Burden Of Proof On Insurer To Show Applicability Of Exclusion Clause: NCDRC

Brief Facts of the Case

The complainant's deceased husband had various accounts (Savings, Current, Recurring, and Term loans) with the bank. The bank obtained a Group Personal Accident Policy from Liberty Videocon General Insurance/insurer for account holders. A premium of Rs.100 was deducted from his account and remitted to the insurer, confirming his insurance coverage for Rs.5,00,000. Subsequently, the insured died due to electric shock, and a post-mortem confirmed accidental death. The complainant submitted the death claim through the bank to the insurer. However, the insurer did not pay the insured amount. Therefore, the complainant filed a complaint before the District Forum, which dismissed the complaint. Subsequently, the complainant appealed to the State Commission of Chhattisgarh, which allowed the complaint. The State Commission directed the insurer to pay a sum of Rs.5,00,000 to the complainant, along with Rs.3,000 as cost of litigation. Aggrieved by this, the insurer filed a revision petition before the National Commission.

Contentions of the Insurer

The insurer argued that the deceased's death was not accidental as he was unauthorizedly connecting an electric wire to a pole, violating the insurance policy's terms. Therefore, the claim was rightly denied, and the complainant was not entitled to compensation. Additionally, the bank denied allegations from the complainant, stating they only collected and forwarded the insurance premium to the insurer. The liability to pay the claim rested with the insurer, not the bank; thus, they sought dismissal of the complaint against them.

Observations by the National Commission

The National Commission observed that the main issue revolved around violating the terms and conditions of Part-III Para 4 and Part-IV Para 3 of the policy, justifying the repudiation of the claim as per the insurance policy. To determine the issue, the Commission reproduced the terms and conditions: Part III, General Exclusions, stated any loss or damage arising from the insured person committing any breach of law with criminal intent. Part IV, General Terms & Conditions, required the insured person to take all reasonable steps to safeguard their interests against accidental loss or damage that might give rise to a claim. The Commission noted the Supreme Court's ruling in M/s Texco Marketing Pvt. Ltd vs. Tata AIG General Insurance Company Ltd. & Ors., which emphasized that the burden of proof lies with the insurer when relying on an exclusion clause, and such clauses must be interpreted in light of the contract's main purpose. They also cited Shivram Chandra Jagarnath Cold Storage v. New India Assurance Co. Ltd. and B.V. Nagaraju v. Oriental Insurance Co. Ltd., which supported reading down exception clauses that are too broad or inconsistent with the policy's main purpose. The Commission concluded that Part-III Para 4 and Part-IV Para 3 indicated the deceased had not taken reasonable steps to safeguard his interests while connecting the wire to the pole, for which he was unauthorized. However, the insurer had not established the exclusion clause's applicability.

Therefore, the Commission upheld the State Commission's order and dismissed the revision petition.

Case Title: Liberty Videocon General Insurance Company Ltd. Vs. Uma Bai Dhankar

Case Number: R.P. No. 735/2018