30.06.2011. The intimation dated 04.07.2011 sent to the insurer (page 166), however, does not contain the description of the nature or the exact extent/location of the damage.

4. As regard the first claim, Surveyor M/s Mehta & Padamsey Surveyors Ltd. was appointed who submitted their report dt. 16/12/2010 and recommended the settlement of claim in full.  But no communication regarding the said report was sent to the complainant by the Insurer. Intimation of the Second damage on/from 25.02.2011 was immediately sent to the insurer vide letter dated 26.02.2011. On 04.03.2011, Surveyor Mr. Ananda Padmanaban visited the spot and advised the complainant firm to carry out the repairing/restoration work which was also duly communicated to the insurance company. The said surveyor submitted his report dt. 05.08.2011 which though was not sent to the complainant who obtained the same through RTI on 09.11.2011.  But insurer did not send anyone to witness and assess the cost of repairing/restoration at the time of second and third accident/damage. An investigator Mr. R. Venugopala Pillai was appointed who submitted his “technical  Investigation’ report for both first and second claim on 29.08.2011. That report was also obtained by the complainant through RTI. Subsequently, the first claim of the complainant was repudiated vide letter dated 16.09.2011 and Second one was repudiated vide letter dated 16.09.2011 on the contention that there are violation of amended terms of policy, deviation from design and that loss does not fall under AOG peril, etc.

5. Furthermore, on 08.07.2011 OP insurer sent a letter to the complainant unilaterally amending the terms of the policy with retrospective effect by modifying original terms of “Special Excess : Normal excess : Rs.1.5 lakhs excess in case of AOG Perils : Rs. 5 lakhs” to “Excess Clause (for material damage) applicable to all works in water, in rivers, dams, canals, sea : 5% of claim amount subject to a minimum of Rs.50 lakhs for normal loss and Rs.1.5 crores for AOG/Testing/Fire/Explosion/Collapse/Major Perils”.

6. Third accident/damage was duly informed by the complainant to the OP vide letter dated 04.07.2011. Surveyor Mr. R. Venugopala Pillai was appointed for the said damage who submitted his survey report on 20.08.2012. Third claim was also repudiated vide letter dated 03.10.2012 by the insurer on the ground of violation of amended terms of policy, deviation of design, loss not falling under AOG peril, etc. first claim has been challenged by the complainant by filing complaint before the State Commission, Tamil Nadu. Balance two claims are the subject matter of the present complaint. Repudiation letter dated 16.09.2011 (all three are similarly worded) is reproduced as under:

16.09.2011

TO

M/s Sri Pathy Associates

Civil Engineering Contractors

62, Thangaperumal Street

Erode - 638 001 Dear Sir,

Reg : Settlement of Contractors All Risk (CAR) Claims

Name of the Insured: The Executive Engineer, Fishing Harbour Project Division, Nagercoil, Kanyakumari District, and Sripathy Associates, 62, Thengaperumal street, Erode - 1

Claim No : 650501/44/10/5690000001, DOL: 11.08.2010

Policy No : 650501/44/10/560000006, POI: 12.05.10 to 11.08.2013

Including 12 month's maintenance period.

We regret to inform you that, we are unable to consider your claim for the reasons stated below: According to the contract entered with the Fisheries Department of Tamilnadu Government you are bound to construct the Breakwater and its approaches for Fishing Harbour at Thengapattinam as per the conditions stipulated in the written agreement entered into with the concerned department. Now you have submitted claim form on the ground that due to storm (Natural Calamities) the breakwater constructions affecting Ch.120 metre to Ch.180 metre wore damaged to the extent of Core Layer-60mts, Secondary Layer-50mts and Toe Beam 40 mts, thereby you have sustained loss and claimed compensation. On receipt of the claim form, surveyor was deputed to study the construction and the alleged damage/loss. Consequently, Our Chief Regional Manager deputed another surveyor to submit a detailed report on looking into all relevant Technical aspects affecting the Breakwater construction being carried out in a coastal area known to be seasonally affected by tide and waves. On careful perusal of the report of the surveyor and conjoint reading of the written contract clearly reveals the fact that you have not constructed the break waters in accordance with the technical specifications contemplated in the agreement.

On analyzing the agreement No.1 CR/2010-11 entered between the Contractor and the Fisheries Dept., Govt. of Tamil Nadu., certain conditions in the Agreement have some relevance to the Claim.( Refer Condition 24 (a), (b), (c) & (d) of the Agreement, Under General Specifications, Technical Specifications and Additional Conditions of Contract).

