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SUPREME COURT OF INDIA
PAMIDIGHANTAM SRI NARASIMHA, ARAVIND KUMAR, JJ.
United India Insurance Co. Ltd. – Appellant
Versus
M/s Hyundai Engineering & Construction Co. Ltd. & Ors. – Respondents
Civil Appeal No. 1496 of 2023
Decided On : 16-05-2024
(A) Insurance Act, 1938 – Section 45 – Insurance – Insurance is a contract of indemnification, being a contract for a specific purpose which is to cover defined losses – Courts have to read insurance contract strictly – Essentially, Insurer cannot be asked to cover a loss that is not mentioned – Exclusion clauses in insurance contracts are interpreted strictly and against insurer as they have effect of completely exempting insurer of its liabilities – It is duty of Insurer to plead and lead cogent evidence to establish application of such a clause – Evidence must unequivocally establish that event sought to be excluded is specifically covered by exclusionary clause. (Paras 16 and 17)
(B) Consumer Protection Act, 1986 – Section 23[Consumer Protection Act, 2019 – Section 67] – Insurance – Contractor’s All Risk Insurance Policy – Death of 48 workmen in bridge collapse accident – Compensation of Rs. 39,09,92,828/- awarded by National Commission – Surveyor had recommended rejection of insurance claim on the ground of violation of conditions of insurance policy – Surveyor’s report is a credible evidence and court may rely on it until a more reliable evidence is brought on record – In present case, Surveyor’s report was evidence tendered by insurance company and it has not been treated as unreliable by NCDRC – There is sufficient evidence to indicate that Surveyor has made site-visits – Continuation of work by respondents could be due to various reasons – Even if NHAI’s decision to continue is taken to be a valid economic decision, that by itself cannot be a reason for not applying applicable clause of contract if such applicability is otherwise proved by cogent evidence – NCDRC fell into clear error of law and fact in allowing consumer complaint for multiple reasons – Order passed by NCDRC set aside. (Paras 23, 27, 28, 29 and 30)
Facts of the case:
Appellant insurance company challenges decision by National Consumer Disputes Redressal Commission, which by its impugned order dated 16.01.2023 allowed Consumer Complaint No.160 of 2019 and directed appellant to release and pay insurance claim of Rs. 39,09,92,828/-.
Findings of Court:
Impugned order dated 16.01.2023 passed by NCDRC in Consumer Complaint No. 160 of 2019 set aside.
Result : Appeal allowed.
The legal analysis of the provided document reveals several key points:
Interpretation of Exclusion Clauses: Exclusion clauses in insurance contracts are to be interpreted strictly and against the insurer, as they serve to exempt the insurer from liabilities fully (!) .
Credibility of Surveyor’s Report: A surveyor’s report is considered credible evidence in insurance disputes. The court may rely on it until more reliable evidence is introduced, especially when it is supported by site visits and detailed assessments (!) (!) .
Nature of Insurance Contracts: Insurance is fundamentally a contract of indemnification, covering specific losses as outlined in the policy. The insurer's obligations are limited to the scope and conditions explicitly stated, and they cannot be asked to cover losses outside those terms (!) .
Application of Conditions and Evidence: The insurer must plead and lead cogent evidence to establish the applicability of exclusion clauses. In this case, the insurer successfully discharged this burden by producing the surveyor’s report and expert findings (!) .
Responsibility for Structural Failure: The collapse of the bridge was attributed primarily to shortcomings in design, workmanship, and stability, with responsibility lying with the contractor and design consultants. The detailed findings of the expert committee support this, highlighting deviations from approved plans and the failure of stability measures (!) (!) (!) .
Effect of Continuation of Work: The decision by the authorities to permit continuation of work and completion of the project does not negate the applicability of the exclusion clauses or the insurer’s right to deny the claim if the conditions for exclusion are met (!) .
Rejection of Independent Expert Reports: Reports from independent experts, which were not examined as witnesses and lacked site inspection, are considered theoretical and are not sufficient to rebut the credible evidence provided by the surveyor and the expert committee (!) (!) .
Legal Burden and Evidence: The burden of proof was effectively discharged by the insurer through the surveyor’s report, which was unrebutted and found credible by the court. The insurer’s reliance on this evidence justified the repudiation of the claim based on the contractual exclusion clauses (!) (!) .
Court’s Conclusion: The court found that the consumer complaint was erroneously allowed by the lower authority, which relied on inconclusive and unsubstantiated reports. The appeal was allowed, and the prior order directing payment was set aside (!) .
