Insurance Company Cannot Take A Defense Which Did Not Form The Basis Of Repudiation Of The Claim : Supreme Court

The Supreme Court observed that, in a claim made by the insured before a consumer commission, an insurance company cannot take a defense which did not form the basis of repudiation of the claim.

In this case, the ground for repudiation of insurance claim was that there was no sufficient balance to cover the declaration and/or loss. The National Consumer Disputes Redressal Commission dismissed the appeal against the State Consumer Disputes Redressal Commission order dismissing the complaint on a different ground that they had converted "from anywhere in India to anywhere in India" policy into the sales turnover policy covering transportation of goods only from two locations. 

Before the Apex Court, the appellants contended that the insurance company could not have resisted a claim petition on grounds beyond those cited by them while repudiating a claim. They relied on a decision of the Supreme Court viz Saurashtra Chemicals Ltd. v. National Insurance Co. Ltd. [(2019) 19 SCC 70].

The bench of Justices Dinesh Maheshwari and Aniruddha Bose referred to the decision in Saurashtra Chemicals Ltd and observed:

"In that case, it was a claim relating to standard fire and special perils policy. Repudiation was solely on the ground that a spontaneous combustion did not result into fire and loss had not been caused by the fire as stipulated by policy conditions. The insured had approached the National Commission. One of the defenses taken by the insurance company in the Commission was that the intimation of claim was with delay for over a month. This delay, according to the insurance company vitiated condition 6(i) of the general conditions of the policy, as applicable in that case. The insurance company was successful before the National Commission. The insured preferred an appeal which was heard and decided by a Coordinate Bench. Before the Bench, the main point on which the case turned was that the insurance company was taking a defense which did not form the basis of repudiation of the claim. It is in that context this Court held this was impermissible."

Referring to the facts of the case, the court observed that the National Commission ought not to have gone beyond the grounds of repudiation and into the nature of coverage. These are all terms of art applicable to the insurance trade, the bench added.

Allowing the appeal, the bench remanded the matter to the State Commission for taking a decision afresh on the claim of the insured on the grounds which formed the basis of repudiation and determine as to whether at the material point of time there was sufficient balance to cover the claim on account of declaration made as regards loss suffered by the insured.

Case details

JSK Industries Pvt Ltd vs Oriental Insurance Company Limited | 2022 LiveLaw (SC) 884 | CA 7630 OF 2022 | 18 October 2022 | Justices Dinesh Maheshwari and Aniruddha Bose

Counsel: Sr. Adv Gopal Shankarnarayan for appellant, Adv S. M. Suri for respondent

Headnotes

Consumer Protection Act, 1986 - Insurance claims - An insurance company cannot take a defense which did not form the basis of repudiation of the claim - Referred to Saurashtra Chemicals Ltd. v. National Insurance Co. Ltd. (2019) 19 SCC 70. (Para 13-15)

Click here to Read/Download Judgment