Burglary claim: stock records, average and suspected collusion
A jewellery showroom in Jaipur was burgled over a weekend. The burglary policy had a sum insured of ₹3 crore on stock. The insured claims ₹4 crore, saying the stock was worth ₹4.5 crore. The shop’s shutters were found cut; the alarm had been switched off; the CCTV recorder was missing. The stock records show opening stock ₹80 lakh, purchases ₹2 crore, sales ₹1.2 crore and closing stock ₹2.4 crore, but the records are incomplete for the last two months. The insured’s manager resigned two weeks before the incident and is untraceable. The police have registered an FIR but no recovery has been made. As surveyor, you must assess the claim.
1. How do you determine the actual stock at risk and apply the average clause?
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Start with the stock records, but do not accept the insured’s figure of ₹4.5 crore without verification. Reconstruct the stock movement from opening stock, purchases, sales and returns, and test the closing stock of ₹2.4 crore against GST returns, purchase invoices, supplier statements, bank receipts, sales tax records and the insured’s stock statements given to the bank. If the verified stock at risk is ₹2.4 crore, the sum insured of ₹3 crore is adequate and no average applies. If the verified stock at risk is higher than ₹3 crore, average applies in the proportion of sum insured to stock at risk. Even without average, the claim cannot exceed the sum insured. The claimed ₹4 crore is therefore capped at ₹3 crore before applying salvage, excess or policy deductions, but only to the extent the loss is proved.
2. What do you do about the missing records and suspected employee collusion?
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Treat the missing records and the manager’s disappearance as risk indicators, not as proof of fraud. Request complete books, purchase and sales registers, GST filings, bank statements, stock audit reports and the insurer’s proposal form. Interview the remaining staff, check attendance and access records, examine the alarm log and the premises for forced-entry evidence, and obtain the FIR and police investigation status. Ask for the manager’s known contact details and employment file. If the records are inadequate, recommend an independent stock audit and a forensic review. Do not accuse any person in the report. State the facts, the gaps and the further enquiries needed, and leave the fraud determination to the insurer and, if necessary, the investigating agency.
3. What should your report recommend, and what evidence must you avoid relying on?
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Recommend payment only for the loss that is proved by contemporaneous records and physical evidence. If the stock at risk is verified at ₹2.4 crore, the claim is within the sum insured and the main issue is proof of loss, not average. If the stock at risk exceeds ₹3 crore, apply average. Deduct any salvage or recovery and apply the policy excess. Recommend that the insurer obtain a police report, a stock audit and, if the indicators remain unexplained, a fraud investigation before settlement. Do not rely on hearsay about the manager, on the insured’s oral statements without documents, on a single stock statement prepared after the loss, or on the claim form alone. Avoid expressing an opinion on criminal liability; the surveyor’s role is to quantify the loss and report the facts.