Supreme Court Holds Insurer Unjustified In Repudiating Boiler-Insurance Claim; Remands Quantum to NCDRC
A Bench of Justices Pamidighantam Sri Narasimha and Manoj Misra heard appeals against a National Consumer Disputes Redressal Commission (NCDRC) order that had set aside the Maharashtra State Consumer Disputes Redressal Commission’s award and dismissed a claim against an insurer. The appeals arose from a consumer complaint by a sugar factory over repudiation of an insurance claim following a boiler accident during the currency of an insurance policy.
The Court allowed the appeals, held that the insurer was not justified in repudiating the claim by invoking exclusion clause 5 of the boiler and pressure plant policy, and restored the matters to the NCDRC for determination only on the quantum of compensation. The Bench emphasised principles of disclosure and burden of proof in insurance contracts and observed that a registered boiler’s explosion during the validity of its fitness certificate could expose latent defects which did not ipso facto justify repudiation. The Court, in its reasoning, observed: The Court noted that the insurer’s repudiation letter itself stated the surveyor’s view and concluded, by relying on the record, that “we repudiate your claim” could not be sustained without proof of fraud, material nondisclosure or that the exclusion plainly applied.
Background
The appellant, Kopargaon Sahakari Sakhar Karkhana Ltd. (now Karmaveer Shankarrao Kale Sahakari Sakhar Karkhana Ltd.), obtained a boiler and pressure plant insurance policy effective 1 February 2005 for Boiler No. GT-23 with risk cover of Rs.1.60 crore. On 12 May 2005 a blast/accident occurred involving the boiler; the boiler was registered under the Boilers Act and carried a fitness certificate dated 17 November 2004. The insurer appointed a surveyor and repudiated the claim by letter dated 22 June 2005, stating inter alia that tubes had “slipped off” from the drum and that corrosion and long service rendered the loss attributable to an exclusion in the policy.
The State Commission partly allowed the consumer complaint and awarded about Rs.49 lakh with interest; the insurer challenged that order before the NCDRC which, relying on survey reports, held the loss to be excluded under exclusion clause 5 and set aside the State Commission’s award, dismissing the complaint. The appellant then moved the Supreme Court.
The Supreme Court examined the survey reports, the Boiler Act regime including registration and fitness certification, and the parties’ pleadings. It found no cogent pleading or material that the insured had suppressed or misrepresented any material fact or prevented inspection. The Court observed that a defect or corrosion discovered after an explosion might be latent and that mere post-accident discovery of wear, age or corrosion did not automatically attract exclusion clause 5 where the boiler was registered and the accident occurred during the fitness certificate’s currency. The Bench held that the insurer bore the onus to prove non-disclosure or applicability of the exclusion; that burden was not discharged; and that the NCDRC erred in dismissing the claim solely on the basis of the survey reports. The Court allowed the appeals, set aside the NCDRC order, and restored First Appeal Nos. 580/2012 and 166/2013 to the NCDRC for fresh consideration limited to the quantum of compensation payable. Parties were directed to bear their own costs and pending applications were disposed of.
Case Details: Case No.: 2025 INSC 1315 (Civil Appeals @ SLP (C) Nos.1377-1378/2022) Case Title: Kopargaon Sahakari Sakhar Karkhana Ltd. (Now known as Karmaveer Shankarrao Kale Sahakari Sakhar Karkhana Ltd.) v. National Insurance Co. Ltd. & Anr. Appearances: For the Petitioner(s): Shri Shekhar G. Devasa For the Respondent(s): Shri Gaurav Sharma