From the specific conditions in the Agreement as indicated above, the following inference were made by the surveyor in his Report on Technical Investigation.

i)  Waves of maximum height 4 metres were expected at the location, Hence, there is no fortuity if such waves, had prevailed at the location any time during the construction period.

ii) Condition 24(a) &(b) confirm the requirement/awareness of the Insured regarding potential damage possible to the stone laying work of the main breakwater, if the completed stretches are not promptly protected by the armour layers. It also limits the advancement of breakwater construction to 30 m stretches at a time.

iii) Condition 24(c) & (d) are stipulations to provide Coreloc armour protection to the Stone laying work, progressively advanced in stretches of 30m at a time without which the uncompleted breakwater construction may not withstand the seasonal waves expected at the location.

As such the alleged damages were caused only due to the negligent in putting up the construction and also non-observance of the above conditions lald down in the agreement In view of the Operative and in the result you are disentitiled to claim any compensation in View of Clause, General Exclusion contained under clause (c) of the policy of insurance.

Further the Investigation corroborates the Design of the Breakwater Construction with that of Technical Specification in the Agreement as

“ NIOT in recommending the Design of the Breakwater Construction with 'Core-Loc' armour protection had clearly shown the cross sections and stone sizes in different sections of the Bligninent. According to the design, seaward side secondary armour stones are of size 375 kg to 750 kg is for the first 130 m length of the main breakwater. Subsequent length in the alignment was recommended to be constructed with 900 kg to 1500 kg stones both for the seaward and Leeward sides.

However, In the Agreement as per Condition 2 Description of work, the entire stretch of Seaward side is to have secondary armour with stones of size 376 Kg to 750 Kg only and the Leeward side of the main breakwater will have stones of size 900 Κα το 1600 Κα sa clear deviation from the recommended design.

Another point noted in the the design is the "Berm (an extended "Toe' Construction at the bottom) to be provided at the seaward side which will give protection/support to both the secondary stones and the Core-Loc blocks. However, when the two losses occurred, the 'Berm was not even constructed. Apparently, the contractor was waiting for completion of stone laying of the entire alignment and favorable sea condition to commence the construction of 'Berm.

Under point No. 8 of the instructions issued by the Government of Tamil Nadu, Fishing Harbour Project circle clearly en enumerates that Contractor should protect the unprotected ted length to avoid damages due to waves of break water. While stopping the work due to climate or weather the core should be property covered to avoid damages. The contractor shall have no claim for compensation on loss on this facts.” On knowing the above Conditions you have carried out the work beyond 30mts, neglecting to adhere the above conditions, which reflects your moral hazard with an ulterior motive to have unlawful gain from the insurance company.

Therefore, there are vital deviations of the original design with respect of the stones used for secondary beyond 130 mts alignment on the seaward side. Further, not having ‘Berm construction at the seaward side of the alignment where secondary armour was already completed also rendered the construction weak

In the light of the conditions adumbrated in the agreement referred to above and in view of surveyor's report ex facie shows that Deviations made from the recommended design and non-conformity of relevant conditions of the agreement while advancing the breakwater construction apparently did provide adequate hydraulic stability to the breakwater under construction struck by seasonal waves expected in the location, resulting in the reported damage. Therefore, the alleged loss was occasioned due to deviation from the Design of construction and thus claim is excluded under the Exclusions To Section-1(d) of the policy conditions.

The Surveyor emphasized in his report that "Apart from some local News papers reporting the damage occurred to the breakwater construction, no authoritative weather papers reporting the from competent agencies such as India Meteorological Department. Belatedly the Contractors have approached IMD, NIOT etc for weather reports relevant for the period of occurrence. Their last letter in this regard was to Indian National Centre for Ocean Information Service, at Guindy, Chennai on 26.07.2011. So far no weather report has been received to confirm the occurrence of any AOG Perils at Thengapattinam."

Nevertheless there was no storm or major peril/AOG peril was occurred on the date o loss/damage. Waves of 4m height can be expected in the coastal waters at Thengapattinam during the monsoon period even with out any Storm or Cyclone. This was known to you a mention of the same was found made in the Agreement of Construction. So the Proximate caus of Loss is not due to AOG peril. As such the sole cause for the mishap was only due to the willful negligence on your part and you cannot be permitted to take advantage of it.

Moreover, the loss does not fall within any other scope of the Policy, Even under AOG Peril, the loss would fall under Excess.

