Fraudulent ATM transactions were excluded from coverage under the Banker's Indemnity Policy, emphasizing the interpretation of ambiguous insurance contract terms in favor of the insured.

JUDGMENT :

Sathish Ninan, J.

The suit for money by a Bank, under a Banker's Indemnity Policy of the defendant Insurance Company, was decreed by the trial court. The Insurance Company is in appeal.

2. Ext.A2 is the base insurance policy with its addition/extension, availed by the plaintiff from the defendant insurance company. It relates to the period 01.04.2012 to 31.03.2013. The plaintiff alleges that, during the period from 11.04.2012 to 20.05.2012 there were various fraudulent transactions in the plaintiff's ATMs across the country, by fraudsters, by utilising ATM cards of other banks. The plaintiff describes the modus operandi of the transactions thus;

“The modus operandi of such transactions is for the fraudster who may be the customer of other banks request for a cash withdrawal for an amount of Rs.10,000/- or less from the ATM centre of the plaintiff bank using the ATM cards of the banks mentioned above. When the ATM dispenses the requested amount, the fraudster will keep one or two currency notes in the presenter intentionally and take the rest of the amount. For the purpose of illustration, in the case of a withdrawal of Rs.10,000/-, the fraudster may take only Rs.9,900/- allowing Rs.100/- note to be remained in the presenter. The fraudster will intentionally allow the ATM to recapture the note which will happen automatically after 42 seconds. After the above mentioned predetermined time of 42 seconds, the remaining currency note/s will be pulled back by the machine. But the notes so pulled back or retracted will not be counted by the ATM and will be moved to the divert tray.”

On such reversal, the entire amount will stand reversed in the customers account. The plaintiff claims to have suffered a total loss of Rs.83,34,600/- under such transactions. The plaintiff seeks to be indemnified by the defendant insurance company under Ext.A2 policy.

3. The defendant insurance company contended that the alleged fraudulent transactions are not covered under Ext.A2 policy. It was contended that the 'add-on cover' styled as 'fraud protection cover' is available only for the plaintiff's debit card holders. Relying upon various clauses in Ext.A2 policy, it is contended that no amount is payable for the alleged incidents.

4. The trial court decreed the suit holding that the transactions in question are fraudulent transactions which are covered under Ext.A2 policy.

5. We have heard Sri.George Cherian, the learned Senior Counsel for the appellant and Sri.Madhu Radhakrishnan, the learned counsel for the respondent.

6. The points for determination in the appeal are:-

“(i) Is the plaint claim excluded under Ext.A2 policy?

(ii) Is the insurance company entitled to rely on the ‘excess’ clause in Ext.A2 policy?

(iii) Does the decree and judgment of the trial court warrant any interference?”

7. The claim was repudiated by the Insurance Company relying upon two exclusion clauses in the policy. The clauses in Ext.A2 policy which are relevant for the case at hand, are as under: -

“A. ON PREMISES

By reason of any money and/or securities for which the insured are responsible or interested in or the custody of which they have undertaken and which now are, or are by them supposed or believed to be or at any time during the period of insurance may be in or upon their own premises (including Mobile Offices) or upon the premises of the Bankers in any recognised place of safe deposit or lodged or deposited in the ordinary course of business for exchange, conversion with the issues the