2020 (4) TMI 902 - SC - Indian Laws

Court rules in favor of insured in insurance claim appeal, holding company liable for policy coverage.

Sushilaben Indravadan Gandhi and Ors. Versus The New India Assurance Company Limited and Ors.

The Supreme Court allowed the appeal, setting aside the Gujarat High Court's judgment and restoring the Motor Accident Claims Tribunal's decision. The ... Limitation of Liability - liability to third parties - Whether Dr. Alpesh Gandhi could have been said to have been in the employ of the Respondent No. 3 on the date of the accident, as a result of which the limitation of liability provision in favour of the Respondent No. 1 as set out would kick in? - HELD THAT:- The High Court held in the impugned judgment that as additional premium had been paid so as to attract the applicability of IMT-5, in any case the Insurance Company would be liable under the policy to pay compensation in the case of death to unnamed passengers other than the insured and his paid driver or cleaner, Dr. Alpesh Gandhi being one such unnamed passenger. This was done on the footing that the exception to IMT-5 was that a person in the employ of the insured coming within the scope of the Workmen's Compensation Act, 1923 is excluded from the cover, but that as Dr. Alpesh Gandhi did not come within the scope of the Workmen's Compensation Act, compensation payable due to his death in a motor accident would be covered by IMT-5. Whether the expression 'employment' is to be construed widely or narrowly - if widely construed, a person may be said to 'employed' by an employer even if he is not a regular employee of the employer? - HELD THAT:- The wider meaning that has been canvassed for by the insurance company cannot possibly be given, given the language immediately before, namely, 'in the course of', thereby indicating that the 'employment' can only be that of a person regularly employed by the employer. Even otherwise, assuming that there is an ambiguity or doubt, the contra proferentum Rule referred to hereinabove, must be applied, thus making it clear that such 'employment' refers only to regular employees of the Institute, which, as we have seen hereinabove, Dr. Alpesh Gandhi was certainly not. Appeal allowed. Issues Involved:1. Determination of whether the deceased was an employee of the respondent institute.2. Liability of the insurance company under the policy for the death of the deceased.3. Interpretation of the insurance policy clauses, including IMT-5 and IMT-16 endorsements.4. Application of the contra proferentem rule in insurance contracts.Issue-wise Detailed Analysis:1. Determination of whether the deceased was an employee of the respondent institute:The primary question was whether Dr. Alpesh Gandhi could be said to have been in the employ of the respondent institute on the date of the accident. The court examined the contract for services dated 04.05.1996 between Dr. Gandhi and the respondent institute. The contract's terms indicated that it was a 'contract for service' rather than a 'contract of service.' Key factors included:- The designation of Dr. Gandhi as an Honorary Ophthalmic Surgeon.- The remuneration described as an honorarium rather than a salary.- The contract was tenure-based, for three years, and extendable only by mutual consent.- Dr. Gandhi was not entitled to financial benefits applicable to regular employees.- The contract allowed termination by notice on either side, indicating a relationship more of equals than master-servant.- Dr. Gandhi was governed by the conduct and leave rules of the institute but was not considered a regular employee.2. Liability of the insurance company under the policy for the death of the deceased:The court analyzed whether the insurance company was liable under the policy. The relevant clause stated that the company would indemnify the insured for death or bodily injury to any person, including occupants carried in the motor car, except where such death or injury arises out of and in the course of the employment of such person by the insured. The court concluded that Dr. Gandhi was not a regular employee of the institute and thus, the exclusion clause did not apply. The insurance policy's IMT-5 endorsement, which provided personal accident cover to unnamed passengers other than the insured and his paid driver or cleaner, was applicable as additional premium had been paid.3. Interpretation of the insurance policy clauses, including IMT-5 and IMT-16 endorsements:The court found that the IMT-5 endorsement applied as additional premium had been paid, covering the death of unnamed passengers. The IMT-16 endorsement, which deals with general liability to employees of the insured, was not applicable as no additional premium was paid for it. The court emphasized that the insurance policy should be construed in favor of the insured if there is any ambiguity.4. Application of the contra proferentem rule in insurance contracts:The court reiterated the principle that exemption of liability clauses in insurance contracts should be construed contra proferentem, i.e., against the insurer in case of ambiguity. The court cited several precedents emphasizing that insurance policies should be interpreted in favor of the insured. The court found that the term 'employment' in the policy referred to regular employees, and since Dr. Gandhi was not a regular employee, the exclusion clause did not apply.Conclusion:The Supreme Court allowed the appeal, set aside the judgment of the Gujarat High Court, and restored the decision of the Motor Accident Claims Tribunal. The insurance company was held liable to pay compensation under the policy for the death of Dr. Alpesh Gandhi. The court applied the contra proferentem rule to interpret the insurance policy in favor of the insured, ensuring coverage for the deceased under the IMT-5 endorsement.