In view of the reasons as stated above, we are unable to consider your claim.

7. The present complaint is filed with regard to second and third accident/claim before this Commission. The complainant is before this Commission with the following prayers for directions to OPs to:

(i)   Pay a sum of Rs.1,21,08,487/- for second claim with interest @ 8% p.a. from 26.02.2011 till the date of filing the complaint (second claim amount Rs.1,04,98,688/- + interest Rs.16,09,799/-) and also interest @ 15% p.a. to the total amount claimed from the date of filing of complaint till the date of realization.

(ii)  Pay a sum of Rs.1,48,10,500/- for third claim together with interest @ 8% p.a. from 30.06.2011 till the date of filing the complaint (third claim amount Rs.1,31,45,414/- + interest Rs.16,65,086/-) and also interest @ 15% p.a. to the total amount claimed from the date of filing the complaint to till the date of realization.

(iii)  Pay Rs.10 lakhs towards loss of business and Rs.10 lakhs on account of loss on reputation.

8. The complaint was resisted by way of written version by the opposite party no. 1 and 2. In view of proximity of second and third loss and in order to ascertain the cause of loss, the company appointed surveyor to give his technical investigation report. Surveyor concluded that there is deviation from the recommended design and non-conformity of relevant conditions of the Agreement which resulted into the reported damages. Mr. S. Anantha Padmanaban, surveyor who was appointed to assess second claim reported that the cause of loss could be attributed to a design defect which is a specific Exclusion in CAR Policy and hence the loss is not tenable under the policy. Apart from the above, the surveyor also concluded that there is willful negligence on the part of the insured and therefore claim is not payable. Another surveyor also concluded that there could be no claim under the CAR policy when willful negligence is established. Hence two claims of the complainant were repudiated by the insurer vide letters dated 19.09.2011 and 03.10.2012.  The claim is said to be repudiated on the basis of recommendations of the surveyor and technical investigations, scrutiny of facts and circumstances of the case and legal opinion.

9. Parties led their evidences by way of affidavit and filed their written statements, rejoinder and written synopsis. We have heard learned counsel for both the parties and perused the record carefully. 

10. It is contended by the complainant that they were allotted construction of breakwater and its approaches to fishing harbor work on the basis of agreement with Fisheries Department dated 03.04.2010. They entered into an agreement/ sub-licence contract with CLI (Concrete Layer Innovations) for technical assistance/ advice. OP insurance company agreed to insure the project of the complainant firm after studying the said agreements and the premium demanded accordingly has been paid. Periodic inspections by the Executive Engineer and his representatives and also by CLI representative were done.  None of them pointed out any mistake or deviation in the execution of the project as there was no deviation, negligence or mistake in the execution of the project by the complainant. It has been submitted that overall the insured complainant has suffered loss on account of covered peril thrice before filing of the complaint. The first loss was suffered on account of “sudden tidal waves and heavy storm” during 11.08.2010 to 19.08.2010 during which the damage to the main breakwater occurred between 180 mtrs. to 240 mtrs. The claim of Rs.84,70,108/-, has not been paid by the insurer but the same is not the subject matter of the present complaint. However, the surveyor appointed by the insurer M/s Mehta and Padamsey Surveyors Pvt. Ltd. inspected the site and took photographs of damage on 24.08.2010 and also witnessed/monitored the re-work pertaining to the damage carried out by the complainant between 29.08.2010 to 18.09.2010 and submitted his report on 16.12.2010.  The second damage occurred due to “unexpected tidal waves and storm” on 25.02.2011 in the main breakwater between 325 to 480 mtrs., for which a claim of Rs.1,09,98,690/- was lodged which also has not been settled by the OP insurer. The intimation of the damage/loss was immediately given vide letter dated 26.02.2011 and consequently surveyor Mr. Anand Padmanabham was appointed who visited the spot on 04.03.2011 and is stated to have submitted his report on 05.08.2011, the copy of which was not provided to the insured complainant. Further, the insurer on 28.06.2011 appointed an investigator Mr. R. Venugopal Pillai for both the claims and the technical investigation report was submitted on 29.08.2011, the copy of which also was not provided to the insured complainant who obtained the same through RTI. Based thereon, the OP insurer repudiated the claims vide letters dated 16.09.2011 and 19.09.2011. It appears that after the investigation report, a clarification letter from M/s Mehta and Padamsey Surveyors Pvt. Ltd. who assessed the first loss, was obtained by the insurer, which is not even finding a mention in the repudiation letters. Re-work/repairing work with respect to the second damage was completed between 05.03.2011 to 09.04.2011 before the technical investigator visited the damaged site on 02.07.2011. The third damage and consequent claim occurred between 20.06.2011 to 30.06.2011 in the main breakwater between 290 mtrs. to 495 mtrs. for which the information to the insurer was provided on 04.07.2011. The rework pertaining to the same was completed between 21.09.2011 to 20.02.2012. The surveyor Mr. R. Venugopala Pillai was appointed who submitted his report on 20.08.2012 and vide letter dated 03.10.2012 the third claim was also repudiated.

