Case Note & Summary
The appellant, Bharat Watch Company, a partnership firm, had insured its stock of watches with the National Insurance Co. Ltd. On the night of 3 August 2001, a theft occurred at its showroom in Solapur, detected the next morning. A claim was lodged, but the surveyor found no signs of forcible entry, leading to repudiation by the insurer. The appellant filed a consumer complaint. The District Forum allowed the claim, and the SCDRC affirmed, both finding that the exclusionary conditions in the policy were not communicated to the insured. The NCDRC reversed, relying on United India Insurance Co. Ltd. vs. Harchand Rai Chandan Lal, which held that theft must involve forcible and violent entry. The Supreme Court allowed the appeal, holding that the concurrent findings of non-communication of exclusionary clauses were binding, and the NCDRC erred in applying the precedent without considering that fact. The District Forum's order was restored.
Headnote
A) Insurance Law - Exclusionary Clauses - Communication of Terms - The core issue was whether the insurer could rely on exclusionary clauses when the terms were not communicated to the insured - The District Forum and SCDRC concurrently found that the exclusionary conditions were not furnished to the appellant - The Supreme Court held that in the absence of communication, the exclusionary clauses are not binding, and the NCDRC erred in reversing the concurrent findings on the basis of the exclusion clause - Held that the law in United India Insurance Co. Ltd. vs. Harchand Rai Chandan Lal applies only when the terms are communicated (Paras 4-5).
Issue of Consideration
Whether an insurer can rely on exclusionary clauses in an insurance policy when the terms of exclusion were not communicated to the insured.
Final Decision
Appeal allowed; impugned judgment of NCDRC set aside; order of District Forum restored; no order as to costs.
Law Points
- Insurance law
- Consumer protection
- Exclusionary clauses
- Communication of terms
- Binding effect of policy conditions
Case Details
2019 LawText (SC) (4) 112
Civil Appeal No. 3912 of 2019 (@SLP(C) No. 25468/2016)
Dr. Dhananjaya Y. Chandrachud, Hemant Gupta
For Petitioner: Mr. Sudhanshu S. Choudhari, AOR, Ms. Surabhi Guleria, Adv., Mr. Yogesh Kalte, Adv., Ms. Nandini Singla, Adv. For Respondent: Mr. Vishnu Mehra, Adv., Mr. Anant Mehrotra, Adv., Ms. Sakshi Mittal, AOR
Bharat Watch Company through its Partner
National Insurance Co. Ltd. through its Regional Manager
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Nature of Litigation
Consumer complaint against insurance company for repudiation of theft claim
Remedy Sought
Appellant sought insurance claim for loss due to theft
Filing Reason
Insurer repudiated claim on ground that theft was not accompanied by forcible and violent entry
Previous Decisions
District Forum allowed claim; SCDRC affirmed; NCDRC reversed relying on Harchand Rai
Issues
Whether exclusionary clauses in insurance policy are binding when not communicated to the insured
Submissions/Arguments
Appellant: Exclusionary conditions were not handed over, hence not binding; Harchand Rai not applicable
Respondent: SCDRC did not notice Harchand Rai; appellant had been insuring for ten years and must have been aware
Ratio Decidendi
Exclusionary clauses in an insurance policy are not binding on the insured if they are not communicated to the insured. The concurrent findings of fact by the District Forum and SCDRC that the terms of exclusion were not made known to the insured were binding, and the NCDRC erred in reversing those decisions based on the exclusion clause without addressing the non-communication.
Judgment Excerpts
The basic issue which has been canvassed on behalf of the appellant before this Court is that the conditions of exclusion under the policy document were not handed over to the appellant by the insurer and in the absence of the appellant being made aware of the terms of the exclusion, it is not open to the insurer to rely upon the exclusionary clauses.
If those conditions were not made known to the insured, as is the concurrent finding, there was no occasion for the NCDRC to render a decision on the effect of such an exclusion.
Procedural History
The appellant filed a consumer complaint after the insurer repudiated the claim. The District Forum allowed the claim on 26 April 2007. The SCDRC affirmed on 19 April 2010. The NCDRC reversed on 16 April 2015. The appellant then filed a special leave petition in the Supreme Court, which was granted and the appeal was allowed on 12 April 2019.
Acts & Sections
- Consumer Protection Act, 1986:
