Theft Coverage Denied Saying Gold Wasn't Kept In 'Locked Safe' : Supreme Court Says Insurance Claim Can't Be Rejected Based On Ambiguous Term

Recently, the Supreme Court, while hearing an appeal, noted that the claim arising out of an insurance policy cannot be repudiated on the basis of a term, mentioned in the policy, which itself is ambiguous.

A Division Bench, comprising Justices Hima Kohli and P.S. Narasimha, observed that the insurance policy itself does not define the word “locked safe” nor does it define what should be the standard make of the “locked safe”. It elucidated:

“The expression used in the policy are ‘locked safe of standard make’. In the absence of any ‘standard make’ described by the respondent- Insurance Company in the policy, and in the absence of any description of a ‘locked safe’ by the respondent- Insurance Company, we are of the opinion that the appellant could not have been fastened with the liability of placing the jewellery in a particular safe, which can be treated as a ‘locked safe’ for meeting the requirements of the respondent-Insurance Company.”

The case revolves around an insurance policy purchased by one Mehta Jewelers (appellant) from National Insurance Company Limited (respondent), for insuring the ornaments in its showroom at Pune. In the year 2007, burglary took place and several gold ornaments were stolen from the shop. However, the claim for the insurance was repudiated citing that the “ornaments in the shop at the material time of burglary were kept in a steel safe of local make and not in burglar resistant safe.”

It may also be noted that the present appeal has been preferred by appellant challenging National Consumer Disputes Redressal Commission wherein it dismissed its claim on the ground that a simple steel almirah cannot be described as a safe and the lock installed is not complex.

Two Stages of Litigation

At first, the appellant challenged denial of its claim before the State Consumer Disputes Redressal Commission. The Commission ruled in appellant’s favour and directed the respondent to pay an amount of ₹28,95,600/- (Rupees Twenty-Eight Lakhs Ninety-Five Thousand and Six Hundred only) along with interest.

The aforesaid order was taken in an appeal by the respondent before the National Commission.

Impugned order

The National Commission, in its impugned order, had allowed the appeal. Therein, it observed that the almirah could be opened by widening the space between the doors of the almirah. Further, even in common parlance, a normal steel almirah is not referred to as a “safe”. A ‘safe’ is understood to be a strong metal cabinet with a special lock where valuables like money, jewellery, important documents etc. are kept.

While overturning State Commission’s findings, reliance was also placed upon on the definition of the word “safe” “strong fireproof cabinet” used in the Oxford Dictionary as also in the Webster dictionary.

Supreme Court’s Verdict

The Court allowed the appeal observing that it was unjustified on the part of the respondent to repudiate the claim of the appellant for the sum claimed. In view of the same, the amount awarded by the State Commission in favour of the appellant was upheld.

Ilam Paridi, Advocate, appeared for the appellant.

Case Title: M/S. MEHTA JEWELLERS v. NATIONAL INSURANCE COMPANY LTD., CIVIL APPEAL NO. 6178/2023

Citation. : 2023 LiveLaw (SC) 859

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