Setting aside the judgment of National Consumer Disputes Redressal Commission(NCDRC), the Supreme Court has held that if the terms of exclusion of policy are not communicated to the insured, the insurer cannot rely on them to repudiate a claim.
The claim in the case arose out a policy for theft insurance. A theft occurred in the show-room of the appellant Bharat Watch Company, which was carried out using a duplicate key. Since there was no force or violence or house breaking involved, the insurer repudiated the claim.
Challenging this, the appellant filed consumer complaint, which was allowed by the District Forum. The insurer's appeal to State Commission against the decision of District Forum was dismissed. Against this, the insurer filed revision before the NCDRC.
The NCDRC held that the theft was not covered under burglary insurance, since no violence or house breaking was involved. It placed reliance of the decision of the SC in United Insurance Co Ltd v Harchand Rai, which had held that held that where the loss or damage was caused without forcible and violent entry to and/or exit from the premises, the claim could not be maintained.
Based on this, the decisions of State Commission and District Forum were reversed and the repudiation of claim was upheld.
Challenging this, the appeal was filed in SC.
The Court noted that the contention of the appellant was that the terms of exclusion were not communicated to it. Both the District Forum and State Commission had entered factual findings regarding this.
Therefore, the Court held that the decision in Harchand was not applicable.
"The NCDRC missed the concurrent findings of both the District Forum and the SCDRC that the terms of exclusion were not made known to the insured. If those conditions were not made known to the insured, as is the concurrent finding, there was no occasion for the NCDRC to render a decision on the effect of such an exclusion", held the bench of Justices D Y Chandrachud and Hemant Gupta.
However, the Court clarified that had the terms of exclusion been communicated, the decision in Harchand would have applied.
"In the circumstances, the NCDRC was in error in reversing the decisions of the District Forum and the SCDRC which were grounded on a pure finding of fact that the terms of exclusion were not made known to the insured", concluded the bench.