Under-insurance wrongly applied, NCDRC says; paper mill to get Rs 62.83 lakh more

The National Consumer Disputes Redressal Commission (NCDRC) has ordered National Insurance Company to pay Sapphire Papers Mill a further Rs 62.83 lakh on a 2011 factory fire claim. In an order pronounced on 15 October 2026, the commission held that the insurer's surveyor had wrongly applied under-insurance, a cut made when the insured value is lower than the value of the property at risk.

What Happened

The mill, in Darjeeling district, West Bengal, held a fire policy for Rs 16.32 crore. A fire caused by an electrical short circuit on 29 December 2011 damaged stock, machinery and buildings. The surveyor first assessed the loss at Rs 43.44 lakh and later cut it to Rs 38.29 lakh in an addendum report. The mill was paid about Rs 38.29 lakh in September 2014 and filed a complaint in 2015 seeking the balance. The insurer argued that the mill had accepted the amount in full and final settlement.

The surveyor had treated stock-in-process as covered only within a Rs 30 lakh "stock" head and applied under-insurance. The commission called this reading far-fetched and arbitrary. Reading the policy as a whole, it held that all stages of stock were covered together up to Rs 180 lakh, with a separate extra cover for spontaneous combustion. As the value at risk was Rs 1.75 crore, below that cover, there was no under-insurance. It accepted the rest of the surveyor's assessment.

The commission found the insurer deficient in service for accepting the survey report without due application of mind, and for paying far less than was due.

What It Means

National Insurance must pay Rs 62,82,998 with 6% simple interest from 2 August 2012, one month after the survey report, until payment, plus Rs 1 lakh as costs. Interest rises to 8% on any amount still unpaid on 15 January 2027. The order may be appealed.

For businesses with fire cover, the ruling shows that a surveyor's reading of policy headings can be tested against the policy as a whole and the premium charged. A cut for under-insurance must match what the policy actually covers. Consumers can seek help through the National Consumer Helpline (1915) or e-Daakhil.

Source: Consumer commission order