Insurance - contra proferentem rule - Ambiguity - Language - Policy - Proposal form

IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                        CIVIL APPEAL No.2140 OF 2007

United India Insurance Co. Ltd.          ……Appellant(s)


                             VERSUS


M/s Orient Treasures Pvt. Ltd.          ……Respondent(s)

                             WITH
                 CIVIL APPEAL No.5141 OF 2007

M/s Orient Treasures Pvt. Ltd.           ……Appellant(s)


                             VERSUS


United India Insurance Co. Ltd.   ……Respondent(s)

January 13, 2016.

In United India Insurance Co. Ltd. VS M/s Orient Treasures Pvt. Ltd.,the respondent company while appealing against the claim allowed by the National Consumer Disputes Redressal Commission as being too low. The issue was that respondent company’s claim after being burgled was rejected by the insurance company as according to the insurer the burglary took place in the night when the jewellery was kept in window display neither of which was covered by the policy.

Among the interesting aspect of this matter is that both the litigants referred to the same court decisions claiming that the said judgments support their cause. (This is a prefect example of the denseness of the legalese. It has been said that the language used in India is more archaic than that used in England). In any case the respondent company tried to invoke the “contra proferentem” rule claiming ambiguity in the language of the policy. The insurer said there is no ambiguity and that the respondent never raised this issue with the insurer or asked for any explanation till the burglary.

The relevant clauses of the policy stated :-

Clause 4) Window display at night is not covered.
Clause 5) We do  not cover stocks kept out of the safe---business hours at night.

The Hon’ble Supreme Court, referring to the judgment of the Constitution Bench of this Court in General Assurance Society Ltd. vs. Chandumull Jain & Anr., AIR 1966 SC 1644, explained that :-

1) A contract of insurance is a species of commercial transactions
2) Delay in issuing the policy makes no difference.
3) A contract is formed when there is an unqualified acceptance of the proposal. Acceptance may be expressed in writing or it may even be implied if the insurer accepts the premium and retains it.
4) In the case of the assured, a positive act on his part by which he recognises or seeks to enforce the policy amounts to an affirmation of it.
5) In interpreting documents relating to a contract of insurance, the duty of the court is to interpret the words in which the contract is expressed by the parties, because it is not for the court to make a new contract, however reasonable, if the parties have not made it themselves.

The Hon’ble Supreme Court while denying the appeal of the respondent stated that :-

1) As per clause 4, if the burglary had been committed during day time in business hours and in that burglary, the articles kept in display window were stolen then in such circumstances, the appellant was liable to reimburse the loss to the respondent of such stolen articles as insured articles under the policy but not if the burglary had been committed of the articles kept in display window during night time (after business hours).
2) As per clause 5, if the burglary had been committed during day time in business hours then the appellant was liable to reimburse the loss to the respondent of the stolen articles treating them as insured articles under the policy but not if the burglary had been committed of the stock/articles kept out of safe after business hours at night.