2004 (2) TMI 376 - SC - Companies Law

Whether the damage caused to the building and the machinery of the respondent was the resultant of the impact by the bulldozer? Whether the word impact contained in clause 5 of the insurance policy covers the damage caused to the building and machinery due to driving of the bulldozer on the road close to the building? Held that - Appeal dismissed. The interpretation placed by the State Commission as well as by the National Commission in relation to the expression impact is in order and appropriate. It is also settled position in law that if there is any ambiguity or a term is capable of two possible interpretations one beneficial to the insured should be accepted consistent with the purpose for which the policy is taken, namely, to cover the risk on the happening of certain event. Although there is no ambiguity in the expression impact , even otherwise applying the rule of contra proferentem, the use of the word impact in clause 5 in the instant policy must be construed against the appellant. Where the words of a document are ambiguous, they shall be construed against the party who prepared the document. This rule applies to contracts of insurance and clause 5 of the insurance policy even after reading the entire policy in the present case should be construed against the insurer.

Summary

Issues: Interpretation of the term "impact" in an insurance policy.

Detailed Analysis:
1. The respondent filed a complaint seeking settlement of an insurance claim under the Consumer Protection Act. The appellant repudiated the claim, stating that the damage was not covered by the insurance policy. The District Forum dismissed the complaint, ruling no deficiency in service. The State Commission allowed the appeal, interpreting the word "impact" in the policy to grant relief to the respondent.

2. The appellant contested the claim, arguing that damage due to a bulldozer's vibration was not covered under the clause of "impact by any road vehicle." The District Forum held that the damage was not due to forcible contact, thus not covered by the policy. The State Commission, considering various meanings of "impact," found the damage caused by the bulldozer's close drive to be covered under the policy.

3. The National Commission, concurring with the State Commission, emphasized interpreting "impact" liberally. The key issue was whether the damage from the bulldozer's close drive was covered by the policy. The insurance policy covered destruction or damage to the property, and the term "impact" was subject to exclusions. The absence of an exclusion for damage caused by a vehicle close to the building indicated coverage under the policy.

4. The Courts interpreted "impact" broadly, considering its various meanings and the intention of the parties. The rule of contra proferentem was applied, construing the term against the insurer due to ambiguity. The judgments emphasized good faith and the insured's benefit in cases of doubt or ambiguity in insurance contracts.

5. The impugned order was upheld, affirming the interpretation of "impact" by the State and National Commissions as appropriate. The judgment concluded that the damage caused by the bulldozer's close drive was covered under the insurance policy. The appeal was dismissed, with no costs awarded.