Supreme Court: Insurance Contracts Must Be Interpreted Strictly, Insurers Bear Burden of Proof for Exclusion Clauses

Landmark Judgment Law Insider (1)

Published on: June 11, 2024 20:31 IST

Court: Supreme Court of India

Case: United India Insurance v. Hyundai Engineering 2024

Honourable Supreme Court of India has held that Insurance is a contract of indemnification, being a contract for a specific purpose, which is to cover defined losses. It is held that Courts have to read the insurance contract strictly. Essentially, the insurer cannot be asked to cover a loss that is not mentioned. Exclusion clauses in insurance contracts are interpreted strictly and against the insurer as they have the effect of completely exempting the insurer of its liabilities.

It is held that while dealing with an exclusion clause, the burden of proving the applicability of an exclusionary clause lies on the insurer. At the same time, it was stated that such a clause cannot be interpreted so that it conflicts with the main intention of the insurance. It is, therefore, the duty of the insurer to plead and lead cogent evidence to establish the application of such a clause.

27. A similar approach was adopted by the other experts. On the other hand, the surveyor has examined himself and adduced documents. Further, there is sufficient evidence to indicate that the surveyor has made site-visits and the proof of that was part of the pleadings filed before us.

28. The submission that NHAI continuing the contract with respondent nos. 1 and 2 and they have, in fact, completed the contract does not impress us. The continuation of work by respondent nos. 1 and 2 could be due to various reasons. Even if the NHAI’s decision to continue is taken to be a valid economic decision, that by itself cannot be a reason for not applying the applicable clause of the contract if such applicability is otherwise proved by cogent evidence.

29. For the reasons stated above, we are of the opinion that the NCDRC fell into a clear error of law and fact in allowing the consumer complaint for multiple reasons. As we have not agreed with the preliminary objection of the appellant to reject the complaint and relegate the respondents to civil court, we made extra efforts to examine the facts in detail. It is for this reason that the evidentiary value of the reports, their scope and ambit, and their contents were examined by us in some detail

Drafted By Abhijit Mishra

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