Supreme Court: To Claim Insurance Insurer Liable to Prove that Claim Falls in Exclusionary Clause of the Policy

Supreme Court: To Claim Insurance Insurer Liable to Prove that Claim Falls in Exclusionary Clause of the Policy

The Supreme Court coram comprising of Justices Ajay Rastogi and Bela M. Trivedi while dismissing an appeal observed that the insurance company had failed to discharge its burden of bringing the case within the exclusionary clause V(d) of the Insurance policies in question. The bench observed, “it is trite to say that wherever such an exclusionary clause is contained in a policy, it would be for the insurer to show that the case falls within the purview of such clause. In case of ambiguity, the contract of insurance has to be construed in favor of the insured.”

The brief background of the case is that the Respondent/Complainant-Vedic Resorts and Hotels Pvt. Ltd. claimed to be running a Resort at West Bengal had obtained two insurance policies from the Appellant (Insurance Company) in respect of the buildings of the said Resort with plant and machinery accessories and furniture.

In 2009, a mob of about 200-250 persons damaged the insured property resulting in loss to the complainant. The incident was reported to the police, where after explosive substances were found and recovered from the housing material-cum-electrical storeroom of the Vedic village of the Respondent.

It was revealed in the investigation that the accused-Gaffar Molla and his associates after the firing and throwing bombs at the football match venue, and upon being chased by the crowd, took shelter in Vedic Resorts and Hotels Pvt. Ltd. of the respondent-complainant. Since the said Gaffar Molla and his associates were given shelter in the said Vedic Resort, the crowd chased them and damaged the insured property of the respondent-complainant.

Later, after the submission of the surveyor’s report assessing the loss to the tune of Rs. 202.216 lakhs, the Appellant rejected the claim stating that the loss was an outcome of a malicious act and therefore fell within the exclusions under Clause V(d) of the Subject policies; and that there had been a breach of warranty on the part of the assured in respect of the class of constructions covered under the subject policies.

The consumer complaint filed by the Respondent challenging the said repudiation of the claim before the National Commission (NCDRC) was partly allowed. Aggrieved by the same, the appellant filed an appeal before the Apex Court.

The Court after perusing the Clause V of the subject policies, observed that, the loss of or visible physical damage or destruction by external violent means directly caused to the property insured was covered, but the loss, damage or destruction to the property caused by burglary, housebreaking, theft, larceny or any such attempt or any omission of any kind of any person in any malicious act was not covered.

The bench was further of the view that if the Insurance company alleges that the loss/damage was not caused by any malicious act, the burden of proving the contrary would be upon the insured.

“Though, it is true that the said Gaffar Mollaand his associates had taken shelter at the Vedic Village when the mob became frenzied and chased them, and though it is also true that during the course of investigation the pipe guns and other explosive materials were found lying in the compound of Vedic Village, nonetheless the alleged incident of firing and causing death of a person appears to have taken place on the spot during the football match being played at the football ground”, opined the Bench.

Therefore, the Court appositely stated that there was hardly any material to show that the entire incident and the resultant damage to the insured property was caused as a result of the malicious act of the respondent-complainant.

According to the Court, the appellant-Insurance Company had failed to discharge its burden of bringing the case within the exclusionary clause V(d) of the policies in question.

Noticing the fact that the surveyor in the Final Survey Report had also opined that the loss had occurred due to the insured peril and the claim was admissible.

The Bench said, “Though it is true that the Surveyor’s Report is not the last and final one nor is so sacrosanct as to the incapable of being departed from, however, there has to be some cogent and satisfactory reasons or grounds made out by the insurer for not accepting the Report. We are afraid in the instant case, the appellant-Insurance Company has failed to make out any such cogent reason for not accepting the surveyor’s Report.”

Thus, the bench stated that is trite to say that wherever such an exclusionary clause is contained in a policy, it would be for the insurer to show that the case falls within the purview of such clause. In case of ambiguity, the contract of insurance must be construed in favor of the insured.

Accordingly, the Apex Court dismissed the appeal.

Advocate Manjeet Chawla and Vishnu Mehra appeared for the Appellant, whereas, Advocate Susmit Pushkar and Sukumar Pattjoshi appeared for the Respondent.