fire insurance claim case study in india

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...where mischief arises from fire in fire insurance cases and from perils of the sea in maritime insurance , and the natural and almost inevitable consequence of that mischief is to create further...conduct of the Insurance Companies after the fire had been extinguished. Mr. Inverarity has before us attempted to show that what his client wants to do before the arbitrators is to prove that this...the case, because the deterioration of machinery from neglect on the part of the Insurance Companies to take care of it is not an inevitable or direct consequence of the mischief by fire . It is only...

...mischief arises from fire in fire insurance cases and from perils of the sea in maritime insurance and the natural and almost inevitable consequence of that mischief is to create further mischievous...conduct of the Insurance Companies after the fire had been extinguished. Mr. Inverarity has before us attempted to show that what his client wants to do before the arbitrators is to prove that this latter...case, because the deterioration of machinery from neglect on the part of the Insurance Companies to take care of it is not an inevitable or direct consequence of the mischief by fire , It is only where...

...: “Where the contract to insure or issue a policy of fire insurance does not specify the terms and conditions of the policy, it is a general Rule that the parties will be presumed to have contemplated a form of pol...Office and the Hartford Fire Insurance Company cases . The assurers were, therefore, within their rights under Condition 10 of the policy to cancel it. As the policy was not ready they were justified in...effect an insurance from loss by fire , for Rs 51,000 on the following Property viz.: One Pucca built and roofed bldg. (C.J Vizandah) Holdings No. 274, 274-A, 274-B and 274C...

..., p. 953) the following occurs : "Where the contract to insure or issue a policy of fire insurance does not specify the terms and conditions of the policy, it is a general rule that the parties will be presumed t.... Dhulian Murshidabad being desirous to effect an Insurance from loss by Fire , for Rs. 51,000 on the following Property viz. : One Pucca built and roofed bldg. (C. J. Vizandah...policy as and when it did. The learned Judge pointed out that the condition was a usual provision in a policy of fire insurance and an assurer cancelling the policy under that condition, need give no...

...Yadav v. Oriental Fire & General Insurance Co. (1989) 4 SCC 128 while Mr Puri, learned counsel appearing for the contesting respondent-claimants, pitched his faith strongly on the earlier decision...indicate two distinct lines of cases . The first line of cases consists of fact situations wherein the insured are alleged to have committed breach of the condition of insurance policy, which required them...unlicensed drivers for being driven by the latter and which get involved in vehicular accidents by the driving of such unlicensed drivers. In such cases the insurance company cannot get benefit of the...

...trading receipt, then the sum. that is expended in that insurance is an allowable deduction. In the Gliksten Case the company were carrying on a timber merchant's trade. They had a policy of fire ... insurance . A fire took place, and the wood which they would have sold in the market was burned. The result was they were reimbursed the value of the timber by the insurance company. The timber was turned...into money, not by an ordinary sale in the market, but by the action of the fire and 'the payment of the insurance , and it was held that the money, which was now in the pockets of the timber...

...Machiavellian on Fire Insurance Law, in cases of reinsurance, representation made by the assured for the original insurance , and forming the basis of the original policy, may in turn be made the basis of the...-Barry's Fire Insurance , there is a passage to which Mr. Venkatarama Iyer drew our attention—“In order to render the reinsurance liable under a facultative reinsurance the liability of...reinsurance issued, by the respondent. The appellant a fire insurer and a limited company, had a branch in Colombo. A merchant in Colombo by name, Liyanage, insured with the appellant his electrical and...

...licence for such a purpose. 5. In j. C. Thompson v. Equity fire insurance company (1910 appeal cases 592) their lordships had to construe the precise signification of...the words "stored or kept". That was a case where thompson the owner of a building had insured against fire with the equity fire insurance co. The building was burnt down and the question was whether...the policy was avoided by the reason of the presence on the premises at the time of the fire of a small quantity of gasoline. The statutory condition which the insurance company relied on was that the...

