TaxTMI 
TaxTMI 
2010 (4) TMI 1179
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....e terms and conditions contained herein or endorsed or otherwise expressed herein that if the Insured shall discover any direct LOSS of Money and/or Securities sustained by the Insured by CONTIGENCIES as provided hereinafter at any time during the period of insurance stated herein or any subsequent period in respect of which the Insured shall have paid or agreed to pay and the company shall have accepted or agreed to accept the premium required for the renewal thereof, the company will indemnify the Insured in respect of all such direct losses but not exceeding, (a) the total sum insured hereby in respect of any loss or losses caused by acts or omissions of any one person whether Officer, Clerk or Employee of the Insured or acts or omissions in which such person is concerned or implicated or in respect of any one casualty or event irrespective of the total amount of such loss. (b) in any one period of insurance twice the total sum insured hereby in respect of all such losses." In lieu of Cover Note No: RENEWAL Policy No:264/52/1/00402 Schedule INSURED NAME: THE AMRAVATI DISTT. CENTRL COOP. BANK LTD., OFFICE, ADDRESS: AMRAVATI Date of Proposal & HEAD Declaration, 1.7.76 ....
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.... Securities wherever committed and whether committed directly or in connivance with others. 5. [Deleted] xxxxxx PROVISOS "1. EXCESS - The Insured shall bear the amount of excess stipulated in the Schedule in respect of each and every loss if the loss is under Contingencies 1, 2 or 3 insured by the Policy. In respect of losses under contingencies 4 or 5, the Insured shall bear 25% of the amount of the loss or the amount of excess stipulated in the Schedule whichever is the higher." xxxxxx (emphasis supplied) 3. An employee of the Bank by name Lodaya working in its Dhamangaon Branch committed a series of embezzlements. On receiving a report dated 28.2.1977 from its Special Auditor about the same, the Bank reported the matter to the police and also to the Insurer. The employee concerned was suspended on 16.3.1977 and eventually dismissed from service on 19.3.1978. 4. The Bank claimed indemnity from the Insurer in terms of the policy in respect of ₹ 3,58,000/- embezzled by the said employee. After prolonged correspondence, the Insurer informed the Bank that its assessors had assessed the reimbursable loss as ₹ 29,000/- and offered the said sum in full set....
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....issed the petition under Section 30 of the Act for setting aside the award and directed that the award be made a rule of the court. 7. Feeling aggrieved, the Insurer filed an appeal in the High Court of Bombay. By Judgment dated 18.2.2008 the appeal was allowed, the judgment of the Civil Court and the award of the Arbitrator were set aside and the matter was remitted to the Arbitrator for deciding the claim afresh, after granting due opportunity to both the parties to lead further evidence and submit their statements before the Arbitrator, if they so desired. The High Court following the decision of a learned Single Judge of that Court in Central Bank v. New India Assurance Co.Ltd. - AIR 1981 Bombay 397, held that the Arbitrator ought to have considered each item of embezzlement separately and could not aggregate the amounts embezzled by Lodaya at Dhamangaon Branch, for the purpose of arriving at the claim and fixing liability of the insurer. The High Court held that the Excess Clause in the policy did not envisage consolidation or aggregation of several losses sustained by the acts of embezzlement by the employee and deduction 25% thereof to arrive at the liability of the insurer....
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....e court to make a new contract, however reasonable, if the parties have not made it themselves." In Oriental Insurance Co. Ltd vs. Sony Cheriyan - 1999 (6) SCC 451, this Court held : "The insurance policy between the insurer and the insured represents a contract between the parties. Since the insurer undertakes to compensate the loss suffered by the insured on account of risks covered by the insurance policy, the terms of the agreement have to be strictly construed to determine the extent of liability of the insurer. The insured cannot claim anything more than what is covered by the insurance policy. That being so, the insured has also to act strictly in accordance with the statutory limitations or terms of the policy expressly set out therein." 10. "Excess" clauses are commonly used in Insurance contracts. In insurance parlance, the term "EXCESS" in the Excess clause in the policy refers to "that part of the amount of loss, under each claim, which is not covered by the policy" or the "amount that the policy holder has, by agreement, to bear or contribute to each insurance claim". In other words it limits the liability of th....
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....n this clause means the occurrence of a state of facts which justifies a claim on insurer and does not mean the assertion of a claim on company. In other words, in my judgment, the operation of the Excess Clause is determined by the facts which give rise to the claim and not by the form in which the claim is asserted. The employer committed several acts of fraud and defalcation and each such separate act caused loss and gave distinct and separate cause of action to the Bank. It is true that all these acts of defalcation were discovered only on October 18, 1972 but the fact of discovery on one day would not enable the Bank to claim that several acts of defalcation constitute one single or composite loss........... The mere fact that several acts of defalcation were discovered on one day would not lead to the conclusion that several losses under different acts could be treated as one composite loss. In accordance with the objects and interpretation of the terms and conditions of the policy, in my judgment, the Bank is liable to be considered as co-insurer to the extent of 25% subject to minimum excess of ₹ 25,000/- in respect of each loss sustained by each set of defalcation ....
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....pplicable in regard to the claims under Contingencies 1,2 and 3 as what was to be borne in such cases was a fixed flat sum of ₹ 11,500/- per every loss. The said words "25% on each and every claim or ₹ 11,500/- whichever is higher on DAR" applied only in regard to losses referable to Contingencies 4 and 5; and in regard to losses thereunder, what was to be borne by the Insured was 25% of the amount of the loss or the amount of excess stipulated whichever was higher. Therefore, the words "each and every claim" were used in the Schedule with reference to losses under Contingency 4 by describing the Excess as "25% on each and every claim or ₹ 11,500/- whichever is higher on D.A.R." This also clearly shows that the stipulated exemption from indemnity is in regard to each and every loss. We may illustrate the effect of this proviso by the following examples: Amount of loss of insured (each claim) Amount of loss to be borne in case of Contingencies 1,2 and 3 (Excess is ₹ 11,500) Amount of loss to be borne in case of Contingency 4(Excess is 25% of the amount of loss or ₹ 11500 whichever is higher) To be borne by Insured To b....