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 for fire insurance claims |
| Overrules / Affirms | Overrules the NCDRC’s impugned judgment; affirms Supreme Court precedents on fire insurance causation |
| Type of Law | Insurance Law |
| Questions of Law | Whether the proximate-cause test or an exclusion for theft can defeat coverage when loss is caused by a specified peril of fire; whether cause of fire is immaterial absent a specific exclusion in the fire peril clauses. |
| Ratio Decidendi | The Court held that under a fire-and-special peril policy, loss by fire is covered once the peril of “fire” is established, and the genesis of the fire is irrelevant unless a specific exclusion applies. Exclusion of theft under the Riot, Strike, Malicious Damage (RSMD) clause cannot be read into the “Fire” peril, where theft preceded the fire. Exclusion clauses must be strictly construed and read down if inconsistent with the policy’s main purpose of indemnifying fire loss. The proximate-cause test does not displace these principles where the insured peril is fire. |
| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon by the Court |
|
| Facts as Summarised by the Court | The insured government company took a Standard Fire and Special Perils Policy. Petty thieves attempted to steal copper windings, triggering a transformer fire. The insured notified the insurer and police and lodged a claim for over ₹2.2 crore. The insurer repudiated under RSMD exclusion for burglary-theft. NCDRC dismissed the insured’s complaint relying on proximate-cause test from Zuari Industries. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All courts and tribunals adjudicating fire insurance claims |
| Persuasive For | High Courts interpreting exclusion clauses in named-peril insurance policies |
| Overrules | The National Consumer Disputes Redressal Commission’s impugned judgment dated 16.07.2015 |
| Follows |
|
What’s New / What Lawyers Should Note
- Fire is an independent, specified peril; its coverage cannot be negated by citing exclusions that apply only to other perils.
- Cause of fire (even if preceded by theft) is immaterial unless the policy’s “Fire” peril expressly excludes that cause.
- Exclusion clauses must be read strictly and “read down” if they undermine the main purpose of indemnifying fire loss.
- Proximate-cause analysis cannot override established fire-insurance principles once “fire” is proved.
- Insurers cannot repudiate fire claims by invoking RSMD exclusions for theft that precedes the fire.
Summary of Legal Reasoning
- Policy Construction
- The fire policy promises indemnity for loss “destroyed or damaged by any of the perils specified,” including “Fire.”
- Exclusions under the “Fire” peril do not list theft or burglary.
- Immateriality of Cause
- Traditional fire-insurance law (BYLES J, Hardy Ivamy, SC in Zuari) holds that once fire is proved, its genesis is irrelevant unless fraud by the insured is alleged.
- Strict Interpretation of Exclusions
- Exclusion clauses must be construed strictly and “read down” if inconsistent with the policy’s main purpose (Glynn v. Margetson; Texco Marketing; Shivram Jagarnath).
- Rejection of Proximate-Cause Override
- The proximate-cause test from RSMD does not displace coverage for fire, a separately defined peril without theft exclusions.
- Overruling NCDRC
- The NCDRC’s reliance on theft as the active and efficient cause was incorrect in light of established fire-insurance jurisprudence.
Arguments by the Parties
Petitioner (Insured)
- The policy covers loss by fire; cause of fire is immaterial unless excluded under the “Fire” peril.
- No clause excludes theft preceding the fire; RSMD does not apply to the “Fire” peril.
- Proximate-cause test is irrelevant since the ensuing fire is an insured peril.
Respondent (Insurer)
- The policy is a named-perils policy with a specific RSMD exclusion for burglary/theft.
- Theft preceded the fire; proximate cause of loss is burglary, which the policy excludes.
- Reliance on Zuari Industries: active and efficient cause doctrine.
- Even if theft and fire are concurrent causes, RSMD exclusion bars liability.
Factual Background
A government-owned cement corporation procured a Standard Fire and Special Perils Policy. On 1 November 2006, thieves attempted to steal copper windings using blow torches, triggering a transformer fire in the factory. The insured filed an FIR and submitted a claim for over ₹2.2 crore. The insurer repudiated the claim, citing the RSMD exclusion for theft. The NCDRC dismissed the insured’s complaint, and the insured appealed to the Supreme Court.
Alert Indicators
- ✔ Precedent Followed — Apex Court reaffirms established fire-insurance principles.