Insurer Cannot Repudiate Fire Claim Based On Mere Speculation: NCDRC

The NCDRC bench, comprising Hon’ble AVM J. Rajendra and Hon’ble Justice Anoop Kumar Mendiratta, found no concrete evidence to support the insurer's allegations of deliberate ignition or fraud.

ETLegalWorld

Published On Apr 28, 2026 at 04:06 PM IST

The National Consumer Disputes Redressal Commission (NCDRC) has ruled that an insurance company cannot reject a claim based on mere presumptions and uncorroborated suspicions of fraud.

In a recent judgment, the Commission ordered United India Insurance Company to partially compensate M/s Shree Hira Industries, and rejected the insurer’s attempt to repudiate the claim regarding a fire incident at a warehouse.

M/s Shree Hira Industries, a proprietary firm, filed a consumer complaint against United India Insurance Company after the insurer repudiated a claim for over INR 3.89 crore following a fire in their warehouse on July 22, 2018.

Advt The insurance company alleged that the fire was a "stage-managed" incident, while citing reasons such as the rapid destruction of cotton bales, the absence of electricity in the warehouse, and inconsistencies in the quantity of iron strips found in the debris.

The NCDRC bench, comprising Hon’ble AVM J. Rajendra and Hon’ble Justice Anoop Kumar Mendiratta, found no concrete evidence to support the insurer's allegations of deliberate ignition or fraud.

“Since the suspicion cast in this regard by the Insurance Company is only a presumption uncorroborated by any cogent evidence, we are unable to concur with the findings arrived at by the Surveyor that the entire stocks could not have been burnt in a severe fire,” the bench said. “In the facts and circumstances, it may be difficult to pin-point the exact cause of fire but in any case the claim cannot be repudiated claiming to be under suspicious circumstances.”

The Commission noted that the insurance company’s arguments were based on assumptions, whereas the police investigation report pointed to the possibility of the fire being caused by friction between iron strips, which was accidental in nature.

The bench further clarified that in the event of a massive fire, the complete destruction of inflammable materials like cotton cannot be ruled out merely because fire-fighting operations started quickly.

While the Commission dismissed the insurer’s ground for total repudiation, it upheld the surveyor’s assessment of the loss quantity and quality, which categorised the burnt stock primarily as "waste cotton".

Advt The bench directed the insurance company to pay the complainant INR 98,68,302 along with 7 percent interest per annum from the date of the survey report until realization.

The order specified that the compensation should be first credited toward the complainant's loan dues with Axis Bank, with the remainder payable to the firm, plus INR 20,000 in litigation costs.

The complainant, M/s Shri Hira Industries, was represented by Adv. Ishita Singh, partner, S&M Advocates.