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National Insurance Company Ltd. vs. Vedic Resorts and Hotels Pvt. Ltd. (Civil Appeal No. 4979 of 2019)

Civil Appeal · 2023 INSC 545Decided 17 May 2023
Civil Appeal No. 4979 of 2019
Ajay Rastogi · Bela M. Trivedi

Background

Vedic Resorts, which ran a resort in West Bengal, held two insurance policies covering its buildings, plant, furniture and stock. In August 2009, a mob of 200-250 people entered the resort and damaged/destroyed insured property. This happened after an unrelated shooting at a nearby football match, where a criminal named Gaffar Molla and his associates fled and took shelter inside the resort compound; the enraged crowd chased them there and vandalized the property, and a subsequent police search of the resort found firearms and explosives stored on the premises. The insurer repudiated the claim (assessed by its own surveyor at about Rs. 202.216 lakhs), arguing the loss was really the result of the resort management's own "malicious act" of harbouring the criminals, which fell within a policy exclusion clause. The National Consumer Disputes Redressal Commission rejected this and ordered payment, leading the insurer to appeal to the Supreme Court.

Decision Breakdown

The Court held that the exclusion clause only removed cover for damage caused by burglary, theft, or a malicious act, and that the burden of proving such an exclusion applies rests squarely on the insurer. On the facts, the shooting and the resulting mob violence originated at the football ground over an unrelated matter, and there was no real evidence that the resort's own management had maliciously caused the damage to its own property: the fact that the fleeing criminals happened to take shelter there did not convert the mob's retaliatory destruction into an act of the insured's own malice. The Court reaffirmed the established principle that ambiguity in an insurance contract must be resolved in favour of the insured (the doctrine of contra proferentem), and that a surveyor's report, while not final, cannot be brushed aside without cogent reasons, which the insurer failed to provide here. The appeal was dismissed and the Commission's award upheld.

Lesson Learnt

An insurer seeking to deny a claim under an exclusion clause must affirmatively prove the exclusion applies; mere circumstantial proximity between a criminal incident and damage to the insured's property is not enough to brand the policyholder's own loss as "malicious," and genuine doubt in an insurance policy's wording is resolved in favour of the person who bought the cover.

Official source (sci.gov.in)View Judgment (PDF)

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