11. As per the complainant, the claims have been repudiated primarily on the grounds of (i) violation of the terms of the policy, (ii) deviation from the design and (iii) the loss not falling under the AOG peril. It is the contention of the complainant that the contract has been carried out as per contract conditions 24 (a), 24 (b), 24 (c) and 24(d). As such the contract does not prescribe any timeframe for installing Core-Loc for protecting armor layer though clause 24(c) and Clause 24(d) prescribe how Core-Loc is to be deployed. Similarly, there is no merit in the objection of the insurer with regard to deviation from design of Indian National Centre for Ocean Information Service because as mentioned in letter dated 13.10.2011, there is no deviation with regard to weight of the stones to be used which in fact is as per agreement with Fisheries Department and the work has been duly and on day-to-day basis supervised by them. Further the insurer has suppress the first surveyor’s report and obtained the further reports from the investigator dated 05.08.2011, 29.08.2011 and 20.08.2012 behind the back of the complainant without involving any officers of the complainant in the so-called survey work with the sole purpose of frustrating the valid claim of the complainant by making unsustainable observations with regard to design and execution of the contract. The contract work in fact happens with the constant supervision and periodic approval of the Fisheries Department of Government of Tamil Nadu as per the approved design.  The damage for which the claims are made have also been certified and the re-work has been supervised by the Executive Engineer and therefore the basis of repudiation is unfounded and arbitrary.

12. On the other hand, the OP insurer has submitted that due to frequency and proximity of the claims made under the policy by the insured, the insurer deemed it fit to ascertain the circumstances and true cause of loss and thus appointed Mr. R. Venugopala Pillai for technical investigation to report on loss vis-a-vis the approved design after examining in detail the approved design, work contract and actual work leading to damage. The technical investigator in report dated 29.08.2011 has arrived at the conclusion that the insured has deviated from the recommended design and has also violated the relevant material and important conditions of the agreement with the Principal resulting into inadequate hydraulic stability of the breakwater under construction which led to the damage during seasonal high waves up to 4 mtrs. height which was duly expected during seasons. The surveyor appointed with regard to the second claim, Mr. S. Anantha Padmanaban, has, echoing the opinion of Mr. R. Venugopala Pillai, observed in his report dated 05.08.2011 that cause of loss can be attributed to design defect which is a specific exclusion and also that the damage/loss is a consequence of willful negligence and willful conduct on the part of the insured which also is a special exclusion under the policy and therefore the claims are not payable. The surveyor for the first claim M/s Mehta and Padamsey Surveyors Pvt. Ltd., when requested to comment on the technical investigation report of Mr. R. Venugopala Pillai, vide their letter dated 29.08.2011 agreed that in light of the documents brought on record by the investigator, the claims under Contractors All Risk Insurance policy are not payable.  When legal opinion about the correctness of the proposed repudiation was sought from Mr. Jakka Ramchandran, advocate, he opined vide his opinion dated 18.08.2011 that the insurer has no liability given the facts brought out by the Investigator. Accordingly, the claims were rightly repudiated by the insurer vide letters dated 19.09.2011 and 03.10.2012.