Amendment of Claims: The court noted the inconsistency in the claim amount and the lack of hearing on the revised amount. It emphasized that the original claim amount of Rs. 39,09,92,828 was supported by credible evidence, and the higher amount was not justified without proper procedure (!) (!) .
Overall, the decision underscores the importance of strict interpretation of exclusion clauses, reliance on credible technical evidence, and the necessity for insurers to substantiate their denial of claims with clear, unequivocal proof.
1. The appellant, United India Insurance Co. Ltd., an insurance company, challenges the decision by the National Consumer Disputes Redressal Commission (hereinafter ‘the NCDRC’), which by its impugned order dated 16.01.2023 allowed the Consumer Complaint No.160 of 2019 and directed the appellant to release and pay an insurance claim of Rs.39,09,92,828/-.
2. Facts: The National Highway Authority of India (‘NHAI’), respondent no. 3 herein, awarded a contract for the design, construction and maintenance of a cable-stayed bridge across the river Chambal on NH-76 at Kota, Rajasthan to a joint venture company comprising of respondent no. 1 and respondent no. 2. The value of the project under the contract was Rs.213,58,76,000/-. The contract provided that the construction work was to be completed within 40 months and the joint venture was thereafter assigned the task of maintaining the said bridge for a period of 6 years, of which, 2 years was the ‘defect-notification period’. NHAI also assigned consultancy services for design, construction and maintenance of the bridge to another joint venture of M/s Louis Berger Group Inc. (USA) and M/s COWI A/S (Denmark).
3. The appellant issued a Contractor’s All Risk Insurance Policy covering the interest of NHAI as principal, and M/s Hyundai Engineering Infrastructure Co. Ltd. along with M/s Gammon India as JV Contractor under the policy bearing No. 011900/44/07/03/60000001 for the period from 05.12.2007 to 04.12.2011 for a total amount of Rs.213,58,76,000/-. The relevant clauses of the policy are extracted as follows :
“SECTION I - MATERIAL DAMAGE:
1. The Company hereby agrees with the Insured (subject to the exclusions and conditions contained herein or endorsed hereon) that if, at anytime during the period of insurance stated in the Schedule, or during any further period of extension thereof the property (except packing materials of any kind) or any part thereof described in the Schedule be lost, damaged or destroyed by any cause, other than those specifically excluded hereunder, in a manner necessitating replacement or repair, the Company will pay or make good all such loss or damage upto an amount not exceeding in respect of each of the items specified in the Schedule the sum set opposite thereto and not exceeding in the whole the total Sum Insured hereby.
The Company will also reimburse the Insured for the cost of clearance and removal of debris following upon any event giving rise to an admissible claim under this Policy but not exceeding in all the sum (if any) set opposite thereto in the Schedule. The term debris only of the Insured property and the cost of clearance and removal of debris pertaining to property not Insured by the policy will not be payable.”
“EXCLUSIONS TO SECTION - I
The Company, shall not, however, be liable for;
(a) the first amount of the loss arising out of each and every occurrence shown as Excess in the Schedule;
(b) loss discovered only at the time of taking an inventory;
(c) normal wear and tear, gradual deterioration due to atmospheric conditions or lack of use or obsolescence or otherwise, rust, scratching of painted or polished surfaces or breakage of glass;
(d) loss by damage due to faulty design;
(e) the cost of replacement, repair or rectification of defective material and/or workmanship, but this exclusion shall be limited to the items immediately affected and shall not be deemed to exclude loss of or damage to correctly executed items resulting from an accident due to such defective material and/ or workmanship;
(f) the cost necessary for rectification or correction of any error during construction unless resulting in physical loss or damage
(g) loss of or damage to files, drawings, accounts, bills, currency, stamps, deeds, evidence of debt, notes, securities, cheques, packing materials such as cases, boxes, crates;
(h) any damage or penalties on account of the Insured's non-fulfilment of the terms of delivery or completion under this Contract of construction or of a
(1) Exclusion clauses in insurance contracts are interpreted strictly and against insurer as they have effect of completely exempting insurer of its liabilities.(2) Insurance – Surveyor’s report is a....
Insurance companies cannot repudiate claims without substantial evidence proving defects in design or construction as supported by independent expert evaluations.
Unless report of Surveyor is established to be arbitrary or perverse the same requires to be considered.
The Insurer must provide clear evidence for repudiation; mere allegations of defects do not suffice against documented damages.
Repudiation – complainant has not been able to dislodge the exclusion invoked by the Insurance Company, the repudiation cannot be faulted with.
Insurers are obligated to act fairly in claim assessments, and claims under insurance policies cannot be dismissed solely based on survey reports lacking independence.
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