TaxTMI 
TaxTMI 
2025 (12) TMI 1140
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....rief facts giving rise to the controversy are that the Appellant, a Government company, invited tender for insurance for its various Units/Dumps/Offices etc., in June 2005. Pursuant to the said tender, on 16.06.2005 the Respondent herein submitted its quote for centralized insurance policy and consequently, on being declared as the successful bidder, the Respondent was awarded the contract for Centralised Insurance coverage at the CO Unit and Zonal Units. Accordingly, a contract dated 21.07.2006, was entered between the Appellant and the Respondent herein and a Standard Fire and Special Perils Policy (Material Damage) (hereinafter referred to as "the policy") was issued by the Respondent herein for the Appellant's unit, Mandhar Cement Factory, Cement Corporation of India, P.O. Mandhar, Rampur District, Chhattisgarh 243111 (hereinafter referred to as "factory"). 3. On the early morning of 01.11.2006, a theft and fire incident occurred at the factory of the Appellant where some petty thieves entered the premises of the Appellant company with a blow torch and portable gas cutter-like apparatus. Although the thieves intended to steal winding copper and transformer oil, using bolt cu....
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....the loss was covered under the exclusion clause of Riots Strike, Malicious and Damage ("hereinafter referred to as RSMD"). The contents of the Repudiation letter are reproduced hereunder: " ...our surveyor was in contact with you and as per the report submitted by them the proximate cause of loss was Burglary. Kindly note that this policy is a named peril policy and this peril is not covered under the policy (RSMD Exclusion Clause-D). In the light of the above facts, we are treating the case as 'No claim' and accordingly closing the same as 'Nil Liability' case." 7. Being aggrieved by the repudiation of the claim by the Respondent, the Appellant filed Complaint No. 210 of 2009 before the NCDRC, inter alia praying that the Respondent be directed to pay the Appellant a sum of Rs. 2,99,39,298.40 along with interest @18% p.a. till date. 8. The Respondent filed their written submissions before the NCDRC inter alia stating that the theft which took place on the premises in the factory preceded the fire, and thus, the incident of theft was the proximate cause of damage. Since theft was not a named peril in the policy, the Respondent was not liable to reimb....
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.... results from separate perils and the one causing the loss (fire) is expressly covered and not excluded. 14. It is further argued that the policy does not list burglary/ theft as an exclusion in the case of fire. Thus, there is no reason for the Respondent to repudiate the claim of the Appellant on the ground that the theft precedes the fire and therefore, the cause of the loss was covered under the exclusion clause of "RSMD". It is further argued that the "RSMD" clause has no application in the facts and circumstances of the case because the damage to the insured property was caused due to fire and not by any of the exclusion made under the "RSMD" clause. 15. Per contra, learned counsel for the Respondent submitted that the policy is a "named peril" policy as opposed to a general all-risks policy and the policy contained a specific exclusion under Clause V(d) which excluded loss from "Burglary, housebreaking, theft........ in any malicious act.". Further, the policy also excluded loss by theft during or after the occurrence of any insured peril except as provided under the RSMD cover. 16. It is argued that the cause of the fire is undisputed that it originated from an att....
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....nce named in the said schedule or of any subsequent period, in respect of which the insured shall have paid and the Company shall have accepted the premium required for the renewal of the Policy, the Company shall pay to the insured the value of the Property at the time of the happening of its destruction or the amount of such damage or at its option reinstate or replace such property or any part thereof..." (Emphasis Supplied) From the bare reading of the opening paragraph of the policy, it is clear that the Respondent had assured to indemnify the loss to the insured by any of the perils specified in the policy. The Perils which are specified in the policy are as follows:- I. Fire II. Lightning III. Explosion/Implosion IV. Aircraft Damage V. Riot, Strike, Malicious and Damage VI. Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood, and Inundation VII. Impact Damage VIII. Subsidence and Landslide including Rockslide IX. Bursting and/or overflowing of water-tanks, apparatus, and pipes X. Missile Testing Operation XI. Leakage from automatic sprinkler installations ....
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....ue them. They mean loss or damage either by ignition of the article consumed, or by ignition of part of the premises where the article is in the one case there is a loss, in the other a damage, occasioned by fire. LORD BACON says: 'It were infinite for the law to judge the causes of causes, and their impulsions one of another, therefore it contenteth itself with the immediate cause, and judgeth of acts by that, without looking to any further degree.' If that were not so, a ship in the neighbourhood of Mount Etna or Vesuvius during an eruption, and receiving damage from substances projected therefrom, might be said to be damaged by fire. So, a shot falling amongst crockeryware might in one sense be said to occasion a loss by fire. But neither of these cases would fall within these words, which must be understood in their plain and ordinary sense..." (Emphasis Supplied) 23. A fire insurance policy is essentially a contract entered between the insurer and the insured for indemnification of the loss caused to the insured goods by fire. The High Court of Madras in its judgment in Sri. Balaji Traders vs. United India Insurance Co. Ltd. reported in 2005 (1) CTC 267, which wa....