13. We have carefully considered the contentions advanced by the parties and carefully perused the records. The policy issued by the insurer and obtained by the insured is Contractors All Risk Insurance policy for a sum assured of Rs.27,62,60,930/-  for the period 12.05.2010 to 11.08.2013 inclusive of maintenance period of 12.08.2012 to 11.08.2013. The contract work insured is that of construction of breakwater and its approaches. Section I of the policy describes the coverage under the policy as per which if the property or any part thereof described in the schedule be lost, damaged or destroyed by any cause other than those specifically excluded, the same shall be made good to the extent of sum assured. The coverage is subject to exclusions provided in clauses (a) to (i). Memo 1 to Memo 9 govern the overall terms and conditions of the policy with regard to material damage (pages 103 to 115 of the complaint). First loss occurred from 11.08.2010 to 19.08.2010, second loss on 25.02.20211, third loss from 20.06.2011 to 30.06.2011. As against the contract value of Rs.27.62 crores total cumulative claim of Rs.73,34,850/- has been raised. We have perused the survey report of M/s Mehta Padamsey dated 16.12.2010 (page 133) (with regard to the first claim which is not the subject matter of this complaint), as per which, the surveyor has categorically noted in Para 14 that as the damage occurred due to circumstances beyond the control of the insured, the damage shall be covered under more than one clauses of Memo 8 of the section 1 of the CAR Policy. After inspecting and quantifying the repair/restoration work, the surveyor has quantified the net liability of the insurer after adjusting excess, at Rs.73,34,850/-. However, the issues as to the design, terms and conditions of the Agreement with the Fisheries Department and the conformity of the same vis-a-vis the work undertaken before damage have not been either enquired into or taken into account by the surveyor. In view of this and in light of the fact that multiple claims came to be raised, we are of the view that appointment of technical investigator before paying the claim cannot be termed arbitrary or baseless and therefore we do not find any infirmity or illegality in insurer wanting to undertake technical investigation and evaluation by appointing a technical investigator.

14. Technical Investigator Mr. R. Venugopala Pillai visited the site on 02.07.2011 in presence of the officers of the Fisheries Department and of the complainant contractor as mentioned on the first page of the report. The investigator in his report dated 29.08.2011 (page 57 to 65 of Volume II) has examined in detail the records relating to the contract execution and agreements and has discussed technical aspects with the site engineers. On page 62, the following conditions of agreement between the complainant contractor and fisheries department have been extracted:

“CONSTRUCTION AGREEMENT

I have sighted a copy of the Agreement No.1/2010-11 between the Contractor and the Fisheries Dept., Govt. of Tamil Nadu. Certain Conditions in the Agreement that have some relevance to the two claims, vis-a-vis the occurrence have been noted. They are explained as follows:

1. Condition 24 of the Agreement, under Technical Specification stipulates as follows:

General: ........"Highest waves are found during rough weather and waves of maximum height 4 metres may occur at that time. The Contractor is bound to take all the precautionary measures against possible damage which may occur to the structure during the course of construction. No extra claim will be entertained on this account"

2. As per Condition 24 a)

“ The breakwater should be advanced to convenient length of maximum 30 m. ………"

3. As per Condition 24 b)

"After operation (a) is completed for a convenient length, the core may be covered immediately by armour stones………….. The maximum period in which a stretch of core formed may be left unprotected with armour stones days during fair weather and two days during rough seasons..... shall be 10 days during fair weather and two days during rough seasons……………”

4. As per Condition 24 c)

"After, operation (b) for a convenient length is completed this portion has to be formed to the correct profiles and formation levels in layers as indicated in the drawings provided for Corelac for breakwaters.

As per Condition 24 d)

“The Coreloc are to be laid in position using cranes such that there should be a minimum of 1 no. In the direction perpendicular to the slope. The Coreloc are to be bid along the side slope so that each Coreloc is placed as a header in the direction of wave propagation. The horizontal layers on the crest and the crest mound are to be laid as headers in the direction of wave propagation so that each offers maximum area against wave action,"

From the specific conditions in the Agreement as indicated above, the following inference may be made.

i) Waves of maximum height 4 metres were expected at the location. Hence, there is no fortuity if such waves had prevailed at the location any time during the construction period.

ii)  Condition 24 a) & b) confirm the requirement/ awareness of the Insured regarding potential damage possible to the stone laying work of the main breakwater, if the completed stretches are not promptly protected by the armour layers.

It also limits the advancement of breakwater construction to 30 m stretches at a time.

iii) Condition 24 c) & d) are stipulations to provide Corloc armour protection to the Stone laying work, progressively advanced in stretches of 30 m at a time without which the uncompleted breakwater construction may not withstand the seasonal waves expected at the location.”

15. After discussion, the technical investigator, in substance, has arrived at the following conclusion:

(1)  The Core-Loc armor protection provided in the design is to help in dissipating some of the internally transmitted wave energy. Absence of such protection would create overtopping wave action.

(2)  There are clear deviations of the original design with respect to the size of stones used for secondary beyond 130 mtr. on seaward side.

(3) The absence of “berm” on seaward side where secondary armor was already completed also rendered the construction weak.

