National Insurance Company Ltd. Vs. The Chief Electoral Officer and Ors. - (Supreme Court) (08 Feb 2023)

Insurance contract must be read as a whole and every attempt should be made to harmonise the terms thereof

MANU/SC/0101/2023

Insurance

The non-application of the general strict liability principle, in case of an insurance policy, is sought to be questioned, where an expanded meaning has been given to the relevant term of the insurance policy in order to grant insurance claim, now assailed by the insurance company. The original claim was made by a writ petition filed by the prospective beneficiary i.e. Respondent No. 2, but while granting the benefits to the beneficiary, a liability was placed on Respondent No. 1 and not on the insurance company, which aspect was reversed by the Division Bench vide its judgment fastening the liability on the insurance company.

It is trite to say that the terms of the insurance policy are to be strictly construed. The insurance contracts are in the nature of special class of contracts having distinctive features such as utmost good faith, insurable interest, indemnity subrogation, contribution and proximate cause which are common to all types of insurances. Each class of insurance also has individual features of its own. The law governing insurance contracts is thus to be studied in three parts, namely, (1) general characteristics of insurance contracts, as contracts; (2) special characteristics of insurance contracts, as contracts of insurance, and (3) individual characteristics of each class of insurance.

The insurance contract must be read as a whole and every attempt should be made to harmonise the terms thereof, keeping in mind that the Rule of contra proferentem does not apply in case of commercial contract, for the reason that, a Clause in a commercial contract is bilateral and has mutually been agreed upon.

Present Court turn to the specific Clause in the MoU, which would govern the insurance policy providing for payment of compensation in the event of death (only) resulting "solely and directly" from the accident caused by external violent and any other visible means. On a plain reading itself, leave aside the question of strict interpretation of the clauses, it is quite apparent that the admissibility of the claim is in the event of death. The second part of the same sentence begins with "only". Thus, even in the event of a death, it is only in the scenario where the consequent situation arises, i.e., it has to be solely and directly from an accident caused by external violence. Here the death is by sun stroke. There was no semblance of any violence being the cause of death. The last aspect which reads as "any other visible means" would be an expression to be read in the context of ejusdem generis with the external violent death and cannot be read in isolation itself.

A proximate causal relationship between the accident and the body injury is a necessity. If in the aforesaid context, the policy is analysed, the cause arising from a sun stroke cannot, be included within the parameters of the 'Scope of Cover' in the insurance policy. Thus, the Appellant insurance company is not liable. The impugned judgment of the Division Bench of the Patna High Court is clearly unsustainable and is set aside. Appeal allowed.

Tags : POLICY PRINCIPLE APPLICABILITY