Strict construction of fire insurance policy left goods outside the covered shed uninsured and upheld non-standard settlement.

Fire insurance cover was construed strictly by the policy terms and the insured's proposal answers, so property and stock lying outside the covered shed or building were not within the accepted risk. The meaning of "factory" in the Factories Act could not enlarge the contractual cover, and the later request to extend the policy was not accepted except for a bank-name amendment. The insurer's non-standard settlement was upheld because the reduction related only to items outside coverage and was supported by the survey material. Interest and costs were found unwarranted in the circumstances, and the broader claim was rejected.

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Issues: (i) Whether the fire insurance policies covered plant, machinery and stock lying outside the covered shed or building within the factory ; (ii) whether the insurer was justified in settling the claim on a non-standard basis and in refusing interest and costs.

Issue (i): Whether the fire insurance policies covered plant, machinery and stock lying outside the covered shed or building within the factory .

Analysis: The policies had to be construed on their own terms, and the insured's proposal answers were material. The proposal specifically negatived the existence of goods stored in the open or in any kutcha or thatched structure within the relevant distance, and the subsequent request to enlarge the cover was not accepted except for amendment of the bank name. The meaning of "factory" in the Factories Act could not override the express wording of the insurance contract. The coverage therefore extended only to the insured goods and machinery in the covered area and not to property lying outside the shed or building.

Conclusion: The claim for loss relating to goods and machinery outside the covered area was not payable under the policies.

Issue (ii): Whether the insurer was justified in settling the claim on a non-standard basis and in refusing interest and costs.

Analysis: The reduction made by the insurer was confined to items found to be outside the scope of cover, and the settlement was made after consideration of the survey report and clarification from the surveyor. The delay in finalising the claim was found to be reasonable in the circumstances, and the award of interest at 18% per annum and litigation costs was held to be unwarranted.

Conclusion: The insurer's settlement was upheld, and the award of interest and costs was set aside.

Final Conclusion: The common judgment resulted in rejection of the insured's broader claim while granting relief to the insurer by setting aside the interest and costs awarded by the Commission.

Ratio Decidendi: An insurance policy must be construed strictly according to its express terms, and coverage cannot be enlarged beyond the risk actually accepted unless the contract is mutually altered.

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