(4) There is a condition in the agreement with Fisheries Department with respect to progressive completion of breakwater including completion of secondary and Core-Loc protection requiring the unprotected length of construction to be never more than 30 mtrs. It is found that there is substantial violation of this condition during construction period which resulted into or aggravated the damage.

(5) It is stipulated in the agreement, and therefore within the knowledge of the insured, that waves of 4 mtr.  height can be expected at Thengapattinam  during monsoon even without any storm or cyclone. Therefore, authoritative proof of an AOG peril, if operated, which caused the reported damage, was necessary which has not been provided till date.

16. The first contention of the complainant is that the surveyor M/s Mehta & Padamsey Surveyors Ltd. had assessed and recommended the loss of Rs.73,34,850/- to be reimbursed by the insurer. The insurer with the sole object of frustrating the complainant’s claim firstly did not settle the claim within the time limit prescribed by the IRDA and then appointed an investigator which is illegal. The contention relates to the first of the three claims and the relevant complaint is not before us. Therefore, we do not need to deal with this contention. With regard to the subsequent two claims, the insurer has relied on the survey reports as also the investigator’s report which are substantially unanimous in opining that both the subsequent claims are not tenable primarily for the reason that the insured-complainant has failed in observing the necessary precautionary conditions (clause 24) in the agreement dated 03.04.2010 of the complainant with the Fisheries Department of Government of Tamilnadu. It has been observed by the Supreme Court in Sri Venkateshawara Syndicate Vs. Oriental Insurance Co. Ltd. (2009) 8 SCC 507 SC that there is no bar to insurer appointing one after the other surveyor provided such appointment is not arbitrary or baseless and that there is enough justification for the same. In any case, with regard to the two claims with which we are concerned in this complaint, there is only one surveyor appointed by the insurer for each claim and therefore, the contention has no bearing in the complaint before us. As we noted earlier, the appointment of investigator is absolutely justified.

17. We have noted that all three losses have been described by the complainant to have arisen due to high-speed winds and high tidal waves. The contract is for construction of breakwater which is to be inside the sea having known possibility of tidal waves as high as 4 mtrs., and therefore, it is obviously expected of the insured contractor that due care and caution is exercised in execution of the work keeping in mind the constant risks of rising waves and sea-waters. Waves upto 4 meter height are admittedly expected in this fishing harbor during monsoon or during rough weather. Therefore, throughout execution of the contract, and in any case after the first loss suffered by the insured, extra and demonstrable care, caution and absolute adherence to the precaution protocol prescribed under the agreement with the Fisheries Department, forming the basis of the Insurance cover granted by the Insurer, can validly expected and insisted for by the Insurer. The evidence of such adherence to prescribed protocol has not been placed on record by the complainant. In our opinion, as a matter of finding of fact as recorded by the Investigator, there is no authentic weather report filed by the complainant evidencing the occurrence or warning of AOG peril of high-speed winds or storm or unusually high waves. There is also no effective refutation of the allegation by the Investigator that the progression of contract work as specified in conditions 24 (a) to (d) of the contract with the Fisheries Department has not happened resulting into exposing the completed contract work to substantially higher risk of damage. The conjoint reading of mandatory conditions 24(a) to 24(d) leads to the conclusion that  the Fisheries Department expected the contractor to undertake all precautions to mitigate the likely damage due to unforeseen weather including high speed winds and high tide with high waves. It is crystal clear that waves during monsoon and rough weather of 4 mtr. height were expected as per clause 24 of the Agreement. The contractor is supposed to have taken all precautionary measures against possible damage to the structure after taking into account the uncertain weather conditions. The progression of the work as mandated in conditions (a) to (d) have to be read in light of this overall objective of obligating the insured contractor to take precautionary measures against possible damages. Clause 24(a) mandates that “The breakwater should be advanced to convenient length of maximum 30 mtrs.” We have noted that maximum convenient length of maximum 30 mtrs. as prescribed is that of the “breakwater”, and not of only core, or of secondary, berm or core-loc. After the core of 30 mtr. or any lesser “convenient length” has been achieved, the same is mandated under 24 (b) to be immediately covered with the secondary armor of stones of 375 to 1500 kgs. As per clause 24(b), the mandated maximum period for which “a stretch of core formed may be left unprotected” is only 10 days during fair weather and only two days in rough seasons. Clause 24(d), in our opinion, has to be read in conjunction with clause 24 (a) and (b) which together mandate that all care and caution shall be exercised by the contractor to ensure appropriate measures and steps against possible damage to the structure during the course of construction. The placing of the core-loc as prescribed in 24(d), therefore, has to be read in light of prescription in clause 24(a) to the effect that advancement of construction of “breakwater” (which includes of course placing of the core-loc) shall be for a convenient length of maximum 30 mtrs.

