Insurance Law-Exclusionary Terms of Policy not Binding on Insured if Terms not Communicated by Insurer- Supreme Court

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April 23, 2019

The Apex Court in the case has held that if the insurer did not furnish the terms and conditions of the exclusion and special conditions to the insured then the same are not binding on insured.

Case name: Bharat Watch Company Through Its Partner v. National Insurance Co. Ltd. Through Its Regional Manager

The instant appeal challenges the order passed by the National Consumer Disputes Redressal Commission (NCDRC), whereby the Commission allowed Respondent Insurance Company’s appeal repudiating the insurance claim.

The appellant’s case was that theft took place at his showroom and subsequently a FIR was lodged with the Police and a claim under the insurance policy was made. However, the Insurance company repudiated the claim on the ground that there was no sign of forcible entry in the Appellant’s showroom.

The NCDRC relying on Supreme Court’s decision in the case of United India Insurance Co. Ltd. vs. Harchand Rai Chandan Lal allowed the Insurance company’s plea. In Harichand Rai’s case it was held by the Apex Court that in a policy of insurance against burglary and/or house breaking, where the loss or damage was caused without forcible and violent entry to and/or exit from the premises, the claim could not be maintained.

Bench’s Verdict

The Two-Judge Bench of the Supreme Court however in view of the appellant’s specific grievance that the conditions of exclusion under the policy document were not handed over to the appellant by the insurer reversed NCDRC’s order and made the following observations in the case:

That it was the specific contention of the appellant that the exclusionary conditions in the policy document had not been communicated by the insurer as a result of which the terms and conditions of the exclusion were never communicated. The fact that there was a contract of insurance is not in dispute and has never been in dispute. The only issue is whether the exclusionary conditions were communicated to the appellant.

In view of the records and evidence in the case, the Apex Court noted that the insurer did not furnish the terms and conditions of the exclusion and special conditions to the appellant and hence, they were not binding.

It was also opined by the Court that if the conditions were not made known to the insured, as is the concurrent finding, there was no occasion for the NCDRC to render a decision on the effect of such an exclusion.

Hence, the Apex Court in view of the aforesaid finding noted that the facts of the present case were different from that in Harichand Rai’s case and accordingly allowed the appeal.

The entire case can be accessed here.

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