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2024 Supreme(Online)(SC) 3675
SUPREME COURT OF INDIA
UNITED INDIA INSURANCE CO. LTD. – Appellant
Versus
M/S. HYUNDAI ENGINEERING AND CONSTRUCTION CO. LTD. – Respondent
C.A. No.-001496 - 2023
Exclusion clauses in insurance contracts are strictly interpreted against the insurer, who must prove their applicability to deny claims.
Headnote:(A) Consumer Protection Act, 1986 - Sections 2(1)(g) and 12 - Insurance claim - The appellant challenged the NCDRC's order directing payment of Rs. 39,09,92,828/- for an insurance claim related to a collapsed bridge, asserting repudiation based on policy exclusions. The NCDRC found the report of the Expert Committee inconclusive and ruled in favor of the respondents. (Paras 1, 14.1, 14.3, 30)
(B) Insurance Contracts - Exclusion Clauses - The court emphasized that exclusion clauses in insurance contracts are interpreted strictly against the insurer, who bears the burden of proving their applicability. (Paras 16, 21)
(C) Liability - The court found that the primary responsibility for the bridge collapse lay with the contractor due to design flaws and inadequate construction practices. (Paras 9.1, 9.2, 20.3)
Facts of the case:
The appellant, an insurance company, repudiated a claim after a bridge collapse during construction, resulting in 48 fatalities. The NCDRC ruled in favor of the contractors, citing inconclusive evidence regarding fault.
Findings of Court:
The court found the NCDRC erred in its judgment, emphasizing the insurer's right to repudiate based on policy exclusions.
Issues: The main issues included the applicability of exclusion clauses in the insurance policy and the determination of liability for the bridge collapse.
Ratio Decidendi: The court ruled that the NCDRC's reliance on inconclusive evidence was misplaced and that the insurer had sufficient grounds for repudiation based on the exclusion clauses.
Result: Appeal allowed; NCDRC's order set aside.
JUDGEMENT
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 o
