1. Insurance claim repudiated based on a terrorism exclusion clause following a mob attack on a factory — Complaint for deficiency in service under Consumer Protection Act. (Para 1 , 2 , 3 , 4 , 5 )
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2022 Supreme(SC) 389
SUPREME COURT OF INDIA
AJAY RASTOGI, ABHAY S. OKA, JJ.
Narsingh Ispat Ltd. – Appellant
Versus
Oriental Insurance Company Ltd. and Another – Respondents
Civil Appeal No. 10671 of 2016
Decided On : 02-05-2022
Important Points
IMPORTANT POINT
When insurance policy itself defines acts of terrorism in Exclusion Clause, terms of policy being a concluded contract will govern rights and liabilities of parties – Parties cannot rely upon definitions of ‘terrorism’ in various penal statutes since Exclusion Clause contains an exhaustive definition of acts of terrorism.
When insurance policy itself defines acts of terrorism in Exclusion Clause, terms of policy being a concluded contract will govern rights and liabilities of parties – Parties cannot rely upon definitions of ‘terrorism’ in various penal statutes since Exclusion Clause contains an exhaustive definition of acts of terrorism.
Subject
Insurance Law - Fire and Special Perils Policy
Act Referred
Headnote
Consumer Protection Act, 1986 – Section 23 – [Consumer Protection Act, 2019 – Section 67] – Insurance – Standard Fire and Special Perils Policy – Damage caused to factory, machinery and other equipment by anti-social elements – Repudiation of claim is based on Preliminary Survey Report, Investigation Report and Final Survey Report – Survey Reports cannot throw any light on question whether there was an act of terrorism – Survey Reports do not record any factual findings regarding incidents which caused the loss – FIR and Closure Report do not refer to acts of terrorism as defined under Exclusion Clause – Final Report (Closure Report) shows that police had registered a First Information Report against 105 miscreants who could not be traced – Respondent has not discharged burden of bringing the case within four corners of Exclusion Clause – When policy itself defines acts of terrorism in Exclusion Clause, terms of policy being a concluded contract will govern rights and liabilities of parties – Parties cannot rely upon definitions of ‘terrorism’ in various penal statutes since Exclusion Clause contains an exhaustive definition of acts of terrorism – Commission committed error by applying Exclusion Clause – Policy specifically covers damage to insured’s property caused by violent means – Decision to repudiate policy cannot be sustained – Valuer appointed by respondent-company has valued loss caused to appellant at approximately Rs.89,00,000/- – Respondent directed to deposit the amount with Commission with liberty to appellant to make application for withdrawal – As there was no warrant for applying Exclusion Clause, impugned judgment and order will have to be set aside, and by restoring complaint filed by appellant, same will have to be ordered to be heard by Commission afresh – Impugned judgment and order set aside. (Paras 8, 11, 13, 14, 15 and 16)
Facts of the case:
This is an appeal under Section 23 of Consumer Protection Act, 1986. The appellant has challenged the judgment and order dated 18th October 2016 of the National Consumer Disputes Redressal Commission. By said Judgment, Commission dismissed the Consumer Complaint No.165 of 2012 filed by the appellant. By the impugned judgment and order, Commission held that because of the “Terrorism Damage Exclusion Warranty”, respondent company was justified in repudiating the claim of the appellant based on the policy of insurance.
Findings of Court:
Respondent shall deposit the sum of Rs.89,00,000/- in Registry of the Commission within one month from today and the same shall be deposited in the interest-bearing account on auto renewal basis. At the same time, the appellant will be at liberty to file an application for withdrawal of the amount before Commission pending complaint. If such an application is filed by appellant, the Commission may examine on its own merits and decide the same in accordance with law.
Result : Appeal allowed.
Legal Category Hierarchy
Advocates appeared:
For the Appellant(s) :Santosh Kumar - I, Shashwat Singh, Advocates
For the Respondent(s):Santosh Paul, Vedant Mishra, Sriharsh N. Bundela, M. J. Paul, Maithreya Shetty, Akshay Kumar, Advocates
For the Appellant(s) :Santosh Kumar - I, Shashwat Singh, Advocates
For the Respondent(s):Santosh Paul, Vedant Mishra, Sriharsh N. Bundela, M. J. Paul, Maithreya Shetty, Akshay Kumar, Advocates
Table of Contents
2. Whether the incident constituted terrorism under the policy's exclusion clause — Burden of proof for invoking exclusionary clauses in insurance contracts. (Para 7 , 8 , 9 )
3. The insurer failed to prove the attack was for political, religious, or ideological purposes as defined in the policy's exhaustive exclusion clause. (Para 10 , 11 , 13 , 14 )
4. The burden of proving a case falls within an exclusionary insurance clause lies with the insurer, and ambiguities are construed in favor of the insured. (Para 12 , 13 )
5. Appeal allowed — Impugned order set aside — Complaint restored for fresh adjudication on quantum — Insurer directed to deposit the surveyor's assessed amount. (Para 15 , 16 , 17 , 18 )
