'Breach Of Condition Must Be Fundamental To Deny Insurance Claim Altogether': Supreme Court Directs Insurer To Award 75% Claim In Vehicle Theft Case

In a case of vehicle theft, the Supreme Court held that any violation of the condition of the insurance policy should be in the nature of a fundamental breach to deny the claimant insurance coverage.

Here, the insurer had repudiated the claim by saying that the driver had left the vehicle unattended in the public road with the key on the ignition.

"The time gap between the driver alighting from the vehicle and noticing the theft, is very short as is clear from the facts of the case. It cannot be said, in such circumstances, that leaving the key of the vehicle in the ignition was an open invitation to steal the vehicle", the Court observed.

With reference to this case, it observed that “It is not the case of the Insurance Company that the Claimant consented or connived in the removal of the vehicle”.

The Court held that even if there was some carelessness, it was not a fundamental breach of condition for totally denying the insurance claim altogether. Therefore, a claim up to 75% must be awarded on a nonstandard basis.

The Supreme Court bench comprising Justices J.K. Maheshwari and Justice KV Vishwanathan was hearing an appeal against the NCDRC judgment which reversed the finding of the state commission and district forum directing New India Assurance Co. Ltd(respondent) to indemnify the claimant to the extent of 75% of sum assured which was 8,40,000.

The court also held that “mere delay in intimating the insurance company about the occurrence of the theft cannot be a ground to deny the claim of the insured.”

Therefore, the court set aside the judgment of NCDRC and awarded 75% of insured claim to the appellant.

BACKGROUND OF THE CASE

The appellant was the owner of a truck having a valid insurance policy for Rs.8,40,000 from 2008 to 2009. On 26th June 2008, the appellant’s vehicle was stolen. He filed an FIR and intimated the respondent about the theft.

After almost a year, in 2009, he filed a complaint before the district forum since the respondent was delaying the settlement of the claim and there was a deficiency in service. This complaint was withdrawn by mistake since proceedings were delayed and a fresh complaint was lodged. The respondent claimed that the terms of conditions of the policy were violated and that it was barred by limitation. The district forum overruled the objections and awarded 75% of the assured sum on a nonstandard basis.

The respondent appealed to the state commission contending that they were informed about the theft six days after the incident violating the 1st condition of the policy.

They submitted that the 5th condition which stated as follows -” The Insured shall take all reasonable steps to safeguard the vehicle insured from loss or damage and to maintain it in efficient condition” was also violated.

The state commission recorded that there was no delay-the appellant lodged the FIR the very next day and informed the respondent also. As far as the 5th condition was concerned, the commission relied on National Insurance Company Limited v. Nitin Khandelwal (2008)and Amalendu Sahoo v. Oriental Insurance Company Limited (2010) to hold that even if there was a breach of that clause, the claim could not have been repudiated in full and 75% of the claim would be admissible.

Now the matter went to the National Commission which held that 5th condition was breached by leaving the vehicle unattended on the road. 

SUPREME COURT’S ANALYSIS

Mere delay in intimating the insurance company about theft not a ground to deny claim

The Supreme Court referred to Gurshinder Singh v. Shriram General Insurance Co. Ltd., (2021) relied by the appellant which held that “when an insured has lodged the FIR immediately after the theft of a vehicle occurred and when the police after investigation have lodged a final report after the vehicle was not traced and when the surveyors/investigators appointed by the insurance company have found the claim of the theft to be genuine, then mere delay in intimating the insurance company about the occurrence of the theft cannot be a ground to deny the claim of the insured.”

The court observed that in this case 1st condition was not violated since FIR was registered immediately and the respondent was also intimated subsequently.

Breach of condition must be fundamental to deny insurance claim altogether held Supreme Court

The court reiterated that any violation of the condition should be in the nature of a fundamental breach so as to deny the claimant any amount. The court noted that respondent had admitted that theft did happen.

It observed that “It is not the case of the Insurance Company that the Claimant consented or connived in the removal of the vehicle, in which event that would not be theft, in the eye of law”.

The Court held that even if there was some carelessness, it was not a fundamental breach of condition for totally denying the insurance claim altogether.

Therefore, a claim up to 75% must be awarded on a nonstandard basis.

Relying on Nitin Khandelwal and Amalendu’s judgment, the court held that in case there’s any contributory factor, the insurance company can only claim a proportionate deduction from the total amount and nothing more.

Case title: Ashok Kumar v. New India Assurance Co. Ltd.

Citation : 2023 LiveLaw (SC) 587

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