Actual loss need not be reimbursed if consumer claim is even partly false

 Cheating does not pay , and trying to inflate a claim on the basis of fa bricated documents disentitles the insured rom getting any benefits whatsoever under a policy .Case Study:Anjal Garments of Ghaziabad was in the business of manufacturing and exporting home furnishing products. The firm had obtained two Standard Fire and Special Perils policies from Oriental Insurance to cover its fac ory, machinery , furniture and fix ure, and stocks including raw ma erials, finished, semi-finished goods and packing materials for a um of Rs 7 crore.

On March 22, 2015, the firm intimated the insurance company that a major fire had occurred the previous evening due to a short circuit, and the estimated loss was about Rs 4 crore. The firm later filed a claim pegging the loss at Rs 5,11,08,267.The insurance company appointed a surveyor to assess the loss and al o asked the Loss Prevention Asso ciation to examine the claim. The company later appointed an inves tigator to probe the incident. On the basis of the reports, the company repudiated the claim, alleging that the fire was not accidental due to short circuit, and an exaggerated and fabricated claim had been lod ged by manipulating the bills and the stock statement.

The firm filed a complaint befo re the National Commission for a direction to pay the claim along with interest, and a further amount of over Rs 7.9 crore for loss of business. The insurance company contested the case, pointing out how the claim had been inflated. It relied on the statement of the store incharge who said there had been a power failure that day , and the generator, MCB and electric connection had been shut down at the time of leaving the premises.

This was also corroborated by the security guard. Even though the exact cause of fire had not been established, it did not appear to be accidental fire.

The surveyor had recorded the firm’s unwillingness to produce the account books. There were discrepancies in the records submitted. There was no correspondence in respect of many export orders, and transactions worth over Rs 6 crore had been made without any letter of credit to purchasers who had defaulted. The purchase bills also revealed irregularities, showing exaggerated purchases.

The insurance firm said the cla im had rightly been repudiated due to manipulation of records and false declarations.

The National Commission concluded that the cause of the fire appeared to be a wilful act. Also, at least three of the challans were found to be false and fabricated to inflate the claim. So, the commission indicted the firm for submitting a false estimate of loss. Accordingly , by its order on February 12, delivered by Justice VK Jain for the bench along with Dr BC Gupta, the commission held the firm’s conduct to constitute a breach of the insurance contract, and ruled that the insurance company was entitled to repudiate the claim.


Even if the claim is partly fraudulent or based on manipulated documents, the insurance company would be entitled to repudiate the entire claim. Even the genuine loss would not be reimbursable under such circumstances.

Jehangir B Gai

(The author is a consumer activist and has won the Govt. of India’s National Youth Award for Consumer Protection. His email is


One thought on “Actual loss need not be reimbursed if consumer claim is even partly false”

  1. Dear sir.
    Will not it be fair enough to leave this issues to the court. The taking the premiums for paying in future is an assurance given by the insurer. Why a similar terms and conditions is not felt to be appropriate so far by the insured. These policies are of no yielding type but surely yields the untruthfulness among men. This kind of policies have been loss to many poor and simple persons so far.
    Could you please ask all the insurers to give the account of all lapsed policies where the insured have incurred loss.
    I request for enforcement of the law where terms and conditions be written in own language by the parties before any third party be he be a lawyer or banking authority.

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