1.       This complaint arises out of an insurance claim in respect of losses suffered by the complainant company for damages, due to collapse of the chimney of the complainant’s unit on 02.09.2014. According to the complainant, the bag house chimney of the cement plant of the complainant at Sanghipuram in district Rajkot, Gujarat buckled at about 6.30 p.m. There was in existence an Industrial All Risk Insurance Policy with a material damage section, where the exclusion clause is as follows:

A. EXCLUDED CAUSES

1. This policy does not cover damage to the property insured caused by:

 a) i) Faulty or defective design materials or workmanship inherent vice latent defect gradual deterioration deformation or distortion or wear and tear.

ii) ………

b) i) collapse or cracking of buildings.

ii) corrosion rust extremes or changes in temperature dampness dryness wet or dry rot fungus shrinkage evaporation loss of weight pollution contamination change in colour flavor texture or finish action of light vermin insects marring or scratching unless such loss is caused directly by Damage to the property insured or to premises containing such property by a cause not excluded in the policy.

          The policy covered risks for such losses subject to the aforesaid exclusion.

2.       At the outset, learned counsel for the complainant has urged that the first major violation of the contract of insurance by the opposite party was by appointing a surveyor, who was not included in the agreed panel as per the agreement. According to clause 7 (i) & (ii) the following is the provision, on which reliance has been placed by the learned counsel for the complainant:

7. Claims:

(i) In the event of a Loss, SIL would give immediate notification to the Insurer. The Insurer shall appoint Surveyor/ Loss Adjuster within 24 hrs from receipt of notification.

(ii) the Surveyor Panel is appointed through Mutual Consent from the IRDA/ Insurers approved list, depending on the type of losses, quantum etc. Following is the Surveyor Panel: (STRICTLY TO BE FOLLOWED PLEASE)

1. Cunningham & Lindsey
2. Sirish Desai
3. Absolute Surveyors
4. Paresh Shah

3.       It is urged that this was to be strictly followed but instead, the opposite party company appointed M/s. Rakesh Narula & Co., who conducted the survey. The submission is that this violation therefore vitiates the survey proceedings, which have been intentionally carried out and procured by the Insurance Company through a surveyor of their choice by violating the aforesaid provisions of the agreement.

4.       The survey was conducted by Mr. Narula, who submitted a preliminary report on 07.10.2014, after visiting the site on 04.09.2014. After investigation and having received the drawings of the chimney, its measurement, thickness, etc. advised the complainant to appoint a government agency or any other expert agency in order to carry out a root cause analysis of the damage. It was also advised that since no such suggestion was forthcoming, therefore, a request was made to appoint a third party preferably the Indian Institute of Technology to carry out the aforesaid analysis. The appointment of IIT Mumbai was suggested. 

5.       It appears that instead of IIT Mumbai, IIT Gandhinagar was entrusted with the aforesaid task and a report was tendered by IIT Gandhinagar, Gujarat regarding the technical position and the probable causes for the damage of the chimney. The said report of IIT Gandhinagar has been filed on record. A perusal of the said report, indicates the observations made after having taken ten samples and testing in a Universal Testing Machine (UTM), that was done to investigate the micro structural defects and the stress and strain behavior of the material utilized for the construction of the chimney. Some excerpts of the observations made by IIT Gandhinagar are as follows:

“It can be observed that the Young’s  modulus of almost all the samples is much lower than the expected value. In fact, many samples (e.g. 4-1,8-2, 10-1, etc.) have as low as 20% of the expected value of Young’s modulus (200 GPa). The yield and the tensile strengths have also degraded considerably for certain chimney samples. The observed stress-strain behavior of the chimney samples was quite different from that of the standard mild steel specimen and showed significant softened behavior, as if the carbon content is much lesser than the standard 0.2-0.3%. To confirm this observation, a chemical composition analysis of the chimney sample #4 was performed. The results are presented in Table2. Chemical composition of the fresh mild steel sample is also presented for comparison. The chimney sample shows carbon content of 0.056%, which is significantly lesser than the expected value of 0.2-0.3%.

