REPUDIATION OF INSURANCE CLAIMS

[Mr. M. GOVINDARAJAN]

In NATIONAL INSURANCE COMPANY LTD. VERSUS VEDIC RESORTS AND HOTELS PVT. LTD. - 2023 (5) TMI 752 - SUPREME COURT, the respondent is running a resort at Village Shikharkpur, West Bengal.  The complainant obtained two insurance policies from the appellant insurance company.  One policy is for the period from 16.09.2008 to 15.09.2009 in respect of the buildings with plant and machineries placed in the resort.  The second policy is for the period from 13.07.2009 to 12.07.2010 in respect of two hotel buildings of the resort with stock. 

On 23.08.2009 at about 05.00 a mob containing 200 - 250 persons entered the resort and damages the insured properties resulting loss to the complainant.  The matter was reported to police and an FIR was registered on the complaint given by the General Manager of the resort.

One another FIR was filed on the written complaint of Monirul Sardar against one Gaffar Molla and his associates.  When Monirul and his brother returning to home they saw a football match going on at Sekharpur Adarsha Sangha Ground.  When the said football match was going on, suddenly one Gaffar Molla and his associates started firing and hurling bombs to postpone the match.  The brother of Monirul Alam @ Amirul Sardar received gunshot injury on his person causing his instant death. Several other spectators also received injuries due to bomb explosion.  During the course of investigation, it was revealed 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 Private 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.  The police  conducted searches in the village on 24.08.2009.  During the search the police found and recovered from the housing material-cum-electrical store room situated within the compound wall of Vedic resort.

The complainant filed claims to the appellant insurance company.  The Surveyor on 16.06.2011 assessed the loss to the complainant to the tune of 1.97 crores for one policy and Rs.4.7 lakhs for another policy.  The appellant insurance company repudiate the insurance claims of the complainant vide their letter dated 06.07.2012.  The reason for the rejection of the claim is that loss in respect of which the subject claim was made, was an outcome of the malicious act and therefore fell within the exclusions under Clause V(d) of the Subject policies. 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.

Since the claim of the complaint has been rejected by the appellant insurance company, the complainant filed a complaint before the National Commission challenging the repudiation of the claim by the appellant insurance company under section 21 of the Consumer Protection Act, 1986.  The National Commission allowed the complaint and directed the appellant insurance company to pay a sum of Rs.2.02 crores to the complainant along with interest @ 9% from the lodgment of the claim till the date of payment.   Against the order of National Commission the appellant insurance company filed appeal under Section 23 of the Consumer Protection Act, 1986 before the Supreme Court. 

The appellant insurance company submitted the following before the Supreme Court-

• The respondent had harbored the hard-core criminal Gaffar Molla and his associates who had killed one person and injured many others at the football match venue, using illegal fire-arms and explosives stored at his own compound of Vedic village and had invited public grudge which had caused damage to his insured property.
• The loss suffered by the respondent was an outcome of the malicious act on the part of the management of Vedic village, which fell within the exclusions provided under Clause V(d) of the Insurance Policy.
• The words ‘or any omission or any kind or any person’ occurring in Clause V(d) of the Policy would cover the damage to the property caused on account of omission of the management of the respondent-complainant to abide by the law.
• The respondent had engaged Gaffar Molla and his associates for carrying out illegal activities and terrorizing the people having their lands adjacent to the resort, to extend the area of his resort.
• The Survey Report of the Surveyor opining that the loss had occurred due to the insured peril and the claim was admissible was highly erroneous and could not be treated as final.

The respondent company supported the findings recorded by the National Commission submitted that the repudiation of his claim by the appellant-Insurance Company was erroneous and the Commission had rightly granted the same.

To this the appellant relied on Clause V(d) of the subject policies.  The said Clause V read as follows-

“V. Riot, Strike and Malicious Damage:

Loss of or visible physical damage or destruction by external violent means directly caused to the property insured but excluding those caused by:

a. to (c)………………

b.

(d) burglary, housebreaking, theft, larceny or any such attempt or any omission of any kind of any person of any person (whether or not such act is committed in the course of a disturbance of public peace) in any malicious act.

If the Company alleges that the loss/damage is not caused by any malicious act, the burden of proving the contrary shall be upon the insured.”

The appellant further contended before the Supreme Court the following-

• From the bare reading of the said clause, it is discernible 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.
• 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. In the instant case, the appellant-Insurance company had repudiated the claim of the respondent taking recourse to the said Clause V(d) of the subject policy on the ground that the loss caused to the respondent was an outcome of the malicious act/acts on the part of the respondent Vedic Village management and it fell within the exclusions provided under Clause V(d) of the Insurance Policy.

The Supreme Court considered the submissions made by the appellant insurance company and respondent complainant.  The Supreme Court observed that there is hardly any material to show that the entire incident and the resultant damage to the insured property were caused as a result of the malicious act of the respondent-complainant.  The Supreme Court further observed that even if, the allegations against the said Gaffar Molla and his associates are taken at their face value, it is difficult to accept the contention raised by the learned counsel for the appellant that the damage caused by the frenzied mob which had chased said Gaffar Molla and his associates, was caused due to the malicious act on the part of the respondent and therefore was excluded from the coverage in view of Clause V(d) of the subject Policy.

In the instant case, the Supreme Court observed that 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. The surveyor in the Final Survey Report dated 16.06.2011 had also opined that the loss had occurred due to the insured peril and the claim was admissible.  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. In the instant case, the appellant-Insurance Company has failed to make out any such cogent reason for not accepting the surveyor’s Report.

The Supreme Court held 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 Supreme Court dismissed the appeal as there is no merit in the appeal filed by the insurance company.