...Section 34 of the Arbitration Act. Harbans Lal v. National Fire & General Insurance Co. Ltd. AIR 1955 Notes on Unreported Cases ...the earlier decisions of the Allahabad High Court in the cases of Shri Har Nath (supra) and Hans Raj Gupta & Co. laid down an erroneous rule of law. His contention on the other hand in substance...each case. He cited Joharimal v. Fatehchand,7 as enunciating correct test in such cases , specifically relying on the following observations at p. 71 in para 23: “On principle and...

...United India Fire & General Insurance Company v. Kalyani . 1983 A.C.J 29 Ker. contended that it was not open to...Supreme Court case British India General Insurance Co. v. Capt. Itbar Singh . 1958-1965 A.C.J 1 S.C. We’ also noted several cases of various High Courts following the...Supreme Court decision. In the light of United India Fire & General Insurance Co. v. Kalyani the respondents' objection is well-founded...

...Chaudhuri, J.:— This is a suit instituted by the plaintiff company for the recovery of the sum of Rs. 9,333-5-1 for damages to their premises by fire . The proposal for insurance was made...assured had any information of the likelihood of a fire , when they applied for insurance . I do not think that there is any doubt whatsoever that they had such information at the time and believed that a... fire was likely. There is overwhelming evidence that before the date of their application for insurance their engineer, Mr. Meyer, had been informed by different persons that there was a strong...

...General insurance Co. Ltd. and anr. , 1996 (1) Civil Court Cases 467 (S. C.), to contend that if the relief claimed is bared by limitation, trial Court was not justified to allow the.... ( 2 ) COUNSEL for the petitioner has placed reliance upon judgment of the Hon'ble Supreme Court in Muni Lal v. The Oriental Fire and...Sampath Kumar v. Ayyakannu and another (2002)7 Supreme Court Cases 559, to the contrary, is not justified, as in that case, trial Court, while dismissing...

...of Marine Insurance till 1907 when the Marine Insurance Act came into force. The general principles of the law of fire insurance in England are mostly derived from cases relating to marina ...This is a suit to recover a sum of Rs. 71,000 on a contract of fire insurance on certain cotton bales which were destroyed by fire at Lasoor on 23-4-1952.2. The plaintiff is...are an insurance company incorporated in New Zealand and have a branch office in Bombay. The parties were known to one another as the textile mills at Gadag were insured against risk of fire with the...

...Parkash Roadlines (P) Ltd. v. Oriental Fire & General Insurance Co. Ltd. 2000 10 Supreme Court Cases 64.9. The facts of this ca...Court concluded that since the Insurance Company has compensated the loss suffered by the owners on account of the fire , which broke out in the godown of the appellant, therefore, they were entitled to...pressed. It was duly insured with respondent No. 1, M/s. United India Insurance Company Ltd. (in short ‘the Insurance Company’). The said cotton bales were entrusted by respondent No. 3 to Truck...

...short), which partially allowed the consumer complaint directing the Insurance Company to pay Rs. 6,57,55,155/- for a fire insurance claim with 9% interest from claim denial date within 8 weeks, or.../- to New India Assurance for safeguarding the custom bonded goods and for covering the risk against fire , etc.5. During the pendency of the insurance policies, on...14.03.2018, a fire broke out at the insured warehouse. The respondent then informed the Insurance Company and the Custom authorities about the same. The Insurance Company appointed M/s. J.C. Bhansali and Co...

... insurance company in cases where S. 14 is not attracted and, therefore, the Commissioner has jurisdiction. The learned counsel for the appellant brought to our notice the ruling in National Insurance ...S. 14 of the Workmen's Compensation Act does not negative the liability of insurance company in cases where the said section is not attracted. In...United India Fire and General Insurance Company, Ltd. v. Machinery Manufacturers Corporation, Ltd. [1987—I L.L.N 321] the Karnataka High Court also has taken the view t...

...in these words: Bearing in mind as I have said that the object of a fire insurance is to insure against fire and that it is common knowledge that in many cases it is difficult, if not...Lord Justice Luxmoore:- On 13th November 1936, the appellant entered into a contract of insurance against loss or damage by fire with the respondent company in respect of...existed. It is stated in Welford and Otter Barry's Fire Insurance 3rd Edition, at page 64 that: The phrase 'civil commotion' is used to indicate a stage between a riot and civil war...