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Long term exposure of mild steel even to relatively low temperatures of 300^o C can cause formation of micro-voids due to creep. Samples collected from the broken chimney show signs of creep. Figure 5 shows a comparison of optical micrographs of the chimney sample and the fresh mild steel sample.

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The presence of creep micro-voids explains the observed degradation in the Young’s modulus of chimney samples.

Scenario  Analysis Using Compute Model of Chimney

At the time of failure of the chimney, the local geographical area of Sanghipuram was experiencing a storm accompanied with wind, rain and lightning. Thus, it is natural to consider the possibility of failure of chimney due to weather. Of the three natural agents; lightning, wind and rain, lightning and wind have potential to cause this failure.

Lightning

There were no visual indication of damage due to lightning. The paint of the chimney was intact and no blackening (due to lighting strike) was observed. Hence, this possibility is ruled out.

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Conclusions

This section summarizes the findings of the scientific study performed to determine the cause of failure of the steel chimney. The material of the chimney samples showed significant departures from typical mild steel behavior. The chimney samples were very weak as compared to standard mild steel (with Young’s moduli as low as 20% of t minimum expected value). The microstructure of the chimney samples showed presence of a large number of voids created due to creep which reduced their strength considerably. The lack of uniformity in the grain size also attributed to their inferior strength. Furthermore, chemical analysis showed that the carbon content of chimney sample was only 0.056% which is significantly lower than that of mild steel (0.2-0.3%). This rendered the material much softer than mild steel.

The failure of the chimney was mostly likely triggered by wind resonance even though the velocity of wind on the day of loss was lower than the design base velocity prescribed in IS 875 (Part 3): 1987. Modal analysis showed that the deformed shape in third mode of vibration matched that of the actual deformation pattern of the chimney. Thus, a combination of degraded chimney material and wind resonance potentially caused the failure. However, if the chimney material would have been as per the original design (in terms of strength and thickness), then wind resonance could not have initiated the failure. 

6.       After having received the said report, it appears that the surveyor raised certain queries from the complainant that was replied to by the complainant vide mail dated 11.01.2016. After receiving the reply, the surveyor submitted his final report on 25.02.2016, and while analyzing the issue with regard to the status of the chimney and its thickness, the surveyor in paragraphs (C) (xv) came to the following conclusion:

(xv) Thickness readings furnished by the insured for thickness as on 28.08.2013 indicates that the b, were observed to be as follows:

Top portion    : 9.9 mm

Middle portion         : 7.8 mm

Lower portion : 8.1 mm

Normally the thickness of the upper portion of the Chimney should not be more than the lower portions.

Thus the Chimney Top portion should be either equal to  or lighter than the Chimney Bottom portion, but in this particular case, the middle portion became weakest and the top portion became heaviest, resulting into stressed middle portion AND IS TO BE NOTED THAT THE SAME MIDDLE STRESSED PORTION WAS DAMAGED DURING THE SUBJECT INCIDENT.

INSURED VIDE THE REPLY TO OUR LOR POINT NO. 4 HAS STATED THAT “TOTAL 44 METRES (FROM 25 TO 69 METRES) OF CHIMNEY IS DAMAGED ALONG WITH SUPPORTING STRUCTURES, WALKWAYS & STAIRCASE AND HENCE REPLACED”.”

7.       He then came to the conclusion that the maintenance of the chimney according to the qualitative standard due to corrosion and other degradation has become weakest in the middle portion and while carrying out the repairs the top portion had become the heaviest, resulting into the stress of the middle portion, which was damaged during the incident. The conclusion is recorded in paragraph (xviii) of the survey report, which is extracted herein under:

(xviii) FROM THE ABOVE ANALYSIS UNDERTAKEN BY US, IT BECOMES CLEAR THAT BOTH TOP AND LOWER PORTION WERE VERY STRONG AND THE MIDDLE PORTION HAD GOT WEAKENED DUE TO CORROSION AS EXPLAINED ABOVE AND HENCE IT BUCKLED AND HAD REQUIRED REPLACEMENT.

