The Supreme Court has asked Oriental Insurance to pay Rs. 3.5 crore to National Bulk Handling Corporation, which suffered by a fraud committed by its employees. The corporation had taken fidelity guarantee insurance. The policy covers fraud, theft, and other offences committed by the employees of a firm or institution.
The insurance under it is for honesty, against negligence or for being faithful and loyal to its employers. The protection afforded is different from normal insurance policies. In this case, the corporation was a collateral management company, which undertook store commodities pledged by farmers, traders and manufacturers to get loans from banks. The claim arose when 601 barrels of mentha oil stored in a godown in Udhampur was found substituted with water.
The corporation claimed compensation under the fidelity policy alleging that its employees were involved in the fraud. The corporation had also filed a police complaint. The insurer, however, argued that there was no evidence to prove that the employees committed the offence as the seals were intact. The court rejected the appeal and ruled that the policy covered employees’ fraud.
