Contracts of Insurance VIII

Posted on by Rudrajyoti Nath Ray

An insurance is a contract of indemnification, being a contract for a specific purpose [Oriental Insurance Co. Ltd. v. Sony Cheriyan, (1999) 6 SCC 451], which is to cover defined losses [United India Insurance Co. Ltd. v. Levis Strauss (India) (P) Ltd., (2022) 6 SCC 1]. Courts have to read an insurance contract strictly. Essentially, an insurer cannot be asked to cover a loss that is not mentioned. An exclusion clause in an insurance contract is to be interpreted strictly and against an insurer as it has an effect of completely exempting an insurer of its liabilities [New India Assurance Co. Ltd. v. Rajeshwar Sharma, (2019) 2 SCC 671; Canara Bank v. United India Insurance Co. Ltd., (2020) 3 SCC 455; Oriental Insurance Co. Ltd. v. Samayanallur Primary Agricultural Coop. Bank, (1999) 8 SCC 543].

Court in Texco Marketing Pvt. Ltd. v. TATA AIG General Insurance Company Ltd., (2023) 1 SCC 428, while dealing with an exclusion clause, held, burden of proving applicability of exclusionary clauses lies on insurers. Also see, National Insurance Company Ltd. v. Vedic Resorts and Hotels Pvt. Ltd., 2023 SCC OnLine SC 648.

The proof of the pudding is in its eating.

– Hon’ble Justice Pamidighantam Sri Narasimha, United India Insurance Co. Ltd. v. M/s. Hyundai Engineering & Construction Co. Ltd., [Civil Appeal No. 1496 of 2023].

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