Insurance Claim Cannot Be Denied For Breach Of Impossible Condition : Supreme Court

The Supreme Court held that an insurance company cannot reject a claim on the grounds of breach of a condition in the contract that was impossible to fulfill.

A bench comprising Justices B.V. Nagarathna and Satish Chandra Sharma upheld the insured's marine claim, which New India Assurance Co. Ltd. had rejected on the grounds that the insured breached a condition requiring the voyage to start and finish before the monsoon despite it being evident that the entire voyage was scheduled during the monsoon season.

The Appellant-insured owned a barge and sought insurance for its maiden voyage from Mumbai to Kolkata. The Respondent-insurer issued a voyage insurance policy for a month (16.05.2013 to 15.06.2013) with a special condition that “voyage should commence & complete before monsoon sets in.”

The Appellant's barge commenced its voyage from Mumbai to Kolkata on 06.06.2013, i.e., after monsoon onset in Kerala on 01.06.2013. As soon as the barge reached the east coast it encountered engine failure, ran aground, and was declared a total loss. Following this incident, the Appellant-insured filed a claim before the Respondent, however, the insurer repudiated the claim, citing a breach of the monsoon clause.

Being aggrieved by the National Consumer Disputes Redressal Commission (“NCDRC”) dismissal of its complaint, the insured approached the Supreme Court.

The question that felled for the Supreme Court's consideration was whether the insurer could reject the claim solely based on the monsoon clause, despite the voyage period inevitably overlapping with monsoon.

Setting aside the NCDRC's decision, the judgment authored by Justice Satish Chandra Sharma held that the condition in the insurance contract could not defeat the insured's claim, as the very purpose of the policy was to provide coverage during foul weather along the west and east coasts—the period during which the barge voyage was scheduled. The Court observed that such a condition was impossible to comply with rendering it non-material.

“There is no doubt that the policy was taken for a period of one month (16.05.2013 to 15.06.2013) to cover the voyage from Mumbai to Kolkata. Further, as per the DGS Circular, foul weather commences on 1st May itself on the East Coast. The Respondent's contention that they had no knowledge of the voyage and that they believed that the Vessel would be laid up at the Kolkata harbour during the foul season is unacceptable and is to be rejected. The Appellant had mentioned in the form that the purpose of insurance is to undertake the voyage from Ghodbunder Jetty in Mumbai to Kolkata harbour. The only logical conclusion of the information provided is that the insurance was availed to cover the foul weather period along the west and east coast.”, the court observed.

“If the condition is to be interpreted strictly, then the assured would be unable to make a claim in case of a marine accident where the vessel is unable to complete its voyage due to a peril, rendering the special condition impossible to comply with. Ultimately, the assured would be without any remedy under the insurance. This amounts to an absurdity, vitiating the very purpose behind an insurance contract.”, the court added.

Further, the court rejected the Respondent-insurer's claim that the appellant had breached the principle of Uberrima Fidei, stating that the insured had disclosed the voyage details in the proposal form, and it was expected of the insurer to have known the voyage would overlap with a monsoon.

“In view of our findings, the Respondent is not entitled to repudiate the claim of the Appellant on the ground of breach of the special condition.”, the court observed.

Accordingly, the appeal was allowed, and the matter was remanded to the NCDRC to decide the extent of the insured sum liable to be paid by the Respondent to the Appellant.

Case Title: SOHOM SHIPPING PVT. LTD. VERSUS M/S. THE NEW INDIA ASSURANCE CO. LTD. & ANR.  Citation : 2025 LiveLaw (SC) 403

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Appearance:

For Appellant(s) Mr. Huzefa Ahmadi, Sr. Adv. Mr. Siddharth Bhatnagar, Sr. Adv. Mr. Amol Chitale, Adv. Ms. Sonia Dube, Adv. Ms. Kanchan Yadav, Adv. Mr. Tanishq Sharma, Adv. Ms. Saumya Sharma, Adv. Mr. Ashray Chopra, Adv. M/S. Legal Options, AOR

For Respondent(s) Mr. Devadutt Kamat, Sr. Adv. Mr. Nikhil Jain, AOR Mr. Abhishek Gola, Adv. Mr. Anshul Mehral, Adv. Ms. Sayatani, Adv. Ms. Divya Jain, Adv.