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2011 Supreme(J&K) 177
JAMMU & KASHMIR HIGH COURT
Hakim Imtiyaz Hussain, Hasnain Massodi, JJ.
New India Assurance Company Ltd.& Ors. -Appellant
Versus
Ghulam Hassan Mir -Resopndent
CIMA No. 106/2008, CIMA No. 181/2009, CMP No. 616/2009 and CIMA No. 27/2009
Decided On : 20-04-2011
Mr.Manzoor A.Dar, Advocate for the Appellants., M/s Sami Yaqoob, Advocate and Tufail Qadri, Advocate for the Respondent.
The central legal point established in the judgment is the obligation of good faith in insurance contracts, which requires both parties to disclose all material information. The failure to do so can result in a lack of good faith and impact the interpretation and application of insurance clauses.
Headnote:
Insurance - Terrorism Damage Exclusion Clause - Insurance Act, Circular No. FT/1/2002 - Summary
Fact of the Case:
The case involved disputes over insurance claims for property damage due to terrorist activities. The appellant insurance company repudiated the claims citing the Terrorism Damage Exclusion Clause. The State Commission held the clause to be extraneous and concluded that there was deficiency in service on the part of the insurance company.
Finding of the Court:
The court found that the appellant company failed to inform the respondent about the revised terms and conditions of the insurance policy, which excluded terrorism damage. The court held that the appellant company's failure to disclose the revised clause and its insistence on its applicability amounted to a lack of good faith, and upheld the State Commission's decision to award compensation to the respondent.
Issues: The issues involved the applicability of the Terrorism Damage Exclusion Clause, the duty of good faith in insurance contracts, and the interpretation of the Insurance Act and Circular No. FT/1/2002.
Ratio Decidendi: The court held that the principle of good faith in insurance contracts obligates both parties to disclose all material information. The failure of the insurance company to disclose the revised clause and its insistence on its applicability constituted a lack of good faith, leading to the court's decision to uphold the compensation awarded to the respondent.
Final Decision: CIMA No. 106/2008 was disposed of with the direction for interest on the award amount to be paid by the appellant company with effect from the date three months after the receipt of the report of the Surveyor/Loss Assessor. CIMA 27/2009 and CIMA 181/2009 were dismissed.
1. The controversy involved in all the three above captioned Civil 1st. Miscellaneous Appeals is by a large identical and the appeals are thus together taken up for disposal.
2. Challenge in CIMA No. 106/2008 is to the judgement of State Consumer Disputes Redressal Commission ("State Commission" for short) dated 22.09.2008, in complaint titled Ghulam Hassan Mir v. New India Insurance Company whereby the State Commission has directed the appellant to pay an amount of Rs. 17,15,729 along with interest at the rate of 8% per annum from 27.09.2002 i.e. the date of loss till final payment of the award amount and further allowed litigation costs in the amount of Rs. 5,000/-.
3. The Civil 1st. Miscellaneous Appeal No. 181/2009 calls in question judgement of the State Commission dated 05.08.2009 whereby the Appellant Insurance Company has been directed to pay an amount of Rs. 13,33,065/- to the respondent with 8% annual interests with effect from the date two months after the receipt of the Surveyors report till the final payment is made and also to pay Rs. 10,000/- to the respondent as litigation charges.
4. The appellant-respondent in CIMA No. 106/2008 through the medium of CIMA No. 27/2009 seeks modification of the State Commission judgement dated 22.09.2008 as regards the quantum of compensation directed to be paid to him by the appellant company as also rate of interest awarded by the State Commission.
5. The admitted facts are as under:-
CIMA No. 106/2008
The respondent on 12.05.2002 obtained an Insurance Policy bearing No. 48-94170 from the Appellant company for an amount of Rs. 23.00 lacs for his residential building and further for an amount of Rs. 4.00 lacs in respect of household goods. The appellant Company agreed to indemnify the respondent subject to the terms and conditions laid down therein, the loss if any to the insured building and goods due to fire and allied perils during the period of 12 months with effect from noon 02.05.2002 to noon 01.05.2003. As ill luck wfauld have it, the insured building and goods on 27.09.2002 during the validity of the insurance policy, suffered extensive loss on account of cross firing/shelling between the Security Forces and unidentified gunmen. The occurrence led to registration of case FIR 116/2002 at local police station. The respondent reported the loss to the appellant insurance company. The report prompted appointment of M/s. Allaqband & Associates as preliminary Surveyor followed by appointment of Sh. AJ. Dillon, Surveyor, for assessment of loss to the insured property. The Surveyor assed the loss at Rs. 18, 30,000-00. The appellant Company taking the loss assessed as exorbitant remitted the assessment report to the Surveyor for a second look and not even satisfied with the reassessed loss of Rs. 17,27,000-00 got it re-examined by Shri Vinod Bhan who re-assed and reduced it to Rs. 13.00 lacs. CIMA No. 181/2009
The respondent on 3rd April 2005 took out an insurance policy from the appellant company for an amount of Rs. 19.00 lacs for stock trade of pesticides and allied items of his business concern run under the name and style of M.S. A.R. Enterprises, College Road Sopore. The insurance was effective from 3rd April 2005 to 2nd April 2006. While the insurance policy was operational and in force, an encounter took place between the Security Forces and militants near the insured property and in the Security Forces operation the insured property got damaged. The occurrence led to registration of an FIR at local police station. The fire mis hap was reported to the appellant company. The Surveyor was appointed and loss to the insured property assessed at Rs. 13,33,065/-CIMA No. 27/2009
The Surveyor appointed by the respondent company (appellant in CIMA 106/2008) assessed the loss to the insured property at Rs. 18,30,886/-. The respondent company found the loss assessed excessive and referred the matter for reassessment to the Surveyor. The loss on review was reassessed as R
