Insurance Contracts Should Be Given Plain Meaning: NCDRC

Brief Facts of the Case

Muthoot Finance Limited/complainant took an insurance policy from United India Insurance/insurer for one of their stores. Subsequently, a burglary occurred, and the complainant approached the insurer with the complainant, but the claim was repudiated, citing negligence on the complainant's side for not having a watchman. The complainant contended that the policy condition of having a watchman all 24 hours was not a pre-condition and only an added security facility, which the complainant observed by having a watchman during office hours. The complainant argued that the parties intended this as there was a permanent 24-hour facility of a burglar alarm, CCTV coverage, and other ancillary measures for the strong room and premises. The complainant submitted that the insurer had subsequently issued a memo introducing the presence of a 24-hour exclusive watchman as a condition, thereby confirming that the previous policy did not mandate a watchman for 24 hours.

Contentions of the Insurer

The insurer opposed the complaint, arguing that the policy categorically recorded a pre-condition of a watchman for 24 hours round the clock. The insurer contended that the policy terms could not be split to segregate the 24-hour requirement for a watchman. The insurer asserted that there was no ambiguity or unclarity in the policy terms and that the subsequent memo was merely an expression of clarity about the existing terms.

Observations by the Commission

The Commission observed that the insurer's main contention was that the policy condition requiring a “24-hour watchman” should be given its plain meaning in line with principles of insurance contract interpretation. The insurer argued there was no ambiguity in the policy terms requiring interpretation, so the insurer's decision to repudiate the claim for lack of compliance with the 24-hour watchman requirement should be upheld. The commission agreed with the insurer that terms in insurance contracts should be given their plain meaning unless ambiguity necessitates a different interpretation. The commission cited Supreme Court precedents like National Insurance Company Vs. Chief Electoral Officer & Ors. (2023) and Bajaj Allianz General Ins. Co. Ltd. Vs. Mukul Aggarwal and Ors. (2024), which indicates that where terms are clear, courts should not construe them differently. Regarding the complainant's contention that the “24-hour” specification did not govern the watchman requirement, the commission found this argument unsustainable, given the clear wording of the provision. The commission also dismissed the complainant's suggestion that the insurer provide detailed interpretations of straightforward policy terms. Taking guidance from recent Supreme Court precedents, the commission declined to broadly interpret ambiguity in the policy's terms in the complainant's favor or require detailed interpretations inconsistent with the clearly stated burglary precautions required under the plain terms of the policy.

The commission did not fine any merits in the complaint and dismissed it accordingly.

Case Title: Muthoot Finance Limited Vs. United India Insurance Company Limited

Case Number: C. C. No. 3331/2017