Supreme Court rules insurance claim cannot be denied due to unclear language.

Supreme Court: Ambiguous Policy Term Cannot Justify Repudiation Of Insurance Claim

Recently, the Supreme Court, while hearing an appeal, noted that the claim arising out of an insurance policy cannot be repudiated on the basis of a term, mentioned in the policy, which itself is ambiguous.

The Case

The case revolves around an insurance policy purchased by Mehta Jewelers from National Insurance Company Limited for insuring the ornaments in its Pune showroom. In 2007, a burglary took place and several gold ornaments were stolen. However, the claim for insurance was repudiated on the grounds that the ornaments were not kept in a burglar-resistant safe but in a steel safe of local make.

The appellant challenged the denial of the claim before the State Consumer Disputes Redressal Commission, which ruled in its favor and directed the respondent to pay ₹28,95,600/★along with interest. The respondent then appealed to the National Commission.

The Impugned Order

The National Commission allowed the appeal, stating that a normal steel almirah cannot be referred to as a “safe” and that a safe is understood to be a strong metal cabinet with a special lock for keeping valuables. The State Commission’s findings were overturned, relying on the definition of “safe” in the Oxford Dictionary and Webster dictionary.

Supreme Court’s Verdict

The Supreme Court allowed the appeal, stating that it was unjustified for the respondent to repudiate the claim. The Court upheld the amount awarded by the State Commission in favor of the appellant.

Summary:

• The Supreme Court ruled that an insurance claim cannot be denied based on an ambiguous policy term.
• The case involved Mehta Jewelers’ insurance claim for stolen gold ornaments.
• The claim was initially denied, stating that the ornaments were not kept in a burglar-resistant safe.
• The State Commission ruled in favor of the appellant, but the National Commission overturned the decision.
• The Supreme Court upheld the State Commission’s decision and awarded the appellant the claimed amount.

Case Title: M/S. MEHTA JEWELLERS v. NATIONAL INSURANCE COMPANY LTD., CIVIL APPEAL NO. 6178/2023

Citation. : 2023 LiveLaw (SC) 859

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