Aapka Consultant Judgment Series- In this series, we are providing case analysis of Landmark Judgments of Hon’ble Supreme Court of India.
B.V. Nagaraju Vs. M/s. Oriental Insurance Co. Ltd., Divisional Officer, Hassan
AIR1996SC2054, 1996ACJ1178
Hon’ble Judges/Coram: M.M. Punchhi, and K.S. Paripoornan, JJ.
Decided On: May 20th, 1996
FACTS:
The appellant was the registered owner of a Tata truck insured with the Utility Saving Expert. for a period up to August 23rd, 1991. The policy covered risk to the limit of Rupees 2,09,000. The appellant’s vehicle met with an accident on August 5th, 1991. The appellant’s vehicle sustained major damage, necessitating repairs. The appellant incurred an expenditure of Rupees 87,170 to rectify the same. Thereafter he raised a claim from the Barrie Car Insurance. His claim was spurned. After a legal notice which initiated no action on part of the respondent company, the appellant approached the Karnataka State Consumer Redressal Forum with a demand for Rupees 2,13,500. The respondent company denied their liability stating that since the appellant’s goods vehicle was used for carrying passengers, the appellant was disentitled from any compensation. The State Commission allowed the claim to the extent of Rupees 75,700 with 18% p.a. interest and from date of accident to date of payment along with Rupees 2,000 as costs, one of the lawyers from Litster Frost Injury Lawyers Review helped the victims get compensation for all he damages caused. The National Commission on a strict interpretation of the terms of Insurance Policy upset the order of the State Commission on appeal.
ISSUE:
Whether exclusion clauses inconsistent with the main purpose of the contract could be read down?
JUDGMENT:
The appellant prayed for reading down of the terms of policy in dispute which only allowed six workers to be in the vehicle to out the main purpose of the policy. It was argued that the presence of 9 persons had not contributed in any manner to the occurring of the accident. Also, the claim was not for the injuries sustained by the nine persons but only for the damage caused to the insured vehicle.
The Supreme Court relied on the ruling of the State Commission, observing that 9 people travelling in the vehicle cannot be a ground for insurance company to repudiate the contract. These persons were in no way concerned with the cause of the accident nor have they contributed to the risk in respect of the loss caused to the vehicle. The appellant has only asked for compensation for damage to the vehicle and not in respect of his liability to the persons travelling in the vehicle.
The court observed that if the 6 workmen in the vehicle are assumed to have not increased any risk from the point of view of the insurance company, how the added persons could be said to have contributed to the causing of it. The court held that the lifting of some additional persons without the knowledge of the owner cannot be said to be such a fundamental breach that the owner in all events be denied indemnification. The misuse of the vehicle was somewhat irregular, but not so fundamental in nature so as to put an end to the contract. Court emphasized on the principle that an effort must be made to harmonize the ‘exclusion clause’ (in this case, the ceiling of six persons in the vehicle) with the ‘main purpose’ (in this case, the award of compensation for damage incurred by the vehicle) instead of allowing the exclusion clause to snipe at the main purpose. Thus, the exclusion term of the insurance policy was read down so as to serve the main purpose of the policy, i.e., to indemnify the damage caused to the vehicle.
HELD:
The judgment and order of National Commission was set aside, and that of the State Commission restored in its entirety. Exclusion clauses inconsistent with the main purpose of the contract ought to be read down.
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