LI Network
Published on: November 23, 2023 at 11:50 IST
The Supreme Court reiterated that an insured individual cannot seek compensation beyond the coverage specified in the insurance policy.
The court emphasized the need to interpret insurance policy terms strictly, citing the recent ruling in National Insurance Company Ltd. v. Chief Electoral Officer. Contrary to the rule of contra proferentem, applicable to commercial contracts, the court clarified that it does not extend to insurance contracts, which are mutually agreed upon.
The case involved a BMW car owner seeking replacement following severe damage, but the court held that the insurance terms did not mandate such a provision.
The owner had two protections—motor insurance from Bajaj General Insurance Company Ltd. and the BMW Secure Advance Policy.
The claimant argued that the conjoint reading of both policies entitled him to a new car if the damage exceeded 75% of the Insured Declared Value.
The State Consumer Disputes Redressal Commission directed the insurer and BMW to replace the car. However, the Supreme Court, interpreting the insurance policy clauses, concluded that replacement was at the insurer’s discretion in case of total loss, rejecting the insured’s right to claim automatic replacement.
Analyzing BMW’s policy, the court found no specific provision for vehicle replacement in cases of total loss. The court noted BMW’s liability under BMW Secure when the insurer accepted total loss or constructive total loss. While examining the insurer’s repudiation, the court found no valid grounds for rejection.
The court declared a deficiency in service by the insurer and BMW under the Consumer Protection Act, 1986, and awarded compensation.
According to the court’s quantification, the insurer was directed to pay Rs. 25,83,012.45, and an additional Rs. 3,74,012/- to the owner for the difference in vehicle value.
The decision partially allowed the appeals, substituting the replacement directive with monetary compensation.
Case Title: Bajaj Allianz General Insurance Co. Ltd. v. Mukul Aggarwal, CIVIL APPEAL NO.1544 OF 2023