...waive their right to demand immediate payment of the premium, and more especially in cases where a proposal is made in respect of a fire insurance policy. It is not always necessary that such a formal...every case a contract for insurance will not be binding unless the premium or a part thereof is paid. No such assumption can be made. There are cases in which it is open to the insurance company to...agreement should be entered into to constitute a valid contract of fire insurance . Where the insurance company on the receipt of a proposal for insurance issue a risk note covering the risk, that fact...

...United India Fire and General Insurance Co. Ltd., v. V. Srinivasan . 1980 A.C.J 413.. In that case also, the policy was given at...., that a stipulation with regard to past risk is neither void nor illegal. In fact, the decision in Oriental Fire and General Insurance Co. Ltd. v. T.G Kundgol . 1983—54. Comp.... Cases 356, is very instructive and interesting. In that case, the accident took place on 11th February, 1978. The proposal along with the premium was received by the Insurance Company on 13th February...

...authorities in support of their contentions. The plaintiffs rely upon the cases of Shosi Mohan Pal Chaudhri v. Nobo Kristo Poodar (1), Brij Kumari v. Salamandar Fire Insurance Co. (2) and Kuttayan Chetty v. Palaniap...

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Read about Five recent insurance related litigations in the Supreme Court

• June 11, 2023
• securenow_insuropedia

Five recent insurance related litigations in the Supreme Court and What They Mean for Policyholders

I. Claims can be rejected if material information is not disclosed when buying insurance

Reliance Life Insurance v. Rekhaben Nareshbhai Rathod – Supreme Court litigation

This case was about a basic principle of insurance law: if the insured does not reveal important information when signing an insurance contract, the insurer can reject policy claims.

In this case, Mrs Rathod’s spouse had bought life insurance from Reliance Life Insurance in September 2009. However, Mrs Rathod had taken a life insurance policy from Max New York Life Insurance Co. Ltd. in July 2009. Reliance. After the death of her spouse, Mrs Rathod made a claim under the policy in February 2010. While Reliance was making a decision on this claim, Max informed it of the previous insurance. Because Mrs Rathod had not revealed this information, Reliance rejected her claim.

The District Commission dismissed Mrs Rathod’s complaint because of her failure to disclose information. However, both the State and National Commissions allowed the appeal noting that “the omission of the insured to disclose a previous policy of insurance would not influence the mind of a prudent insurer . ” In appeal, the Supreme Court (SC) reversed this decision. It noted that not disclosing insurance obtained earlier was the suppression of a material fact, which would allow Reliance to reject the claim. Giving a wrong answer or not revealing important facts in the proposal form cancels the policy since it goes against “good faith”.

II. Insurance company must provide all reasons for rejecting a claim in the initial rejection letter

Branch Manager, Bajaj Allianz Life Insurance Company Ltd. and Ors. Dalbir Kaur

The SC set aside a verdict from the National Consumer Disputes Redressal Commission (NCDRC) in this case. It noted that an insurance contract is of “utmost good faith” and anyone who wants life insurance must disclose all important facts. The NCDRC had dismissed Bajaj Allianz’s plea against an order asking it to pay a full death claim with interest to the mother of the deceased. The SC bench headed by Justice D. Y. Chandrachud was hearing a plea by Bajaj Allianz against this NCDRC verdict.

The SC noted that a proposal form specifically asks about pre-existing conditions to help the insurer evaluate risk. The proposer had not revealed that he was suffering from a pre-existing illness and was vomiting blood barely a month before the issuance of policy. Alcohol abuse had caused his pre-existing ailment. The insurer did not have these details. The court decided to set aside NCDRC judgement as it did not lay down the correct principle of law.

The insured person’s mother was 70 years old and had lost the support of her son. Considering this, the court used its jurisdiction under Article 142 of the Constitution to not to recover the paid out amount.

III. Unless the insured is duly informed, exclusionary clauses are not applicable

Supreme Court ruling on Litigation in case- Saurashtra Chemicals Ltd . v.  National Insurance Co. Ltd.

Saurashtra Chemicals bought a standard fire and special perils policy from National Insurance for the coal and lignite in its factory compound. It paid an additional premium to cover the risk of loss to the stock from spontaneous combustion.

