United India Insurance Co. Ltd. vs M/s Hyundai Engineering & Construction Co. Ltd.
Background
NHAI had contracted a joint venture of Hyundai Engineering and Gammon India to build a cable-stayed bridge over the river Chambal at Kota, Rajasthan, insured under a Contractor's All Risk policy issued by United India Insurance. During construction, part of the bridge collapsed on 24.12.2009, killing 48 workmen. A government Expert Committee found the collapse resulted from design shortfalls, poor workmanship, and departures from approved construction sequencing, placing primary responsibility on the contractor and its design/supervision consultants. Based on this report and its own surveyor's findings, the insurer repudiated the respondents' claim, but the NCDRC later ruled in the respondents' favour, ordering the insurer to pay over Rs. 39 crore (an unauthorised addendum even tried to raise this to Rs. 151 crore), relying instead on privately commissioned theoretical reports that found no design fault.
Decision Breakdown
The Supreme Court set aside the NCDRC's order, holding that the insurer had discharged its burden of proving the exclusion clause applied by relying on the credible, evidence-based reports of the government Expert Committee and its own surveyor, both based on actual site inspection and testimony that went unrebutted. By contrast, the respondents' expert reports were untested theoretical desk studies whose authors were never examined as witnesses, so they carried little evidentiary weight. The Court also rejected the argument that NHAI's decision to let the contractor finish the project proved there was no fault, holding that was a separate commercial decision unrelated to whether the insurance exclusion clause applied. Since the evidence clearly showed the collapse was caused by construction and design defects covered by the policy's exclusions, the claim was rightly repudiated, and the appeal was allowed with no order as to costs.
Lesson Learnt
In insurance disputes, tested evidence, an examined surveyor's report and an official expert inquiry based on site inspection, carries far more weight than untested, theory-based expert opinions procured by a party but never subjected to cross-examination; and even where the exclusion clause burden falls on the insurer, that burden can be discharged with credible on-ground evidence.