18. It is seen that though the surveyor Shri Anantha Padmanabhan in his report dated 05.08.2011 (with regard to damage which allegedly occurred on 25.02.2011) has given a factual finding (page 70 of written version by OP) that the construction of core and secondary armor of breakwater continued beyond length of 30 mtrs. without placing the core-loc, and thus reducing the hydraulic stability of the structure and increasing the risk of damage, the complainant has not placed any evidence on record to establish that the core-locs, as prescribed, were appropriately placed before making advance in construction beyond every stretch of 30 mtrs or that why such placement was not considered a necessary precautionary measure. We may reproduce the final observation of the surveyor Mr. Anantha Padmanabhan:

The Insured does not appear to have taken cognizance of these specific instructions and had proceeded for lengths more than 30 mts. at a stretch, without commencing the coreloc layer till the date of loss i.e., after reaching more than 100 mts, which has contributed dually for this loss. Had the coreloc been placed in position as per specification, this loss could have been certainly been averted.  This could also be construed as Wilful Negligence or Wilful Act on the part of the insured, which is also a specific exclusion under the Policy.

19. Similarly, Mr. R. Venugopal Pillai has in his survey report dated 20.08.2012 with regard to alleged damage between 20.06.2011 to 30.06.2011, observed as under:

6. It was noted that stone laying work for the formation of Core and secondary layers of the Breakwater of Trapezoidal cross section had progressed without providing Core-Loc “Berm (intended to support the secondary layer) and interlocking armor protection on the seaward side.

7. Among stones found disturbed in the affected secondary layer on the seaward side of the Breakwater, a large percentage of stones appeared to be smaller and not conforming to size 900-1500 kg. (The minimum requirement as per design).

20. Apart from the factual finding of advancing in construction of core and secondary armor without placing the core-loc beyond 30 mtrs, the surveyor has also given a factual finding that the berm was also not in place.  The surveyor has given the concluding remarks as under:

Waves of 4 m. height may be expected in the coastal waters at Thengapattinam during the monsoon period even without any storm or cyclone. This was known to the Insured as mention of the same was found made in the Agreement of construction.  As on date, no authoritative proof has been provided to confirm, if an AOG peril had caused the reported damage.

In the light of the reasons cited above, it is my considered view that Deviation made from the recommended design and non-conformity of relevant conditions of the Agreement while advancing the breakwater construction apparently did not provide adequate hydraulic stability to the breakwater under construction when struck by seasonal waves expected in the location, resulting in the reported damage.

Based on the various aspects cited above, it is my considered view that there was deviation in the intended design and non-conformity in the Agreement vis-a-vis the method of progressive advancement of the construction which are material to the claim.

21. In view of the above adverse factual findings in the surveyor’s report, it was incumbent upon the insured-complainant to bring on record cogent evidence to establish the fallacy or untenability in the surveyor’s factual findings. No such serious attempt has been made by the complainant. It is also noteworthy that the following description or quantification of the damage, as claimed by the insured or as noted by the surveyors, would undoubtedly point out that there is no damage reported with regard to the core-loc as late as upto 20.06.2011 i.e. more than a year after the execution of the agreement with the Fisheries Department dated 03.04.2010. As such, as per the said agreement vide clause 11, the contractor was required to submit within a month of the agreement, a complete construction programme of operations providing for orderly performance of the work.  The work was to advance at the rate of 10% every three months from commencement as per the Articles of Agreement, implying that more than 50% of the contract work should have been completed by 20.06.2011 i.e. the date of the second damage. The core-loc is a patented technology for which the complainant-contractor entered into a separate agreement with M/s  Concrete Layer Innovations (CLI). As per the said agreement, the following number of core-loc units were to be manufactured on site and were to be placed as primary armor on the breakwater in specified fashion.

