… The victim claims compensation of Nu 3.75M from insurance company
The proprietor of Phuntsho Timber Industry claimed compensation of Nu 266,890 on April 21, 2020, from Bhutan Insurance Limited (BIL) after a windstorm damaged one of his factory’s structures.
In his letter to the BIL’s general manager in Phuentsholing, the proprietor stated that the heavy storm blew off the entire roof of the store or work shed within his factory premises at the industrial estate in Phuentsholing. He also claimed for the finished furniture products and other items in the store which rain had destroyed. The incident occurred around 8.30 pm on April 19, 2020.
The insurance claim of Nu 266,890 was worked out, according to Phuntsho Wangdi, based on the estimated cost of re-roofing work, materials and the items damaged in the store.
Of the Nu 18.771 million with an annual premium of Nu 79,780 for structures and other related properties he insured, Nu 354,034 was insured for the store and work shed under the industrial all-risk policy from July 11, 2016.
BIL branch office in Phuentsholing conducted both self-assessment and joint assessment of the damages and estimated the total loss of Nu 195,000. The report was then forwarded to the head office in Thimphu for further validation.
While reviewing the report and making the final assessment, according to BIL officials, they found that only the roof of the store or work shed was damaged and the claimant was eligible for compensation of Nu 82,766 only. “This is because the claimant had insured the building less than the market value,” an official from the claim division said.
An official from BIL said that BIL reviewed the estimated claim once again and came out with three options after the claimant appealed to the chief executive officer. The first and second options were calculated based on loss ratio and loss estimated amounting to Nu 23,633 and Nu 30,270 respectively. Phuntsho Wangdi through email accepted the third option of Nu 101,466 offered by BIL on September 17, 2020.
“I accepted their offer since I needed the money to repair my damaged structure,” Phuntsho Wangdi said. “However, they didn’t pay me even after five months.”
He said that BIL refused to pay even after accepting the third option. “I then informed the insurer through email on October 15 that the claimed amount, which was mutually agreed between the two parties should be treated as null and void,” he said.
Phuntsho Wangdi then moved Phuentsholing Drungkhag court to claim his initial compensation of Nu 266,890. “I would have accepted had the company paid me the amount immediately,” he told Kuensel.
He also claimed compensation of Nu 3.750M from BIL for the loss incurred as the insurer refused to pay him. The lukewarm response from the company also affected his business, and production and his employees had to remain idle for 26 months.
He also accused BIL of illegally transferring Nu 79,780 as insurance premium into the insurer’s account from his account maintained with Bhutan National Bank (BNB) without his consent. He requested the court to refund the premium amount of Nu 79,780 with interest.
BIL officials said that since the proprietor hasn’t renewed his insurance for his timber factory, the insurer renewed the insurance policy as per the existing prudential regulations of Royal Monetary Authority (RMA). The regulations stated that a financial institution shall ensure that fixed assets pledged as collateral or mortgaged against loans are properly insured.
BIL signed memorandum of understanding (MoU) with the BNB stipulating a condition that in the event of the borrower’s failure to insure or renew the insurance policy, BNB would insure or renew the insurance policy and debit the cost of the insurance to the borrower’s loan account. “So BIL hasn’t transferred the insurance premium unilaterally but done as per the prudential regulations and MoU signed with BNB,” BIL officials said.
Both Phuentsholing drungkhag court and Chukha dzongkhag court ruled in favour of the defendant reasoning that the plaintiff had accepted the third option offered by BIL as per the Contract Act of Bhutan. The dzongkhag appellate court ordered BIL to pay the compensation of Nu 101,466 to Phuntsho Wangdi by January 20 this year.
For the compensation of Nu 3.750M claimed by Phuntsho Wangdi, the court ruled the compensation is not permissible for any loss or damage which is remote or indirect as per Section 211 of the Contract Act.
However, the court ordered BIL to pay 50 percent of Nu 101,466 to the claimant as remedies for breaching the contract. The Chukha court’s ruling stated that the company, being a service provider, had failed to perform its obligations. “The claimant had reminded the insurer twice through emails to pay him the third option amount, but BIL kept the payment pending, which defeated the purpose of insuring against the natural disasters,” the judgment passed on December 28 stated.
Aggrieved by the dzongkhag court’s ruling, Phuntsho Wangdi appealed to the High Court on January 3.