Case Note & Summary
The appellant, M/s. Century Textiles & Industries Ltd., a public limited company, filed a suit against four insurance companies (Oriental Fire & General Insurance Co. Ltd., New India Assurance Co. Ltd., National Insurance Co. Ltd., and United India Fire & General Insurance Co. Ltd.) seeking recovery of losses under five insurance policies. The policies covered fire, riot, strike, and malicious damage for stock and stock in process of its Rayon and Tyre Cord divisions, and one policy covered consequential loss. On the night of 24th July 1976, workmen agitated within the factory premises at Kalyan, gathering in a mob and attempting to reach the residence of the Senior Vice-President. The management, apprehending riot and widespread damage, declared a lockout from 2:00 a.m. on 26th July 1976. The plaintiff claimed that during the lockout, the stock was damaged or lost, and sought compensation under the policies. The defendants denied liability, arguing that the loss was not caused by any insured peril. The learned single Judge dismissed the suit, holding that the plaintiff failed to prove that the loss was caused by riot, strike, or malicious damage. The plaintiff appealed. The Division Bench of the Bombay High Court upheld the dismissal, holding that the lockout was not a peril insured under the policies. The court noted that the policies covered loss caused by riot, strike, and malicious damage, but not loss resulting from a lockout declared by the employer. The burden of proof was on the insured to show that the loss was directly caused by an insured peril, which the plaintiff failed to discharge. The court also rejected the claim for consequential loss as it was dependent on the main claim. The appeal was dismissed with no order as to costs.
Headnote
A) Insurance Law - Interpretation of Policy - Riot and Strike Coverage - Lockout - The court considered whether a lockout declared by the management after a workmen's agitation falls within the definition of 'riot' or 'strike' under the insurance policies. Held that lockout is not a peril insured under the policies; the policies covered loss caused by riot, strike, and malicious damage, but not loss resulting from a lockout declared by the employer. The burden of proof was on the insured to show that the loss was directly caused by an insured peril, which the plaintiff failed to discharge. (Paras 2-10) B) Insurance Law - Burden of Proof - Causation - The court held that the insured must prove that the loss was directly caused by an insured peril. In this case, the plaintiff did not establish that the loss of stock was due to riot or strike; the evidence showed that the lockout was declared to prevent damage, and the loss occurred during the lockout period. The court found that the plaintiff failed to prove that the loss was covered under the policies. (Paras 11-15) C) Insurance Law - Consequential Loss Policy - The fifth policy covered consequential loss following damage to property by an insured peril. Since the court held that the loss of stock was not caused by an insured peril, the claim for consequential loss also failed. (Paras 16-18)
Issue of Consideration
Whether a lockout declared by the employer following a workmen's agitation constitutes a 'riot' or 'strike' within the meaning of the insurance policies, and whether the plaintiff is entitled to claim for loss of stock and consequential loss under the policies.
Final Decision
The appeal is dismissed. The judgment and order of the learned single Judge dated May 4, 2007 is confirmed. No order as to costs.
Law Points
- Interpretation of insurance policy
- riot and strike coverage
- lockout as an insured peril
- burden of proof on insured
- strict construction of policy terms
