Theft of Vehicle - Insurance Company cannot repudiate the claim of insurance on the ground of delay in informing the company.

 

 Insurance Company could  not have repudiated the merely on the ground that there was a delay in intimating the Insurance Company about the occurrence of the theft nevertheless the claim was not repudiated on the ground that it was not genuine says Supreme Court.

On the recent case in the Hon’ble Supreme Court of India in the matter of claiming insurance in the event of theft, a question arose –  whether  the  Insurance Company can repudiate the claim in toto made by the owner of the vehicle in case of loss of the vehicle due to theft merely on the ground that there was delay in informing the company?

The Supreme Court  Bench of Justices Sanjiv Khanna and Bela M. Trivedi headed by the latter decided the above question in accordance to settled position of law on insurance  held in the case of Gursinder Singh vs. Shriram General Insurance Company Ltd. & Another (2020) 11 SCC 612. The three Judge Bench of the Supreme Court interpreted the condition no. 1 of the Insurance Contract that disentitles the claimant of the insurance claim in the following:

“9. We are of the view that much would depend upon the words “cooperate” and “immediate”, in Condition 1 of the standard form for commercial vehicles package policy. Before we analyse this case any further, we need to observe the rules of interpretation applicable to a contract of insurance. Generally, an insurance contract is governed by the rules of interpretation applicable to the general contracts. However, due to the specialised nature of contract of insurance, certain rules are tailored to suit insurance contracts. Under the English law, the development of insurance jurisprudence is given credence to Lord Mansfield, who developed the law from its infancy. Without going much into the development of the interpretation rules, we may allude to Neuberger, J. in Arnold v. Britton, which is simplified as under:

(1) Reliance placed in some cases on commercial common sense and surrounding circumstances was not to be invoked to undervalue the importance of the language of the provision which is to be construed.

 (2) The less clear the words used were, the more ready the court could properly be to depart from their natural meaning, but that did not justify departing from the natural meaning.

(3) Commercial common sense was not to be invoked retrospectively, so that the mere fact that a contractual arrangement has worked out badly, or even disastrously, for one of the parties was not a reason for departing from the natural language.

(4) A court should be very slow to reject the natural meaning of a provision as correct simply because it appeared to be a very imprudent term for one of the parties to have agreed.

(5) When interpreting a contractual provision, the court could only take into account facts or circumstances which existed at the time that the contract was made and which were known or reasonably available to both parties.

(6) If an event subsequently occurred which was plainly not intended or contemplated by the parties, if it was clear what the parties would have intended, the court would give effect to that intention.

10. A perusal of the aforesaid shows that this contract is to be interpreted according to the context involved in the contract. The contract we are interpreting is a commercial vehicle package policy. There is no gainsaying that in a contract, the bargaining power is usually at equal footing. In this regard, the joint intention of the parties is taken into consideration for interpretation of a contract. However, in most standard form contracts, that is not so. In this regard, the court in such circumstances would consider the application of the rule of contra proferentem, when ambiguity exists and an interpretation of the contract is preferred which favours the party with lesser bargaining power.

11. It is argued on behalf of the respondents and rightly so, that the insurance policy is a contract between the insurer and the insured and the parties would be strictly bound by the terms and conditions as provided in the contract between the parties.

12. In our view, applying the aforesaid principles, Condition 1 of the standard form for commercial vehicles package policy will have to be divided into two parts. The perusal of the first part of Condition 1 would reveal that it provides that “a notice shall be given in writing to the company immediately upon the occurrence of any accidental loss or damage”. It further provides that in the event of any claim and thereafter, the insured shall give all such information and assistance as the company shall require. It provides that every letter, claim, writ, summons and/or process or copy thereof shall be forwarded to the insurance company immediately on receipt by the insured. It further provides that a notice shall also be given in writing to the company immediately by the insured if he shall have knowledge of any impending prosecution inquest or fatal inquiry in respect of any occurrence, which may give rise to a claim under this policy.

13. A perusal of the wordings used in this part would reveal that all the things which are required to be done under this part are related to an occurrence of an accident. On occurrence of an accidental loss, the insured is required to immediately give a notice in writing to the company. This appears to be so that the company can assign a surveyor so as to assess the damages suffered by the insured/vehicle. It further provides that any letter, claim, writ, summons and/or process or copy thereof shall be forwarded to the company immediately on receipt by the insured. As such, the intention would be clear. The question of receipt of letter, claim, writ, summons and/or process or copy thereof by the insured, would only arise in the event of the criminal proceedings being initiated with regard to the occurrence of the accident. It further provides that the insured shall also give a notice in writing to the company immediately if the insured shall have the knowledge of any impending prosecution inquest or fatal inquiry in respect of any occurrence which may give rise to a claim under this policy. It will again make the intention clear that the immediate action is contemplated in respect of an accident occurring to the vehicle.

