Kathmandu. Nepal Insurance Authority (NEA) has ruled that all claims cannot be rejected on the basis of negligence by the contractor during the construction phase.
The decision was taken in response to the dispute over the damage to the under-construction structures that took place on the premises of the Special Economic Zone (SEZ) at Simara of Bara on February 14, 2022.
The authority has directed the insurer, Himalayan Everest Insurance, to pay full compensation for the loss except those caused due to negligence. The NEA has ruled in favor of the insured (construction company) dismissing the company’s decision to dismiss the claim of negligence in the construction of physical infrastructures.
Subject of dispute
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The main issue of the dispute is the insurance claim for the physical damage caused during the slope of the roof of the building under construction in the SEZ. The case had reached the legal process after the insurance company refused to pay the claim of Rs 3,64,58,520 submitted by the insured Gauri Parbati-Pratishtha JV.
Facts of the case
The contractor company, which was constructing canteens and assembly halls at Simara SEZ, suddenly collapsed while casting the roof. Although the insured had filed a claim with details of the damage, the surveyor appointed by the company reported that the accident occurred due to the negligence of the workers and weak support. On the basis of the same report, the insurance company had decided not to pay the claim on May 4, 2080 saying that the insurance policy does not cover the loss caused by negligence.
Basis for Authority’s decision
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The authority has ordered the payment on the following basis after listening to the views of both the parties and taking the opinion of third party experts:
Explanation of Insurance Clause: The Insurance Authority explains the Contractor Full Risk Insurance Special Exception Clause. In the case of a defective work, the insurance company is not liable for the repair cost of the same product, but the insurance company is liable for other improperly done works (rods, concrete, etc.) that are damaged due to the result.
Opinion of Experts: The authority had appointed an independent expert through the Insurance Surveyors Association of Nepal and conducted the study. Experts had confirmed that other construction works except Teka were being carried out as per the approved design and standards.
Sudden and Unexpected Incident: The Authority believes that the incident was not a sudden and unexpected accident but wilful negligence on the part of the insured.
Partial Liability: The Authority has directed the company to pay the remaining physical infrastructure damage by deducting the amount of the loss and deduction specified in the insurance policy.
The NRA decided the dispute on August 3, 2081.
Path to Appeal
According to Section 128 of the Insurance Act, 2079, if the insurance company or the insured party is not satisfied with this decision, the insurance company or the insured can go to the High Court Patan within 35 days.
