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Sangrur Sales Corporation v. United India Insurance Company Limited & Anr.

Civil Appeal · 2020 INSC 52Decided 17 Jan 2020
Civil Appeal No. 378 of 2020
Dr. Justice D.Y. Chandrachud · Justice Hrishikesh Roy

Background

The appellant's sanitaryware shop, insured under a Standard Fire and Special Perils policy, collapsed after excavation work being carried out by someone else on an adjoining plot caused subsidence. The insurer repudiated the claim relying on a policy exclusion for damage caused by "demolition, construction, structural alterations or repair of any property or groundworks or excavations." The District Forum and State Commission ruled in the shop-owner's favour, but the National Consumer Disputes Redressal Commission (NCDRC) reversed this and upheld the insurer's repudiation.

Decision Breakdown

The Supreme Court held that the exclusion clause, properly read, applies only where the insured himself carries out demolition, construction, or excavation on his own property, not where a third party's excavation on a neighbouring plot causes the damage. It reiterated the settled principle that when an insurance policy's wording is capable of two interpretations, the one favourable to the insured should be preferred. Since no part of the excavation was attributable to the appellant, the exclusion clause could not be invoked, and the Court allowed the appeal, set aside the NCDRC's order, and restored the District Forum's award in the shop-owner's favour.

Lesson Learnt

Exclusion clauses in insurance policies are read narrowly, and any genuine ambiguity is resolved in favour of the policyholder: damage caused by a third party's activity on a neighbouring property is not automatically excluded just because the clause mentions "excavations."

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

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