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....lings of the High Court, it is clear that it is immaterial whether the fire was caused by the negligence of the servant of the plaintiff firm or by some other method, unless it is pleaded specifically that the fire occasioned by the willful act of foul play or fraud by the insured himself. The first defendant has not raised any plea of fraud and therefore, as observed by the learned single Judge, since the plaintiff has failed to prove the cause of fire, the claim should be negatived, is not acceptable to us. 26. The learned counsel for the appellant submitted, that the fire loss caused negligently by the insured, even if it is correct, is covered by fire insurance, since otherwise such policies would practically be of little importance. Therefore, on the ground that the contract is based upon the utmost good faith, the insurer cannot repudiate the claim of the insured, unless it is shown that the assured or insured failed to make such disclosure as agreed under the terms of the contract. 27. In the book 'Principles of Insurance Law' by Dr. Avtar Singh, it is said as follows, under the heading 'Cause of fire is immaterial': "In insuring against fire, the ....
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....d in order to determine whether in a particular case the loss is caused by fire, the following rules generally apply:- a) There must be an actual fire; hence mere heating or fermentation will not be sufficient to render the insurers liable for loss occasioned thereby. b) There must be something on fire which ought not to have been on fire. c) There must be something in the nature of an accident, but a fire occasioned by the wilful act of a third person without the consent of the Insured, is to be regarded as accidental for the purpose of this rule. If these requisites are satisfied, any loss attributable to the fire, whether by actual burning or otherwise, is within the contract. 34. The object of the contract is to protect the Insured against loss occasioned by fire. The fire must be accidental. The dictionary meaning of the expression 'accidental' is a 'happening occurring unexpectedly or by chance'. Consequently, damage from a deliberately set fire will not be covered. To carry out the investigation, therefore, beyond the cause of the loss and to cast upon the Insured the burden of establishing that the cause of the fire itself was covered by ....
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.... that the insured caused the fire. Thus, it is now established that the loss caused to the Appellant was due to fire only and the incident of theft/ burglary merely preceded the incident of fire. 26. Additionally, in case of insurance contracts, the exclusion clause must be construed strictly and wherever there is any ambiguity between two or more clauses in the contract, it must be interpreted in favour of the insured. This court in the case of Texco Marketing Private Limited vs. Tata Aig General Insurance Company Limited and Others reported in (2023) 1 SCC 428 has held as under: "...13. An exclusion clause has to be understood on the touchstone of the doctrine of reading down in the light of the underlining object and intendment of the contract. It can never be understood to mean to be in conflict with the main purpose for which the contract is entered. A party, who relies upon it, shall not be the one who committed an act of fraud, coercion or misrepresentation, particularly when the contract along with the exclusion clause is introduced by it. Such a clause has to be understood on the prism of the main contract. The main contract once signed would eclipse the offend....
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....e that the driver of the insured vehicle was responsible for the accident. In fact, it was not disputed that the oncoming vehicle had collided head-on against the insured vehicle, which resulted in the damage. Merely by lifting a person or two, or even three, by the driver or the cleaner of the vehicle, without the knowledge of the owner, cannot be said to be such a fundamental breach that the owner should, in all events, be denied indemnification. The misuse of the vehicle was somewhat irregular though, but not so fundamental in nature so as to put an end to the contract, unless some factors existed which, by themselves, had gone to contribute to the causing of the accident. In the instant case, however, we find no such contributory factor. In Skandia case, this Court paved the way towards reading down the contractual clause by observing as follows : (SCC pp. 665-66, para 14) "14. ... When the option is between opting for a view which will relieve the distress and misery of the victims of accidents or their dependants on the one hand and the equally plausible view which will reduce the profitability of the insurer in regard to the occupational hazard undertaken by him by ....
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....iven to the words of the policy. This Court observed that a cash box cannot be classified as a "safe" within the meaning of a burglary insurance policy and the insurer was exempted from any liability arising from the theft of jewellery and cash from the cash box. The exceptions to an insurance policy must be construed strictly since they reflect the agreement between the parties with respect to the losses that are covered by the insurance policy. Any departure from this principle is possible only if the terms of the policy are ambiguous or unclear. In Sangrur Sales Corpn. v. United India Insurance Co. Ltd., a two-Judge Bench of this Court, of which one of us (D.Y. Chandrachud, J.) was a part, held that in the event two constructions are possible or if there is any ambiguity, a construction that is beneficial to the insured should be adopted consistent with the purpose of the policy. 19. Another instance where exception clauses may be interpreted to the benefit of the insured is when the exception clauses are too wide and not consistent with the main purpose or object of the insurance policy. In B.V. Nagaraju v. Oriental Insurance Co. Ltd., a two-Judge Bench of this Court r....
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....s hardly any choice. The Court cannot but opt for the former view. Even if one were to make a strictly doctrinaire approach, the very same conclusion would emerge in obeisance to the doctrine of "reading down" the exclusion clause in the light of the "main purpose" of the provision so that the "exclusion clause" does not cross swords with the "main purpose" highlighted earlier. The effort must be to harmonise the two instead of allowing the exclusion clause to snipe successfully at the main purpose. The theory which needs no support is supported by Carter's "Breach of Contract" vide para 251. To quote: "Notwithstanding the general ability of contracting parties to agree to exclusion clauses which operate to define obligations there exists a rule, usually referred to as the "main purpose rule", which may limit the application of wide exclusion clauses defining a promisor's contractual obligations. For example, in Glynn v. Margetson & Co. [Glynn v. Margetson & Co., 1893 AC 351 (HL)], AC at p. 357, Lord Halsbury, L.C. stated : (AC p. 357) '... It seems to me that in construing this document, which is a contract of carriage between the parties, one must in the....