Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-002052-002052 – 2016 |
| Diary Number | 5494/2016 |
| Judge Name | HON’BLE MR. JUSTICE VIJAY BISHNOI |
| Bench | HON’BLE MR. JUSTICE J.K. MAHESHWARI; HON’BLE MR. JUSTICE VIJAY BISHNOI |
| Precedent Value | Binding authority |
| Overrules / Affirms | Affirms existing precedent |
| Type of Law | Insurance law |
| Questions of Law | Whether a fire insurer can repudiate a claim by treating a preceding theft as the proximate cause under a named‐peril policy and invoking burglary/theft exclusions when the damage is caused by fire, a covered peril. |
| Ratio Decidendi | The Court held that a standard fire insurance policy indemnifies loss by any specified peril; fire is a specified peril whose exclusions (fermentation, natural heating, public authority burning) do not include theft. If loss is caused by fire, the cause igniting it is immaterial absent a specific exclusion or fraud by the insured. Exclusion clauses must be strictly construed and read down in favor of the insured. The insurer’s reliance on the RSMD burglary/theft exclusion to repudiate a fire loss claim when theft merely preceded the fire is unjustified. |
| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon by the Court |
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| Facts as Summarised by the Court | A government company insured its factory under a centralized fire and special perils policy. Petty thieves broke in using blow torches, triggering a fire. The insurer repudiated the claim citing a theft exclusion under the RSMD clause. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All NCDRC, State Consumer Commissions and subordinate courts |
| Persuasive For | Other High Courts |
| Follows |
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What’s New / What Lawyers Should Note
- Clarifies that in a fire insurance policy the cause of ignition is immaterial if fire is a covered peril and not specifically excluded under the fire clause.
- Confirms that a burglary/theft exclusion under the RSMD clause cannot bar indemnification for loss by fire when theft merely precedes the fire.
- Reinforces that exclusion clauses must be strictly construed and read down against the insurer if inconsistent with the main cover.
- Provides a binding precedent to counter repudiation based on proximate‐cause arguments in fire claims.
Summary of Legal Reasoning
- The policy’s opening clause indemnifies loss caused by any specified peril; “Fire” is a specified peril with limited exclusions (fermentation, heating, public authority burning).
- Reliance on precedents (Byles J, Sri Balaji Traders, Orion Conmerx) confirms that once loss by fire is established, its cause is immaterial absent wilful act or fraud by the insured.
- The RSMD clause excludes theft/burglary only during or after an insured peril, and the policy is silent on theft preceding fire; burglary/theft exclusions cannot be invoked to negate a covered fire loss.
- Exclusion clauses must be strictly construed and read down in favor of the insured (Texco, Shivram Chandra, Nagaraju).
- The insurer’s repudiation was unjustified; matter remitted to NCDRC for loss assessment.
Arguments by the Parties
Petitioner (Appellant)
- The policy covers fire damage and does not exclude loss where theft precedes fire.
- The proximate‐cause test is irrelevant when the damage results from an insured peril.
- RSMD exclusions do not apply to loss due to fire itself.
Respondent (Insurance Company)
- The policy is a named‐peril contract; burglary/theft is excluded under Clause V(d).
- Theft was the active and efficient cause of the fire; proximate cause is burglary.
- Zuari precedent supports treating the first cause in a chain as the operative proximate cause.
Factual Background
The Cement Corporation invited tenders for centralized insurance and awarded a fire and special perils policy to the insurer in July 2006. On 1 November 2006, miscreants broke into the Mandhar factory using blow torches to steal copper windings, unintentionally setting a transformer on fire, causing extensive damage. The insured lodged a claim for ₹2.20 crore, which was repudiated under the RSMD burglary/theft exclusion. The NCDRC dismissed the complaint, holding burglary as the proximate cause. The Supreme Court granted relief and remitted the claim for reassessment.
Statutory Analysis
- The policy lists perils I–XII, including “Fire” (I) and “Riot, Strike, Malicious and Damage” (V).
- Fire peril exclusions: (a) own fermentation, heating, spontaneous combustion; (b) public authority burning.
- RSMD clause excludes “Burglary, housebreaking, theft…” during or after insured perils.
- No exclusion for theft preceding fire; exclusion clauses read strictly and in harmony with the policy’s main purpose.
Alert Indicators
- ✔ Precedent Followed – Existing law on immateriality of cause in fire insurance affirmed.