Case Note & Summary
The appellant, Cement Corporation of India, a government company, invited tenders for insurance in June 2005. The respondent, ICICI Lombard General Insurance Company Limited, was awarded the contract and issued a Standard Fire and Special Perils Policy for the appellant's Mandhar Cement Factory. On 01.11.2006, thieves entered the factory premises with a blow torch and portable gas cutter, intending to steal copper and transformer oil. The use of these tools triggered a fire in the transformer, causing damage. The appellant notified the respondent and registered an FIR. The respondent repudiated the claim, citing an exclusion clause for 'burning by order of any Public Authority'. The appellant filed a complaint before the NCDRC, which dismissed it. The Supreme Court allowed the appeal, holding that the proximate cause of the fire was the theft, which is a covered peril under the policy. The exclusion clause was not applicable as the fire was not ordered by any public authority. The court set aside the NCDRC's order and directed the respondent to pay the claim amount with interest.
Headnote
A) Insurance Law - Standard Fire and Special Perils Policy - Interpretation of Exclusion Clause - Theft and Fire - The issue was whether the fire caused by thieves during a theft is covered under the policy. The court held that the proximate cause of the fire was the theft, which is a covered peril, and the exclusion for 'burning by order of any Public Authority' does not apply as the fire was not ordered by any public authority. The insurer's repudiation was set aside. (Paras 1-10) B) Insurance Law - Proximate Cause - Theft as a Covered Peril - The court applied the doctrine of proximate cause, holding that the theft was the efficient cause of the fire, and since theft is a covered peril, the loss is covered. The exclusion clause must be strictly construed against the insurer. (Paras 5-8)
Issue of Consideration
Whether the fire incident caused by thieves during a theft is covered under the Standard Fire and Special Perils Policy, and whether the exclusion clause for 'burning by order of any Public Authority' applies.
Final Decision
Appeal allowed. Impugned judgment of NCDRC set aside. Respondent directed to pay the claim amount with interest at 9% per annum from the date of repudiation until payment.
Law Points
- Interpretation of insurance contracts
- Proximate cause doctrine
- Exclusion clauses strictly construed against insurer
- Theft as a covered peril
- Burden of proof on insurer to establish exclusion
