Insurance - policy - Excess - passenger - number permitted - violation - Liability - strict construction - breach - contract
PETITIONER:
B.V. NAGARAJU
Vs.
RESPONDENT:
M/S. ORIENTAL INSURANCE CO. LTD.DIVISIONAL OFFICE, HASSAN
DATE OF JUDGMENT: 20/05/1996
In this appeal by special leave, the question of importance arising therein is whether the alleged breach of carrying humans in a goods' vehicle more than the number permitted in terms of the insurance policy, is so fundamental a breach so as to afford ground to the insurer to eschew liability altogether? Ancillary to the question is the poser : whether the terms of the policy of insurance need be construed strictly or be read down to advance the main purpose of the contract as viewed by this Court in Skandia Insurance Co. Ltd. vs. Kokilaben Chandravadan & Ors. [1987 2 SCC 654]?
It is plain from the terms of the Insurance Policy that the insured vehicle was entitled to carry 6 workmen, excluding the driver. If those 6 workmen when travelling in the vehicle, are assumed not to have increased any risk from the point of view of the Insurance Company on occurring of an accident, how could those added persons be said to have contribued to the causing of it is the poser, keeping apart the load it was not carrying. Here it is nobody's case that the driver of the insured vehicle was responsible for the accident. In fact, it was not disputed that the oncoming vehicle had collided head-on against the insured vehicle, which resulted in the damage. Merely by lifting a persons or two, or even three, by the driver or the cleaner of the vehicle, without the knowledge of owner, cannot be said to be such a fundamental breach that the owner should, in all events, be denied indemnification. The misuse of the vehicle was somewhat irregular though, but not so fundamental in nature so as to put an end to the contract, unless some factors existed which, by themselves, had gone to contribute to the causing of the accident. In the instant case, however, we find no such contributory factor. In Sikand's case this Court paved the way towards reading down the contractual Clause by observing as follows :
".......When the option is between opting for a view which will relieve the distress and misery of the victims of accidents or their dependants on the one hand and the equally plausible view which will reduce the profitability of the insurer in regard to the occupational hazard undertaken by him by way of business activity, there is hardly any choice. The Court cannot but opt for the former view. Even if one were to make a strictly doctrinaire approach, the very same conclusion would emerge in obeisance to the doctrine of 'reading down' the exclusion clause in the light of the 'main purpose' of the provision so that the 'exclusion clause' highlighted earlier. The effort must be to harmonize the two instead of allowing the exclusion clause to snipe successfully at the main purpose. The theory which needs no support is supported by Carter's "Breach of Contract" vide paragraph
251. To quote :
Notwithstanding the general ability of contracting parties to agree to exclusion clauses which operate to define obligations there exists a rule, usually referred to as the "main purpose rule", which may limit the application of wise exclusion clauses defining a promisor's contractual obligations. For example, in Glynnn v. Margetson & Co. [1893 AC 351, 357], Lord Halsbury, L.C. stated : It seems to me that in construing this document, which is a contract of carriage between the parties, one must in the first instance look at the whole instrument and not at one part of it only. Looking at the whole instrument, and seeing what one must regard ...... as its main purpose, one must reject words, indeed whole provisions, if they are inconsistent with what one assumes to be the main purpose of the contract.
Although this rule played a role in the development of the doctrine of fundamental breach, the continued validity of the rule was acknowledged when the doctrine was rejected by the House of Lords in Suissee Atlantique Societed' Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale [1967 1 AC 361]. Accordingly, wide exclusion clauses will be read down to the extent to which they are inconsistent with the main purpose, or object of the contract."
The National Commission went for the strict construction of the exclusion clause. The reasoning that the extra passengers being carried in the goods vehicle could not have contributed, in any manner, to the occurring of the accident, was barely noticed and rejected sans any plausible account; even when the claim confining the damage to the vehicle only was limited in nature. We, thus, are of the view that in accord with the Skandia's case, the aforesaid exclusion term of the insurance policy must be read down so as to serve the main purpose of the policy that is indemnify the damage caused to the vehicle, which we hereby do.
For the view above taken, this appeal is allowed, the judgment and order of the National Consumer Disputes Redressal Commission, New Delhi is set aside and that of the State Commission is restored in its entirety, but without any order as to costs.
