Once Loss Is Caused By Fire, Cause Of Fire Becomes Immaterial, Supreme Court Allows Insurance Claim
Reiterating that the cause of fire is immaterial, when the loss is occurred to the insured from the fire, the Supreme Court on Tuesday (December 16) allowed a fire insurance claim, noting that the insurer can't deny claim saying that the proximate cause of fire was not provided in the specified peril. “Once it is not disputed that the loss is caused by fire, then the cause igniting the...
Reiterating that the cause of fire is immaterial, when the loss is occurred to the insured from the fire, the Supreme Court on Tuesday (December 16) allowed a fire insurance claim, noting that the insurer can't deny claim saying that the proximate cause of fire was not provided in the specified peril.
“Once it is not disputed that the loss is caused by fire, then the cause igniting the fire becomes immaterial. The insurer cannot refuse to indemnify the damage caused by fire, which is a specified peril, on the ground that the proximate cause of fire was burglary/theft (which is excluded under the RSMD clause), particularly when no such exclusion is provided in the specified peril “Fire”.”, observed a bench of Justice Jitendra Kumar Maheshwari and Justice Vijay Bishnoi, where the Appellant suffered a loss due to the fire caused in an attempt to burglary/theft.
In November 2006, thieves entered CCI's Mandhar cement factory in Chhattisgarh. While attempting to steal copper windings from a transformer using a blow torch, they inadvertently started a fire, causing extensive damage. CCI lodged a claim of approximately ₹2.20 crores under its Standard Fire and Special Perils Policy.
Respondent-ICICI Lombard repudiated the claim. Relying on the surveyor's report, the insurer argued that the “proximate cause” of the loss was burglary or theft, a peril specifically excluded under the policy's “Riot, Strike, Malicious Damage” (RSMD) clause. The NCDRC upheld this repudiation in 2015, leading to CCI's appeal to the Supreme Court.
Setting aside the National Consumer Disputes Redressal Commission decision, the judgment authored by Justice Bishnoi observed:
“it is a settled position that if the damage is caused by fire, then the reason by which the fire took place becomes irrelevant. In the current scenario, the fire took place in the factory of the Appellant which caused a huge loss to the Appellant. The loss occurred on account of the transformer being set ablaze and the fire could not be controlled for about 6 hours. It is also an admitted position that, on the intervening night of 01.11.2006, some miscreants entered the factory and committed burglary. It was reported in the FIR that flames were coming out of the transformer and at no stage any defense was taken that the insured caused the fire. Thus, it is now established that the loss caused to the Appellant was due to fire only and the incident of theft/ burglary merely preceded the incident of fire.”
The Court reinforced the principle that ambiguities in insurance contracts, especially exclusion clauses, must be resolved in favour of the policyholder.
“In the case at hand, in terms of the policy, the burglary/theft is not an exclusion under the specified peril “Fire”. Even, the general exclusions to the policy do not cover theft which precedes the insured peril as an exclusion and the said exclusion is only provided under the RSMD clause. It is a trite law that the exclusions in the contract for insurance must be read strictly and, therefore, the exclusion provided under the RSMD clause would not oust the liability of the insurer when the loss or damage is attributable to the peril of fire which has its independent exclusions.”, the court held.
Accordingly, the appeal was allowed.
Cause Title: CEMENT CORPORATION OF INDIA VERSUS ICICI LOMBARD GENERAL INSURANCE COMPANY LIMITED
Citation : 2025 LiveLaw (SC) 1215