          While discussing the report from IIT Gandhinagar, the surveyor also observed as under, under the heading (d) corrosion (xii):

    (xii) IIT Gandhinagar on their independent detailed examination of the debris, found so many micro voids, which is a clear cut indication that the creep of material of the chimney in the middle portion had reached to the Tertiary Creep stage and hence failed.

8.       He thus came to the conclusion that the thickness of the chimney in the middle portion was less than the design and which conclusion had been correctly drawn in the report of IIT Gandhinagar.

9.       Resultantly the claim was repudiated on the ground that the loss/damage was due to degraded chimney material, and it collapsed when the wind resonance potentially affected the same. Learned counsel urges that these findings are incorrect, in as much as, there was no such precondition, while taking the policy regarding the thickness of the material to be utilized for constructing the chimney and hence such a ground on merits was not available for a repudiation of the claim.

10.     The sum and substance of the argument therefore is that at the time when the policy was taken no such conditions were mentioned, regarding the technical status of the chimney to be either acceptable or not acceptable. Accordingly, at the stage of the assessment of the claim no such plea can be taken.

11.     It is therefore submitted that the claim could not have been repudiated and the entire loss was liable to reimbursed.

12.     Mr. Abhishek Kumar Gola, learned counsel for the opposite party Insurance Company has vehemently opposed the claim urging that even if there was a condition for appointment of the surveyor from amongst the agreed list, the same does not create an estoppel  or  bar for appointing a surveyor in terms of the provision of Section 64 UM of the Insurance Act 1938. He contends that this argument of having violated the agreement is misconceived, in as much as, it is not the case of the complainant that the surveyor appointed was not possessed of the qualification of a surveyor as per IRDA Regulations.

13.     Responding to the submissions on the technical analysis, it is urged by Mr. Gola that IIT Gandhinagar is one of the prestigious institutions of the country and the technical report submitted by it clearly indicates that the cause of collapse was the incorrect up keep of the chimney contrary to the prescribed specifications and that suffered a lot of wear and tear. In the given circumstances, the exclusion clause was clearly attracted and any damage, breakage or crack or collapsing of the chimney was not covered under the risk policy. The claim was therefore rightly repudiated.

14.     It is further submitted that once a technical report, which has been procured at the instance of the complainant and his choice, then the same cannot be castigated or found fault with, as it is an independent report and has been recorded scientifically and in full detail. The conclusion drawn in the report clearly points out that the middle section of the chimney was inappropriately maintained contrary to design with no apt material and the thickness was below standard, which gave way on account of the burdened upper portion of the chimney, contrary to the design. Consequently, this coupled with the wear and tear of the chimney and the degraded quality of the steel used ultimately resulted in the collapse of the middle portion of the chimney. The technical report could not be found fault with and it clearly observes the deficiencies on the part of the complainant itself in maintaining the chimney. Hence the claim has been rightly repudiated relying on the same.

15.     It is further submitted that the aforesaid facts can be corroborated from the query raised by the surveyor and the reply given by the complainant as referred to hereinabove. Analyzing the same there could not be any dispute that the chimney had not been padded with the adequate material and repaired according to the design standards and was also suffering from serious wear and tear. In the circumstances the risk was not covered and hence the claim deserves to be dismissed.

16.     Having considered the submissions raised, the issue with regard to the appointment of a surveyor in a way could be raised as clause 7 (i) & (ii) of the agreement as quoted above, indicates that it should be strictly observed. Nonetheless, this is not a procedure of arbitration and is rather defining a choice of appointment of surveyors. According to section 64 UM of the Insurance Act, 1938 there is no such legal bar on the Insurance Company on the choice of a competent and a qualified surveyor. M/s. Rakesh Narula & Co. that conducted the preliminary and final survey is not alleged to be disqualified in any way, even though the name of the said surveyor does not appear in the list referred to in the agreement. The appointment of such a surveyor per se does not get vitiated, as there is neither any statutory or legal bar operating against the Insurance Company to appoint a surveyor even beyond the list agreed. The said clause under the agreement cannot act as a mandate against law and there cannot be an estoppel against statute, in as much as the appointment of a surveyor is a statutory obligation on the Insurance Company. Even otherwise no malafides can be presumed nor substantiated against the surveyor in the present case. The surveyor had suggested an independent scientific analysis that was accepted and carried out at this behest of the complainant.