The Sick Industrial Companies Act had declared Saurashtra Chemicals  a sick unit. They had closed the factory from 17 February 2006 to 9 August 2006. It reopened on 10 August 2006. Between 11 August and 20 August 2006, a spontaneous combustion destroyed some coal and lignite . National Insurance received a notice of the loss and damage. A surveyor assessed the total loss at Rs. 63,43,679.

However, National Insurance rejected the claim saying there was no loss as specified in the policy because spontaneous combustion had not resulted in a fire.

Saurashtra Chemicals then filed a consumer complaint before the NCDRC. National Insurance responded stating:

• No claim could be paid since the loss by spontaneous combustion was not covered.
• Since Saurashtra Chemicals had closed the factory for almost 6 months, the insurance cover ceased to operate. The policy stated that insurance would end if the building that had the insured property was unoccupied for more than 30 days.
• Delay in claim by more than 30 days, violating condition no. 6(i) of the policy’s general conditions.

The NCDRC did not accept the first and second reasons. However, it found the third reason valid. It dismissed the complaint on breach of condition No. 6(i) of the policy since the insured did not submit the notice of the loss in writing within 15 days of the incident.

Saurashtra Chemicals filed an appeal in the SC. The SC noted that the rejection letter did not mention the delay as a reason for rejection. National Insurance first mentioned the delay in its reply before the NCDRC. Therefore, SC allowed Saurashtra Chemicals’ appeal.

New India Assurance Co. Ltd. v. Paresh Mohanlal Parmar- Supreme Court ruling

Mr Parmar bought a burglary and housebreaking insurance policy for 5 June 2003 to 4 June 2004 from New India Assurance for Rs. 20 lakh. During this period, there was a theft in Mr Parmar’s warehouse. He reported the theft to the police and shared the information with New India Assurance. Their surveyor visited and submitted his preliminary report. New India Assurance claimed there was no forced entry because a duplicate key had been used to open the warehouse. It rejected the claim.

The State Commission dismissed Mr Parmar’s complaint. He then went to the NCDRC. It noted that the warehouse lock was found on the street and the culprit had been convicted under Section 454 IPC. Thus, it ruled that the culprit had forced open the warehouse . It also found that New India Assurance had not made Mr. Parmar aware of the relevant terms and conditions of the policy.

New India Assurance filed an appeal in the SC. Mr Parmar argued that he had not been provided with the policy’s terms and conditions. Thus, they could not reject his claim. The SC could not find any evidence to the contrary. It noted that the insurer(s) had to prove that the insured was aware of the policy’s terms and conditions when the insurer issued the policy. The SC thus supported the NCDRC order to pay the claim.

IV. Determining whether the insured is a regular employee and the use of the contra proferentum rule

Sushilaben Indravadan Gandhi and Anr. v. New India Assurance Co Ltd and Ors.

A doctor travelling in a hospital vehicle died in an accident caused by the driver’s carelessness. The hospital’s arrangement was that New India Assurance would pay compensation for those not employed by the hospital. Workmen Compensation Act, 1923 covered the employees. The main issue, in this case, was whether the doctor was a hospital employee.

The SC first examined the hospital contract. Was it a “Contract for Service,” which suggests a relationship between equals on professional terms, or “Contract of Service,” which implies a master-servant relationship? The SC ruled that the they could not treat the doctor as a regular hospital employee. His contract clearly showed that his services were provided as an independent professional. The SC thus applied the contra proferentem  principle. This states that the exclusion clause must be read against the insurer. The SC thus allowed compensation of INR 37.6 lakh to the appellants.

The SC thus clarified the position on ambiguous policy, where the contra proferentem rule will be applied. In cases of ambiguity in the policy wording, the ruling would be against the party that has prepared the contract; in most cases, this is the insurance company.

The SC also made it clear that doctors must be considered professionals. Their terms of service were different from those of general hospital employees.

