A Cut Wall, an Absent Watchman and a Retail-Price Claim Schedule
A jewellery showroom insured under a burglary policy for Rs 1.50 crore on stock reports on a Monday morning that the strong room's rear wall had been cut open with a gas cutter over the weekend and three trays of ornaments removed. The manager was on leave and the keys were with him; the night watchman was absent, having told the manager he would attend a family wedding. The FIR was lodged at 11 a.m. on Monday and the police panchnama records 'some ornaments missing'. The claim schedule lists 214 items at retail price totalling Rs 62 lakh, including making charges and GST. The stock statement submitted to the insured's banker as on 31 March showed stock at cost of Rs 92 lakh. The policy contains a warranty that the strong room will be kept locked and a watchman posted at night. Fourteen months earlier the same insured had claimed Rs 18 lakh for a burglary.
1. Is this a burglary loss within the meaning of the policy? Deal with the wall breach and with the breach of the watchman warranty.
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The wall breach. Burglary cover requires violent and forcible entry into the premises. A rear wall cut with a gas cutter is strong prima facie evidence of such entry, but it must be tested: the direction of the cut and where the debris lies, whether the cutting was done from outside or inside, tool marks consistent with the implement recovered or not recovered, the alarm and CCTV logs, the condition of the locks and the strong room door, and the statements of the watchman, manager and neighbours. An inside job wearing the appearance of forcible entry is a known pattern, and the surveyor's scene examination is the only opportunity to test it.
The watchman warranty. There is a clear breach: the strong room was not guarded. Whether that defeats the claim depends on the character of the term. A true promissory warranty, breach of which discharges the insurer from liability for the loss regardless of causation, is fatal to the claim; a condition requires the insurer to show that the breach was material to the loss. Here the absence of the watchman is plainly material to a weekend cut-through of a wall - a guard on duty is the very thing that would have interrupted it.
The surveyor's role. Report the facts, the breach, the evidence on forcible entry, and the materiality of the breach. Do not repudiate and do not confirm cover; recommend that the insurer obtain a legal view on the effect of the warranty and on the insured's own breach of the reasonable-care condition, and keep the file open for the final police report.
2. Assess the quantum. How do you convert a retail-price schedule into an indemnity claim?
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Indemnity is cost, not retail. The insured has lost goods, not the profit he would have earned on them. The claim schedule at retail price, including making charges and output GST, must be rebuilt from purchase-side evidence: supplier invoices, hallmarking records, karigar job work bills, and the stock register. Making charges are recoverable only to the extent actually incurred. GST paid on purchases is a cost where input credit is not available, but GST that would have been charged on sale is not a loss at all.
Cross-check against independent records. The banker's stock statement of Rs 92 lakh at cost is the most useful anchor, because it was prepared for a third party before the loss. Compare it with purchase invoices, GST returns, the stock register and the insured's own valuation of the three trays. Then test plausibility: 214 items in three trays requires a very dense packing indeed - examine the trays, their dimensions and their normal capacity, and reconcile with the physical stock count of what remains.
Average. Sum insured Rs 1.50 crore exceeds the value at risk of Rs 92 lakh, so there is no underinsurance and the average clause does not operate. Say so expressly, because it forecloses an argument the insured might otherwise expect.
Conclusion. Quantify on the best available evidence, at cost, item by item, with a stated basis and a stated range of uncertainty. Where the records cannot support the schedule, the report should say precisely which items are supported, which are partly supported and which are not, rather than returning a single unsupported figure.
3. What is the significance of the earlier burglary claim and the absent watchman for your report and recommendation?
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Both are moral-hazard indicators, and both must be stated factually without any allegation of fraud. The surveyor reports; the insurer decides.
The earlier claim. Obtain the earlier claim file: the modus operandi, the items claimed, the suppliers involved, the police outcome, whether it was settled and on what basis, and whether the insured disclosed it at the last renewal if the proposal asked about prior losses. A second burglary within fourteen months, at premises where the guarding arrangement had lapsed, is a pattern that a reasonable insurer would want examined before payment. Failure to disclose a prior loss where asked is a material non-disclosure quite separate from the current claim.
The absent watchman. The manager knew the watchman would be away, held the keys himself, and went on leave. That sequence - knowledge, arrangement, absence - is what makes the breach of warranty material rather than technical, and it belongs in the report in chronological order with supporting statements.
Documentary discipline. Preserve the FIR, the panchnama, the final police report when it issues, the scene photographs, the stock registers and the correspondence with the insured. Obtain the police final report or a status note before the insurer closes the file, since a later 'untraced' report and a later recovery both change the position.
Recommendation. Report the coverage questions, the quantum assessed at cost, the discrepancies between the claim schedule and the banker's statement, and the repeat-claim history. Recommend that the insurer consider a field investigation and a legal view on the warranty before taking a coverage decision, and that any payment be made with a reservation of rights preserved.