Insurance Company Held Liable for Repudiation Despite Basement Exclusion Clause; Consumer Court Awards Rs. 16 Lakhs Plus Interest.


14 October 2024 Consumer Law >> Civil & Consumer Law   |   Insurance >> Personal Law  

In a significant ruling of M/S. Jindal & Co., Through Its Proprietors, Narendra Jindal v/s Universal Sompo General Insurance Co. Ltd., Uttrakhand & Others., for consumer rights, the National Consumer Disputes Redressal Commission (NCDRC) has overturned a state commission’s decision and held an insurance company liable for repudiating a claim despite an exclusion clause regarding basement storage. The case centered on a Dehradun-based business, M/s Jindal & Company, whose stock of surgical goods was severely damaged by rainwater flooding their basement in August 2012.

The appellant, Narendra Jindal, proprietor of M/s Jindal & Company, had taken out an insurance policy with Universal Sompo General Insurance Company Ltd. through Allahabad Bank. He alleged that bank officials and insurance company executives had induced him to purchase the policy, promising comprehensive coverage. Crucially, the proposal form, submitted in May 2011, explicitly mentioned “stock of surgical and pharmaceutical items kept in the basement.”


 

 

Following the flood damage, Jindal’s claim was repudiated by the insurance company, citing a clause in the policy that excluded coverage for stock stored in the basement. This decision was upheld by the State Consumer Disputes Redressal Commission, Uttaranchal.

However, the NCDRC, upon hearing the appeal, found the state commission’s ruling flawed. The national commission emphasized that the proposal form, a crucial document, clearly indicated the appellant’s intent to insure stock kept in the basement. By accepting the proposal and issuing the policy, the insurance company had implicitly agreed to cover this risk.

The NCDRC referenced a Supreme Court judgment, Texco Marketing Pvt. Ltd. vs. Tata AIG General Insurance Co. Ltd. & Ors. (2023), which established that an exclusion clause contradicting the core purpose of an insurance contract cannot be enforced. In this case, the commission argued, the insurance company knowingly entered into a contract that was inherently contradictory, effectively nullifying the policy’s intended purpose.

Furthermore, the surveyor’s assessment of the loss, amounting to Rs. 1,603,520, was accepted by the NCDRC.

In its order, the NCDRC allowed the appeal, setting aside the state commission’s decision. The insurance company was directed to pay the appellant Rs. 1,603,520, along with 9% interest per annum from the date of repudiation (March 14, 2013) until realization. The insurance company was also ordered to pay Rs. 50,000 as costs to the complainant. The insurance company was given two months to comply with the order.

This ruling underscores the importance of transparency and clarity in insurance contracts. It also serves as a reminder to insurance companies that they cannot rely on exclusion clauses to deny legitimate claims when the proposal form clearly indicates the insured’s intent. This decision reinforces the rights of consumers and reiterates that insurance policies must align with the informed expectations of the insured.