Case Title: National Insurance Company Ltd V. Vedic Resorts and Hotels Pvt. Ltd.
Summary
The Supreme Court ruled in a case involving National Insurance Company Ltd v. Vedic Resorts and Hotels Pvt. Ltd that an insurer must provide “cogent and satisfactory” reasons for rejecting a surveyor’s report in an insurance claim. The court emphasized that in cases where an insurance policy contains an exclusionary clause, the insurer bears the burden of demonstrating that the policy covers the particular incident in question. The court also emphasized that in situations where an insurance contract contains ambiguity, it is the responsibility to construe it in the insured’s favor. The case involved a resort owner in West Bengal who held two insurance policies for the resort’s hotel buildings with the Insurance Company. The insurance company denied the complainant’s claim, asserting that the resort management committed a malevolent act that caused the loss.
The National Consumer Disputes Redressal Commission issued a directive to the insurance company, requiring repayment of Rs. 202,216 lakhs plus interest at the rate of 9% per annum from the date the claim was filed until the payment was received. The court rejected the appeal, referencing cases National Insurance Company Limited vs. Ishar Das Madan Lal (2007) 4 SCC 105 and General Assurance Society Ltd. vs. Chandumull Jain and Another AIR 1966 SC 1644.
About the case
In a case involving National Insurance Company Ltd v. Vedic Resorts and Hotels Pvt. Ltd, the Supreme Court ruled that although the Surveyor’s Report is not conclusive and may be modified in an insurance claim, the insurer must provide “cogent and satisfactory” reasons for rejecting the report. A division bench consisting of Justices Ajay Rastogi and Bela M. Trivedi further emphasized that in cases where an insurance policy contains an exclusionary clause, the insurer bears the burden of demonstrating that the insurance policy covers the particular incident in question.
The Supreme Court further emphasized that in situations where an insurance contract contains ambiguity, it is the responsibility to construe it in the insured’s favor. “Though it is true that the Surveyor’s Report is not the last and final one nor is so sacrosanct as to the incapable of being departed from, however, there has to be some cogent and satisfactory reasons or grounds made out by the insurer for not accepting the Report.” The Supreme Court ruled. The subject of this dispute was the resort owner (Respondent) in West Bengal, who held two insurance policies for the resort’s hotel buildings with the Insurance Company (Appellant). A throng of approximately 200-250 individuals caused damage to the resort property when they entered the premises following an altercation with a group attempting to disrupt a football game. The police conducted an investigation into the incident in response to FIRs filed. The investigation revealed that Gaffar Molla and his associates, in pursuit of the mob, concealed in the resort of the complainant after firing and throwing bombs at a football match venue adjacent to the resort.
Following this, the rabble caused damage to the insured property. In addition to pipe guns, live grenades, and explosive substances, the police discovered them within the resort’s compound. According to the surveyor’s concluding report, the complainant incurred a loss of approximately Rs 202,216 lakhs across both policies. Nevertheless, the insurance company denied the complainant’s claim, asserting that the resort management committed a malevolent act that caused the loss suffered by the complainant. As such, the resort management claimed that the expense fell within one of the exclusions specified in Clause V(d) of the insurance policy. Subsequently, the complainant filed a complaint with the National Consumer Disputes Redressal Commission, which issued a directive to the insurance company, requiring the repayment of Rs. 202,216 lakhs plus interest at the rate of 9% per annum from the date the claim was filed until the payment was received. In opposition to the Commission’s directive, the insurance company petitioned the Apex Court for an appeal.
Advocate Vishnu Mehra, representing the insurance company, contended that the complainant had provided sanctuary to a criminal and his accomplices who made use of the resort’s stored firearms and explosives. Before hiding at the resort, Gaffar Molla and his cohorts incited the mob by fatally wounding one individual and injuring several others at the football stadium. The throng was provoked by their actions and subsequently attempted to cause damage to the insured property. Since the loss sustained by the resort was attributable to the management’s malevolent act, the insurance company argued that it was protected by one of the exclusions specified in Clause V(d) of the insurance policy. Counsel Sukumar Pattjoshi, representing the complainant, contended that the Insurance Company’s denial of its claim was in error and that the Commission’s order should not be disturbed. The insurance company had denied the resort’s claim on the grounds that it resulted from the resort’s management’s malicious act of harboring individuals who caused the death of another by utilizing explosives and firearms. The Apex Court, on the other hand, noted that the fatal shooting incident occurred at the location of the football match and not at the resort. The apex court further noted that the absence of evidence implicating the resort management in the incident that resulted in the damage was in violation of Clause V(d) of the insurance policy and therefore disqualified coverage.
In addition, the court noted that the insurance company failed to provide reasonable grounds for declining the surveyor’s report when the Final Survey Report deemed the claim admissible. In rejecting the appeal, the Court made reference to the cases National Insurance Company Limited vs. Ishar Das Madan Lal (2007) 4 SCC 105 and General Assurance Society Ltd. vs. Chandumull Jain and Another AIR 1966 SC 1644. It further stated: “It is common knowledge that in cases where an exclusionary clause is present in a policy, the insurer must demonstrate that the particular case falls within the scope of that clause.” When there is uncertainty regarding an insurance contract, it is necessary to interpret it in the insured’s favor. The Rule of “Contra Proferentem” and the Interpretation of Ambiguous Terms in Insurance Contracts in Favour of the Insured are relevant judicial decisions.