B.V. NAGARAJU
Vs.
RESPONDENT:
M/S. ORIENTAL INSURANCE CO. LTD.DIVISIONAL OFFICE, HASSAN
DATE OF JUDGMENT: 20/05/1996
In this appeal by special leave, the question of importance arising therein is whether the alleged breach of carrying humans in a goods' vehicle more than the number permitted in terms of the insurance policy, is so fundamental a breach so as to afford ground to the insurer to eschew liability altogether? Ancillary to the question is the poser : whether the terms of the policy of insurance need be construed strictly or be read down to advance the main purpose of the contract as viewed by this Court in Skandia Insurance Co. Ltd. vs. Kokilaben Chandravadan & Ors. [1987 2 SCC 654]?
It is plain from the terms of the Insurance Policy that the insured vehicle was entitled to carry 6 workmen, excluding the driver. If those 6 workmen when travelling in the vehicle, are assumed not to have increased any risk from the point of view of the Insurance Company on occurring of an accident, how could those added persons be said to have contribued to the causing of it is the poser, keeping apart the load it was not carrying. Here it is nobody's case that the driver of the insured vehicle was responsible for the accident. In fact, it was not disputed that the oncoming vehicle had collided head-on against the insured vehicle, which resulted in the damage. Merely by lifting a persons or two, or even three, by the driver or the cleaner of the vehicle, without the knowledge of owner, cannot be said to be such a fundamental breach that the owner should, in all events, be denied indemnification. The misuse of the vehicle was somewhat irregular though, but not so fundamental in nature so as to put an end to the contract, unless some factors existed which, by themselves, had gone to contribute to the causing of the accident. In the instant case, however, we find no such contributory factor. In Sikand's case this Court paved the way towards reading down the contractual Clause by observing as follows :
".......When the option is between opting for a view which will relieve the distress and misery of the victims of accidents or their dependants on the one hand and the equally plausible view which will reduce the profitability of the insurer in regard to the occupational hazard undertaken by him by way of business activity, there is hardly any choice. The Court cannot but opt for the former view. Even if one were to make a strictly doctrinaire approach, the very same conclusion would emerge in obeisance to the doctrine of 'reading down' the exclusion clause in the light of the 'main purpose' of the provision so that the 'exclusion clause' highlighted earlier. The effort must be to harmonize the two instead of allowing the exclusion clause to snipe successfully at the main purpose. The theory which needs no support is supported by Carter's "Breach of Contract" vide paragraph
251. To quote :
Notwithstanding the general ability of contracting parties to agree to exclusion clauses which operate to define obligations there exists a rule, usually referred to as the "main purpose rule", which may limit the application of wise exclusion clauses defining a promisor's contractual obligations. For example, in Glynnn v. Margetson & Co. [1893 AC 351, 357], Lord Halsbury, L.C. stated : It seems to me that in construing this document, which is a contract of carriage between the parties, one must in the first instance look at the whole instrument and not at one part of it only. Looking at the whole instrument, and seeing what one must regard ...... as its main purpose, one must reject words, indeed whole provisions, if they are inconsistent with what one assumes to be the main purpose of the contract.
Although this rule played a role in the development of the doctrine of fundamental breach, the continued validity of the rule was acknowledged when the doctrine was rejected by the House of Lords in Suissee Atlantique Societed' Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale [1967 1 AC 361]. Accordingly, wide exclusion clauses will be read down to the extent to which they are inconsistent with the main purpose, or object of the contract."
The National Commission went for the strict construction of the exclusion clause. The reasoning that the extra passengers being carried in the goods vehicle could not have contributed, in any manner, to the occurring of the accident, was barely noticed and rejected sans any plausible account; even when the claim confining the damage to the vehicle only was limited in nature. We, thus, are of the view that in accord with the Skandia's case, the aforesaid exclusion term of the insurance policy must be read down so as to serve the main purpose of the policy that is indemnify the damage caused to the vehicle, which we hereby do.
For the view above taken, this appeal is allowed, the judgment and order of the National Consumer Disputes Redressal Commission, New Delhi is set aside and that of the State Commission is restored in its entirety, but without any order as to costs.
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