2004 (9) TMI 698 - SC - Indian Laws

Interpretation of the term burglary in the insurance policy - Justification of the repudiation of the insurance claim by the appellant company - Validity of the orders passed by the Consumer Disputes Redressal Forum - Whether in terms of the policy the repudiation of the claim of the respondent by the appellant company is justified or not - HELD THAT - It is possible that an insurer may sustain loss in technical terms of the criminal law but no relief can be given to him unless his case is covered by the terms of the policy. It is not open to interpret the expression appearing in policy in terms of common law; but it has to give meaning to the expression as defined in the policy. The act that causes the loss must fall within the definition in the policy and it cannot take the cover and contents of the definition as laid down in the criminal law. Therefore when the definition of the word burglary has been defined in the policy then the cause should fall within that definition. Once a party has agreed to a particular definition he is bound by it and the definition of criminal law will be of no avail. In this connection the decision of the National Consumer Disputes Redressal Commission in the case of National Insurance Company Ltd. v. Public Type College 2001 (5) TMI 987 - NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI - LB which has taken the colour and content of the definition given in the criminal law does not lay down the correct proposition of law. It is settled law that terms of the policy shall govern the contract between the parties they have to abide by the definition given therein and all those expressions appearing in the policy should be interpreted with reference to the terms of policy and not with reference to the definition given in other laws. It is a matter of contract and in terms of the contract the relation of the parties shall abide and it is presumed that when the parties have entered into a contract of insurance with their eyes wide open they cannot rely on definition given in other enactment. Thus the decision of the National Consumer Disputes Redressal Commission in the case of National Insurance Company Ltd. v. Public Type College is not a good law and all the Tribunals i.e. National Consumer Disputes Redressal Commission State Commission District Forum having applied the ratio of that case; the impugned order cannot be sustained. Thus we are of the opinion that theft should have preceded with force or violence as per the terms of insurance policy. In order to substantiate a claim an insurer has to establish that theft or burglary took place preceding with force or violence and if it is not then the insurance company will be well within their right to repudiate the claim of the insurer. However all the three forums have already awarded compensation and the amount has been paid to the respondent therefore on the point of equity we would not like to disturb the payment which has already been made. However in view of legal position stated by us the orders of the District Forum State Commission and the National Commission cannot be upheld. In the result we allow this appeal set aside the order passed by the National Consumer Disputes Redressal Commission New Delhi confirming the order of the State Commission District Forum. But the amount of compensation which has already been paid to the respondent shall not be recovered in the facts and circumstances of the present case.

Summary

Issues Involved:
1. Interpretation of the term "burglary" in the insurance policy.
2. Justification of the repudiation of the insurance claim by the appellant company.
3. Validity of the orders passed by the Consumer Disputes Redressal Forum, State Commission, and National Commission.

Summary:

1. Interpretation of the term "burglary" in the insurance policy:
The policy defined "burglary and/or housebreaking" as theft involving entry or exit by forcible and violent means or following assault or violence or threat thereof. The Supreme Court emphasized that the definition given in the policy is binding on both parties. The term "burglary" in the policy necessitates the element of force and violence as a condition precedent. The Court referred to English and American jurisprudence, which consistently held that burglary must involve forcible and violent entry to be covered by the insurance policy.

2. Justification of the repudiation of the insurance claim by the appellant company:
The appellant company repudiated the claim on the ground that the theft did not involve force or violence, as required by the policy. The Supreme Court upheld this repudiation, stating that the terms of the policy must be construed strictly. The Court noted that the respondent's claim did not meet the policy's requirement of force or violence preceding the theft. Therefore, the insurance company was justified in repudiating the claim.

3. Validity of the orders passed by the Consumer Disputes Redressal Forum, State Commission, and National Commission:
The District Forum, State Commission, and National Commission had ruled in favor of the respondent, interpreting "burglary" to include theft without force or violence. The Supreme Court disagreed with this interpretation, stating that the terms of the policy should govern the contract. The Court held that the decision of the National Consumer Disputes Redressal Commission in the case of National Insurance Company Ltd. v. Public Type College, which influenced the lower forums, was not good law. Consequently, the orders of the District Forum, State Commission, and National Commission were set aside.

Equitable Consideration:
Despite setting aside the lower forums' orders, the Supreme Court decided not to disturb the compensation already paid to the respondent on equitable grounds. The Court also suggested that insurance companies amend their policies to make them more understandable and viable for the common man, ensuring that the definition of "burglary" aligns with common parlance.

Conclusion:
The appeal was allowed, the orders of the National Consumer Disputes Redressal Commission, State Commission, and District Forum were set aside, but the compensation already paid to the respondent was not to be recovered. No order as to costs.