6. Who bears the burden of proof when an insurance company relies on an exclusionary clause to repudiate a claim?
The insurer bears the burden of showing that the case falls within the purview of the exclusionary clause. In cases of ambiguity, the contract of insurance shall be construed in favor of the insured. (Para 12 , 13 )
7. Can an insurance company rely on statutory definitions of terrorism to invoke a policy's terrorism exclusion clause?
No. When a policy contains its own exhaustive definition of terrorism within an exclusion clause, the terms of that concluded contract govern the rights and liabilities of the parties, regardless of definitions in penal statutes. (Para 13 )
8. How should the phrase similar purposes be interpreted within a policy's definition of terrorism?
The court held that the words similar purposes, appearing in a list including political, religious, and ideological purposes, must be construed ejusdem generis. (Para 10 )
9. Does a policy covering damage by violent means apply if the insurer fails to prove the act was terrorism?
Yes. If the insurer cannot prove the act falls under the terrorism exclusion, the policy's explicit coverage for loss or physical damage caused by external violent means or riots applies. (Para 14 )
JUDGMENT :
ABHAY S. OKA, J.
1. This is an appeal under Section 23 of the Consumer Protection Act, 1986. The appellant has challenged the judgment and order dated 18th October 2016 of the National Consumer Disputes Redressal Commission (for short, ‘the Commission’). By the said Judgment, the Commission dismissed the Consumer Complaint No. 165 of 2012 filed by the appellant.
2. The appellant had taken Standard Fire and Special Perils Policy from the respondent-insurance company for the period from 28th June 2009 to 27th June 2010. The policy was in respect of Engineering Workshop and Plant at Village Khunti District Saraikela, Jharkhand. The total sum assured was Rs. 26,00,00,000/- under different headings. The appellant paid a premium of Rs. 2,20,462/-. According to the appellant, the policy covered the loss caused to the property of the appellant on account of fire, lightning, explosion, riots, strike etc.
3. The appellant lodged a claim on the basis of the said policy, based on the incident of 23rd March 2010. As per the claim made by the appellant, after midnight of 22nd March 2010, about 5060 antisocial people with arms and ammunition entered the factory premises of the appellant at Village Khunti, District Saraikela in Jharkhand. According to the appellant’s case, the mob demanded money and jobs for local people. According to the case of the appellant, substantial damage was caused to its factory, machinery and other equipment. According to the appellant, the object of the incident was to terrorise the management of the appellant and workers in the factory by forcing them to pay a ransom to the miscreants. A First Information Report was also registered at the instance of the appellant based on the said incident. The appellant lodged a regular claim with the respondent company on the basis of the policy. According to the appellant’s case, a surveyor appointed by the respondent-insurance company carried out the survey and assessed the loss at Rs. 89,43,422/-. However, by addressing a letter on 21st December 2010, the appellant claimed that the respondent-insurance company was liable to make an interim payment of Rs. 1.5 crores.
4. By the letter dated 23rd December 2010, the respondent-insurance company repudiated the appellant’s claim by placing reliance on the Exclusion Clause in the policy regarding loss or damage caused by the acts of terrorism. Therefore, the appellant filed the complaint mentioned above before the Commission complaining about deficiency in the service offered by the respondent-insurance company. In the complaint, a prayer was made for the grant of monetary relief of Rs. 1,51,35,780/- on account of the loss suffered by the appellant. A separate amount of Rs. 25,00,000/- was claimed on account of agony and harassment caused to the appellant due to illegal repudiation of the policy by the respondent-insurance company. The appellant claimed interest at the rate of 18% p.a. on the amounts mentioned above and cost amount of Rs. 10,00,000/-.
5. By the impugned judgment and order, the Commission held that because of the “Terrorism Damage Exclusion Warranty” (for short ‘the Exclusion Clause’) the respondent company was justified in repudiating the claim of the appellant based on the policy of insurance. It was held that the damage caused to the factory and equipment of the appellant was due to an act of terrorism.
6. For the sake of convenience, we are reproducing the said Exclusion Clause, which reads thus:
“Terrorism Damage Exclusion Warranty:
Notwithstanding any provision to the contrary within this insurance it is agreed that this insurance excludes loss, damage cost or expense of whatsoever nature directly or indirectly caused by, resulting from or in connection with any act of terrorism regardless of any other cause or event contributing concurrently or in any other sequence to the loss.
For the purpose of this endorsement an act of terrorism means an act, including but not limited to the use of force or violence an