17.     Coming to the merits of the claim, bereft of the opinion of the surveyor, the report of IIT Gandhinagar that has been extracted hereinabove, leaves no room for doubt that the design of the chimney and its requirement has been examined by one of the best technical experts of the country and there is no doubt with regard to the competence of the IIT Gandhinagar in carrying out the root cause analysis. The technical specifications including the variation in the thickness of the chimney in all the parts, bottom, middle and top, indicate that the thickness of the steel material was less than 10 mm and the thickness in the middle was the least. Technically the same was also found by the surveyor to be defective causing unnecessary stress on the middle part as indicated in the report. What is clinching in the technical report is the conclusion drawn by IIT Gandhinagar in its report as quoted hereinabove to the effect that had the chimney material been as per the original design (in terms of strength and thickness), then the wind resonance could not have initiated the failure.

18.     The technical analysis therefore rests with the aforesaid conclusion and no material contrary to the same or evidence has been led on the part of the complainant to dislodge the said technical conclusion. This is based on an empirical examination of the material and consequently, the aforesaid finding of IIT Gandhinagar as accepted by the surveyor and by the Insurance Company cannot be doubted.

19.     Additionally it is also observed that the surveyor has also examined the damage with the help of the analysis made in the report submitted by IIT, Gandhi Nagar. On an analysis of the report what appears is that the chimney was not maintained according to the design standards and the steel element thereof had corroded. It was also noted that lightening had not struck the chimney as there were no signs or scars of lightening on the chimney and the maximum wind speed on the date of loss was only 14.3 Km/hour. The total rainfall as on the date of loss was only 14.60 mm. Consequently, the wind speed was not sufficient to blow of the chimney. It is therefore probable that the wind which was blowing may have accelerated the damage. According to the scientific study conducted by IIT Kanpur, the failure of the chimney might have been triggered by the wind resonance but the potential cause was on the account of the defect in design and the maintenance of the chimney.

20.     The surveyor discussing the maintenance history has referred to the same and then referred to the various causes resulting in the reduction of the thickness of the chimney which is mentioned in Clause C under the heading “Thickness” of the surveyor’s report. The extent of corrosion has been detailed under the heading “Corrosion” of Clause D of the said report referring to the creeps that worsened and lead to secondary and tertiary stage which is the failure and rupture stage.  It has also been observed that tertiary stage results into failure due to micro-structure or metallurgical changes, for example grain boundary separation and formation of internal cracks, cavities and voids. The examination of the material confirmed the existence of such creeps and voids indicating a gradual deterioration and wear and tear of the chimney. A void is an emptiness that can cause a defect like a blank. It is the absence of the material that is supposed to be in place. The material becomes partially devoid of its contents resulting in weakness. The efficacy of the material utilized gets deprived of its force or strength. The removal might be on account of either some manufacturing deficiency or caused by wear and tear or any other external effect of corrosion. Creeping is caused on account of periodical expansion and contraction or such other factors either due to variation in temperature or caused by impacts. Thus, the chimney must have suffered these changes causing the crumbling of the structure given the life of the chimney of more than a decade.

21.     There is no material brought forth by the Complainant either through pleadings or evidence so as to contradict the aforesaid scientific analysis made on the basis of material that was collected and subjected to an empirical investigation.
22.     Having come to that conclusion about the weakness in the material as per the design of the chimney and then the highly probable wear and tear, which has been reported, the coverage stands excluded under the exclusion clause quoted hereinabove. A preponderance of all the probable circumstances as discussed above leads to the inescapable conclusion that the complaint cannot be sustained which is hereby dismissed.