14. We find that the second part of Condition 1 deals with the “theft or criminal act other than the accident”. It provides that in case of theft or criminal act which may be the subject of a claim under the policy, the insured shall give immediate notice to the police and cooperate with the company in securing the conviction of the offender. The object behind giving immediate notice to the police appears to be that if the police is immediately informed about the theft or any criminal act, the police machinery can be set in motion and steps for recovery of the vehicle could be expedited. In a case of theft, the insurance company or a surveyor would have a limited role. It is the police, who acting on the FIR of the insured, will be required to take immediate steps for tracing and recovering the vehicle. Per contra, the surveyor of the insurance company, at the most, could ascertain the factum regarding the theft of the vehicle.

15. It is further to be noted that, in the event, after the registration of an FIR, the police successfully recovering the vehicle and returning the same to the insured, there would be no occasion to lodge a claim for compensation on account of the policy. It is only when the police are not in a position to trace and recover the vehicle and the final report is lodged by the police after the vehicle is not traced, the insured would be in a position to lodge his claim for compensation.

16. …………………… 10

17. That the term “cooperate” as used under the contract needs to be assessed in the facts and circumstances. While assessing the “duty to cooperate” for the insured, inter alia, the court should have regard to those breaches by the insured which are prejudicial to the insurance company. Usually, mere delay in informing the theft to the insurer, when the same was already informed to the law enforcement authorities, cannot amount to a breach of “duty to cooperate” of the insured.

18. ……………

19. …………..

20. We, therefore, hold that when an insured has lodged the FIR immediately after the theft of a vehicle occurred and when the police after investigation have lodged a final report after the vehicle was not traced and when the surveyors/investigators appointed by the insurance company have found the claim of the theft to be genuine, then mere delay in intimating the insurance company about the occurrence of the theft cannot be a ground to deny the claim of the insured.”

    The reason that led the insured to file an appeal being aggrieved  is that the Insurance Company has repudiated the claim of the complainant, the appellant on the ground that the complainant had committed the breach of Condition No. 1 of the Insurance Contract which reads as under:

     “1. Notice shall be given in writing to the company immediately upon the occurrence of any accidental loss or damage in the event of any claim and thereafter the insured shall give all such information and assistance as the company shall require. Every letter, claim, writ, summons and/or process or copy thereof shall be forwarded to the company immediately on receipt by the insured. Notice shall also be given in writing to the company immediately the insured shall have knowledge of any impending prosecution, inquest or fatal inquiry in respect of any occurrence which may give rise to a claim under this policy. In case of a major loss, theft or criminal act which may be the subject of a claim under this policy the insured shall give immediate notice to the police and co-operate with the company in securing the conviction of the offender.”

The Insurance Company repudiated the of the complainant stating that there was breach of condition no.1 of the insurance policy which mandated immediate notice to the insurer of the accident loss/ damage. On the contrary after the lapse of more than five months the complainant intimated about the loss only after accused were arrested and also the challan was filed in Court.

     In the present case the Insurance Company could  not have repudiated the merely on the ground that there was a delay in intimating the Insurance Company about the occurrence of the theft nevertheless the claim was not repudiated on the ground that it was not genuine says Supreme Court.

    On the above views, the Apex Court set aside the impugned judgment of the National Consumer Redressal Commission  being erroneous and against the settled position of law  upholding the orders of the District Forum and the State  Commission.

    It is pertinent to note that during the pendency of the complaint before the District Forum the Insurance Company repudiated the claim on the ground of delay. But the Forum allowed the claim  of insured amount on non-standard basis alongwith interest and a compensation of Rs. 10,000/- and litigation expenses of Rs. 5000/-. Thereafter the Insurance company being aggrieved preferred appeal before the State Consumer Disputes Redressal Commission which was dismissed. Therefore the Company preferred appeal which was allowed, hence being aggrieved the complainant/appellant preferred the present appeal before the Hon’ble Supreme Court

 

Case:

Jaina Construction Company  Versus The Oriental Insurance Company  Limited & Anr.(Civil Appeal No. 1069 Of 2022)

DOJ: 11.02.2022

JUDGMENT IN PDF