In conclusion, the five recent insurance-related litigations in the Supreme Court serve as significant reminders of the complexities and nuances within the insurance industry. These cases shed light on the importance of comprehensive policy interpretation, diligent claims handling, and adherence to contractual obligations. By closely studying these rulings on five recent insurance related litigations in the Supreme Court, insurers and policyholders can gain valuable insights into potential pitfalls, mitigating risks, and fostering a stronger foundation for fair and effective insurance practices.

Last Updated on June 11, 2023 by Aishwary Mishra

• Supreme court
• Fire Insurance | Exact Cause Of...

Fire Insurance | Exact Cause Of Fire Immaterial If Insured Was Not Responsible For Initiating Fire: Supreme Court

Suraj kumar.

28 Nov 2023 2:14 PM GMT

In a fire insurance claim, the Supreme Court recently held that the exact cause of the fire is immaterial if the insured is not implicated as the one responsible for initiating the fire. This principle, grounded in the Canara Bank v. United India Insurance Company (2020) 3 SCC 455 case reinforces the insurer's duty to honor the terms of the insurance policy and fulfill its obligations to...

In a fire insurance claim, the Supreme Court recently held that the exact cause of the fire is immaterial if the insured is not implicated as the one responsible for initiating the fire. This principle, grounded in the Canara Bank v. United India Insurance Company (2020) 3 SCC 455 case reinforces the insurer's duty to honor the terms of the insurance policy and fulfill its obligations to the insured.

The Court observed “ Therefore, it was unequivocally declared that the precise cause of a fire, whether attributed to a short circuit or any alternative factor, remains immaterial, provided the claimant is not the instigator of the fire. This case underscored the fundamental principle that an insurance company’s obligation to the insured is of much greater import….Moreover, the fire is found to have occurred within the insured warehouse and the appellant’s plea to the contrary is not believable. Therefore, it is a case of wrongful repudiation by the appellants.”

The judgment, steeped in the principles of good faith and trust inherent in insurance contracts, underscored the insurer's fiduciary duty, particularly when the insured is not found negligent.

It stated very eloquently “ In the realm of risk and uncertainty, individuals and organizations seek solace in the bastion of insurance – a covenant forged on the bedrock of trust. The trust serves as the cornerstone, forming the essence of the insurer-insured relationship. The fundamental principle is that insurance is governed by the doctrine of uberrima fides – there must be complete good faith on the part of the insured.

The heart & soul of an insurance contract lies in the protection it accords to those who wish to be insured by it. This understanding encapsulates the foundational belief that insurance accords protection & indemnification, preserving the sanctity of trust within its clauses. Effectively, the insurer assumes a fiduciary duty to act in good faith and honor their commitment. This responsibility becomes particularly pronounced when the insured, in their actions, have not been negligent. In light of the vital role that trust plays in insurance contracts, it is important to ensure that the insurer adequately fulfills the duty that has been cast on it, by virtue of such a covenant.”

The Supreme Court bench comprising Justices Hrishikesh Roy and Justice Sanjay Karol was hearing an appeal against NCDRC directing the Insurance Company to pay more than 6 crores for a fire insurance claim with 9% interest from the claim denial date within 8 weeks, or face 12% interest beyond the stipulated 8 weeks

The case revolved around a fire that broke out on 14.03.2018, at a warehouse covered by an insurance policy with the claimant having paid Rs. 44,02,562/- for coverage against fire and safeguarding custom bonded goods. Various investigations were conducted, and 7 of the reports suggest short-circuiting as the cause of the fire. However, the forensic investigation report determined that a short-circuit was not the cause; rather, sparks from rooftop welding work may have triggered the fire. The surveyor’s report from M/s. Bhansali & Co. also aligned with such a conclusion.

On 03.10.2018, the insured raised a claim for a sum of Rs. 6,57,55,155/. But, the Insurance Company rejected the claim on 15.07.2019, citing reasons such as the insured premises at Survey No. 9/3 were not affected by the fire and the alleged negligence during roof construction, which increased the risk and voided the insurance coverage under Clause 3 of the policy's terms and conditions.

