Case Title: Bajaj Allianz General Insurance Co.Ltd. V. Mukul Aggarwal, CIVIL APPEAL NO.1544 OF 2023
Citation: (SC) 1000
Summary
The Supreme Court reaffirmed that an insured person is limited to making claims covered by their insurance policy. The court noted that an insurance contract is bilateral and mutually agreed upon, so the rule of contra proferentem would not apply to a commercial contract like an insurance contract. In National Insurance Company Ltd. v. Chief Electoral Officer, the owner of a BMW had an accident in Gurgaon that left the vehicle irreparably damaged. The owner obtained two forms of protection: the BMW Secure Advance Policy (the BMW Secure) and a vehicle insurance policy from the insurer, Bajaj General Insurance Company Ltd. The court found that the insurer’s responsibility would not exceed the vehicle’s IDV less the wreck, which the court determined to be worth the entire cost of the vehicle. The court ordered the insurance to reimburse the owner for the difference of Rs. 3,74,012/. The appeals were partially granted, and the State Commission’s directive to replace the car was replaced with one to provide monetary compensation.
About the case
On Monday, November 20, 2023, the Supreme Court reaffirmed that an insured person is limited to making claims that are covered by their insurance policy. The Court further stated that a policy’s provisions, which establish the insurance company’s liability, must be carefully studied. A bench of Justice Abhay S. Oka and Justice Rajesh Bindal noted that an insurance contract is bilateral and mutually agreed upon, like any other commercial contract, so the rule of contra proferentem would not apply to a commercial contract like an insurance contract. This was in reference to the recent ruling in National Insurance Company Ltd. v. Chief Electoral Officer. The case facts state that the owner of a BMW had an accident in Gurgaon that left the vehicle irreparably damaged. He had obtained two forms of protection: the BMW Secure Advance Policy (the BMW Secure) and a vehicle insurance policy from the insurer, Bajaj General Insurance Company Ltd.
According to the owner’s interpretation of the two policies taken together, the insured is entitled to a replacement car if the vehicle sustains damage exceeding 75% of its insured declared value (IDV). After the owner took the BMW 3 Series 320D to the State Consumer Disputes Redressal Commission in Delhi, the commission ordered BMW and the insurer to compensate the owner for the whole loss of the vehicle by exchanging it for a brand-new vehicle of the same type. After that, the insurer and BMW went to the NCDRC, which denied their appeals. They then made their way to the Supreme Court. According to the Court’s interpretation of the BMW policy, there was no explicit clause providing for the replacement of a car in the event of a complete loss, constructive total loss, or vehicle theft. The Court further concluded that when it is proven that the insurer under the motor insurance policy has accepted the scenario of whole loss or constructive total loss of the car, BMW may be held liable under the terms of BMW Secure.
After carefully examining each of the grounds for the insurer’s repudiation of the insurance policy, the court came to the conclusion that none of them had any merit. Accordingly, the Court determined that the insurer and BMW had failed to provide adequate service as defined by Section 2(g) of the Consumer Protection Act of 1986. The Court decided that the owner was therefore entitled to payment from both of them. In accordance with the Motor Insurance Policy’s clause (3), the insurer’s responsibility would not exceed the vehicle’s IDV less the wreck the court determined to be worth the entire cost of the vehicle. As a result, the Court determined that the insurer owed Rs. 25,83,012.45 in total. The Court further found that a fair amount will have to be granted due to the disparity in the vehicle’s values because BMW did not claim that the vehicle of the same manufacture was not available or, if it was, what its cost was on that particular day. The Court further held that a reasonable amount must be awarded due to the disparity between the value of the vehicle involved in the accident and the value of a new car of the same make, since BMW did not argue that the vehicle of the same make was unavailable or, if it was, what was the cost of the vehicle on that particular day. In light of this, the Court ordered the insurance to reimburse the owner for the difference of Rs. 3,74,012/. As a result, the appeals were partially granted, and the State Commission’s directive to replace the car—which had been verified by the National Commission—was replaced with one to provide monetary compensation.