22. The placement of these core-loc units is the fundamental soul of the breakwater by which the hydraulic and kinetic force of the sea water and sea waves would be repelled/dissipated so as to provide safety and longevity to the core of the breakwater. It is the finding of the surveyor that as per the agreement with the Fisheries Department (clause 24) and also as a necessary precaution for ensuring no damage to the construction, the placement of these core-loc units should not have been postponed beyond a maximum permissible convenient stretch of 30 mtrs. In other words, the construction of core of breakwater should not have proceeded beyond 30 mtrs. unless both the protective armors inclusive of core-loc units were placed on this stretch of 30 mtrs. Thus, as about 50% of the work should have been completed by 20.06.2011, it is reasonable to expect at a macro level that at least 25 to 30% of the total i.e. at least 1500 to 2000 core-loc units should have been properly placed as primary armor not only as a requirement under the agreement, but also as a necessary precautionary measures for protection of the already constructed breakwater comprising core and secondary armor.  However, the damage reported by the insured and noted by the surveyor with regard to the first, second and third damage clearly bring out that no damage with regard to core-loc has been reported either by the complainant or by the surveyor leading to an irrefutable conclusion that core-loc units were not placed. This is evident from the damage noticed by the surveyors tabulated as under in terms of quantity of work damaged as measured in terms of weight wherein no damage to the core-loc primary armor has been reported by the complainant nor any such damage has been noticed by the surveyor:

* first claim, page 140 of complaint      # 2nd claim page 82 of WV   $ 3rd claim, page 240 of WV      

23. Therefore, we agree with the observations and conclusion of the investigator on page 64, 65 of the written version, of the second surveyor on page 69 and 70 of the written version and of the second surveyor on page 246 and 247 of the written version clearly opining that the complainant contractor has not stage-wise proceeded in the construction of the breakwater as was required by clause 24 of the agreement with the Fisheries Department. Before proceeding beyond 30 mtrs. of the breakwater, it was required that both secondary armor and core-loc armor were put in place. Failure/negligence in observing this mandatory precaution resulted into inadequate hydraulic stability of the breakwater under construction. Moreover, not having berm construction on the seaward side where secondary armor were completed also rendered the construction weak and exposed to the enhanced risk of damage due to tidal waves. As observed earlier, in the face of such categorical and well-documented findings of the investigator/surveyor, it was for the insured complainant to positively establish with cogent evidences that the allegation of violation of conditions stipulated in clause 24 of the agreement is unfounded. The perusal of clause 3.1.2. of the agreement with the CLI (page 75-76 of the complaint)  indicates that during the period of two years during which the contract was to remain in force, the CLI team was to make five technical visits and provide technical assistance and prepare technical assistance report. The first contractual site visit report for site visit during 10.11.2010 to 12.11.2010 has been filed along with complaint on page 119-132. As per the same till the date of such visit, no core-loc units were placed on the breakwater. No further technical reports of core-loc team has also been placed on record by the complainant. Clause 11 of the agreement with Fisheries department provided (page 57 of complaint) that a complete construction program of operations providing for orderly performance of the work shall be submitted by the contractor within 30 days indicating the sequence of operations. The copy of such construction programme submitted to the Fisheries Department so as to establish that there is no violation of clause 24 of the agreement along with periodic progress reports as submitted to the Fisheries Department has  also not been placed on record by the complainant. As such, apart from the bald accusation that the investigation/survey reports are unfounded, there is no credible material to establish such averment. Therefore, we find no infirmity or illegality in the action of the insurer in repudiating both the subject claims having acted in conformity with the opinion and findings of the surveyor/investigator. Needless to mention that surveyor appointed under Section 64 UM of the Insurance Act, 1938 is a technically sound, professional, statutory authority and as held by Supreme Court in Khatema Fibers Vs. New India Assurance Co. Ltd, 2021 SCC OnLine SC 818, unless found to be arbitrary or baseless, cannot be lightly brushed aside. The OP insurer in their repudiation letters dated 16.09.2011 and 19.09.2011 have exhaustively communicated the basis of repudiation which does not stand successfully repelled before us.

24. The complaint raises the issues of other wrongful actions of the insurer with regard to mid-term cancellation of the policy and revival thereof and adverse unilateral amendment of the policy coverage with regard to excess clause. These issues would require consideration or adjudication in the event the claim itself is found tenable in terms of the policy as was originally issued. However, in view of the discussion as above, we find no error on the part of the insurer in repudiating both the claims within the policy terms as originally issued and therefore these issues in our opinion do not require any further discussion or adjudication. It may also be categorically observed that the complaint with regard to the first claim dated 19.08.2010 is pending before State Commission and having perused the survey report of M/s Mehta & Padamsey Surveyors Ltd. with regard to claim and also after noting the length of stretch and the place of the breakwater on which the damage has occurred, we are of the considered opinion that the State Commission should decide that complaint absolutely on the basis of material placed before the State Commission without getting influenced by any of the observations contained in the present order.

25. In view of the above, the complaint is dismissed.