Unsatisfied with the repudiation of the claim, the respondent filed a consumer complaint. The NCDRC ruled in favor of the claimant and held that the insurance policy covered the complainant's warehouse and that the roofing work did not significantly increase the risk, making Clause No. 3 inapplicable. It highlighted that the approved surveyor's report, while important, is not absolute and not binding on the parties, relying on the case of New India Assurance Co. Ltd. vs. Pradeep Kumar.

New grounds for repudiation cannot be introduced during the hearing if they were not included in the repudiation letter

The Court referred to earlier cases such as Galada Power and Telecommunication Ltd. vs. United India Insurance Co. Ltd . (2016) 15 SCC 161 and Saurashtra Chemicals Ltd. vs. National Insurance Co. Ltd. (2019) 19 SCC 70, where it was firmly established that new grounds for repudiation cannot be introduced during the hearing if they were not explicitly mentioned in the repudiation letter.

Further, the court examined the location of the fire, policy documents, the Leave & License Agreement, and communications from various departments. It concluded that the insured premises at Survey No. 9/3 was covered by the insurance policy.

Essential repair works by insured won’t amount to an alteration increasing risk of loss or damage to deny claim

The Court scrutinized Clause 3(a) of the insurance policy, which says the policy won’t apply if “there is an increased risk of loss or damage to the insured premises or goods within it.”

In the present case, the insured had undertaken repairs on the rooftop to prevent water leakage to the warehouse.

The court held that “ such essential repair work on the rooftop by itself, cannot be reasonably construed to be an alteration that would increase the risk of loss or damage.”

outlines circumstances under which the policy would cease to be applicable. It specifically addressed the repair work undertaken on the rooftop to prevent water leakage, asserting that such essential repairs did not constitute an alteration increasing the risk of loss or damage.

Significant time gap between repair work and fire, no negligence by insured

The Court referred to varying conclusions in various reports regarding the cause of the fire. While seven reports suggested a short circuit, the forensic investigation report pointed to sparks from rooftop welding work.

The Court questioned the logic of the forensic investigator's conclusion, pointing out a significant time gap between the welding work and the fire. The Court emphasized that the evidence did not support negligence on the part of the insured.

The surveyor’s report in insurance claims is not sacrosanct and binding

The court highlighted the significance of a surveyor's report in insurance claims, citing the Insurance Act of 1938. The Act mandates that claims exceeding Rs. 20,000 must undergo an initial assessment by an approved surveyor.

However, the Court emphasized that while the insurer has the discretion to settle the claim for a different amount, the surveyor's report is not a conclusive and binding document

The Court referred to New India Assurance Co. Ltd. v. Pradeep Kumar (2009) 7 SCC 787 which observed that “ It is not that sacrosanct that it cannot be departed from; it is not conclusive. The approved surveyor’s report may be the basis or foundation for the settlement of a claim by the insurer in respect of loss suffered by the insured but such report is neither binding upon the insurer nor insured.”

In the present case, the court found that the surveyor's report, although comprehensive, was inconclusive regarding the actual cause of the fire.

Claimant neither importer nor owner but merely custodian of goods: Insurance claim can include customs duty

The next issue was about the inclusion of customs duty, amounting to 2 crores in the insurance claim filed by the insured. The appellant contended that customs duty should not be part of the claim, citing the Customs Act, 1962, which specifies that only the importer is liable to pay customs duty. He argued that since no bills of entry were filed, and no assessed goods were lost in the fire, there is no customs duty liability.

However, the court agreed with the claimant who argued that Sections 22 and 23 of the Customs Act, which grant privileges related to abetment and remission, apply exclusively to 'importers' of insured goods. The claimant, functioning as a custodian, neither assumes the role of an importer nor owner of the goods but acts solely as a trustee on behalf of their clients.

This distinction became crucial in establishing the claimant's right to include customs duty in the insurance claim.

In light of the above, the Court dismissed the appeal of the Insurance Company. The customs duty component of the claim was directed to be paid to the Customs Department directly.

Case title: New India Assurance Co Ltd v. M/S Mudit Roadways

Citation: 2023 LiveLaw (SC)

For Appellants: Adv. Aditya Kumar

For Respondent: Sr Adv. Mr. Mrinal Kumar Choudhury and Adv. Parthiv K. Goswami

Click Here To Read/Download Judgment