Supreme Court Upholds Insurance Claim for Vedic Resorts Against Riot Damage
The case of National Insurance Company Ltd. v. Vedic Resorts and Hotels Pvt. Ltd. revolves around an insurance dispute concerning damage caused by a riotous mob at the insured premises. The Supreme Court was called upon to decide whether the damage fell under the exclusions of the insurance policy or if the insured was entitled to compensation.
The judgment is significant as it clarifies the insurer’s burden of proof in cases of exclusion clauses and reaffirms the principle that insurance contracts must be interpreted in favor of the insured in case of ambiguity.
Background of the Case
The respondent, Vedic Resorts and Hotels Pvt. Ltd., operated a resort at Village Shikharkpur, West Bengal, and had obtained two insurance policies from National Insurance Company Ltd.:
- Policy No. 100900/11/08/3300000420 covering the resort’s buildings, machinery, accessories, and furniture for the period September 16, 2008, to September 15, 2009.
- Policy No. 100900/11/09/3100000270 covering two hotel buildings with stock for the period July 13, 2009, to July 12, 2010.
On August 23, 2009, at around 5:00 PM, a mob of 200-250 persons entered the resort, causing extensive damage to the insured property. The resort reported the incident to the police, leading to the registration of FIR No. 144 of 2009. A separate FIR No. 143 of 2009 detailed the events leading up to the riot, including the shooting of a person at a nearby football match by an individual who later sought shelter at the resort.
The insurance company appointed a surveyor, who assessed the damage at Rs. 202.216 lakhs. However, the insurer repudiated the claim, citing an exclusion clause in the policy.
Petitioner’s Arguments
The appellant, National Insurance Company Ltd., represented by Mr. Vishnu Mehra, argued:
- The damage resulted from a malicious act that was excluded under Clause V(d) of the policy.
- The insured harbored criminals, leading to public outrage and property destruction.
- The insurer was not liable as the damage was a direct consequence of unlawful activities at the resort.
- The surveyor’s assessment was erroneous and could not be considered conclusive.
Respondent’s Arguments
The respondent, Vedic Resorts and Hotels Pvt. Ltd., represented by Mr. Sukumar Pattjoshi, countered:
- The damage was caused by an external mob, which is covered under the policy.
- The exclusion clause did not apply as the resort was not directly involved in the criminal acts.
- The insurer failed to provide evidence that the insured had engaged in malicious activities.
- The surveyor’s report was valid and showed that the loss was due to an insured peril.
Supreme Court Judgment
The case was heard by Justice Ajay Rastogi and Justice Bela M. Trivedi. The Supreme Court ruled in favor of the insured, affirming the findings of the National Consumer Disputes Redressal Commission (NCDRC).
1. Interpretation of Insurance Policy Exclusions
The Court emphasized that exclusions must be interpreted strictly and in favor of the insured:
“Wherever such an exclusionary clause is contained in a policy, it would be for the insurer to show that the case falls within the purview thereof. In case of ambiguity, the contract of insurance shall be construed in favor of the insured.”
2. Burden of Proof on the Insurer
The Court ruled that the insurer failed to prove that the damage resulted from the insured’s malicious act:
“There is hardly any material to show that the entire incident and the resultant damage to the insured property was caused as a result of the malicious act of the respondent-complainant.”
3. Riot Damage Covered Under the Policy
The Court held that the insurer could not deny liability simply because the damage was caused by an angry mob:
“Even if the allegations against the accused are taken at their face value, it is difficult to accept the contention that the damage caused by the frenzied mob was due to the malicious act of the respondent.”
4. Validity of the Surveyor’s Report
The Court rejected the insurer’s challenge to the surveyor’s findings, stating:
“The insurer has failed to provide cogent reasons for disregarding the surveyor’s report, which concluded that the damage was covered under the policy.”
Final Verdict
The Supreme Court ruled:
- The appeal was dismissed.
- The insurer was directed to pay Rs. 202.216 lakhs with interest at 9% per annum from six months after the claim was lodged until payment.
- The exclusion clause did not apply as the damage was caused by a riot, not a malicious act by the insured.
- The insurer must honor the policy and compensate the insured for the loss.
Conclusion
This judgment reinforces the principle that insurance companies must adhere to strict standards when invoking exclusion clauses. It ensures that businesses affected by unforeseen events like riots receive rightful compensation under their insurance policies.
Petitioner Name: National Insurance Company Ltd..Respondent Name: Vedic Resorts and Hotels Pvt. Ltd..Judgment By: Justice Ajay Rastogi, Justice Bela M. Trivedi.Place Of Incident: West Bengal.Judgment Date: 17-05-2023.
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