Prestige Institute of Management and Research

(Department Of Law)

Jaina Construction Company v. The Oriental Insurance Company Limited

and Ors. I(2022)CPJ119(SC)

Submitted To: Submitted By:

Mr. Jalaj Sarmandal Shreya Patni
Ms. Sanmati Rathore BALLB ‘A’ X
182068
 List of Abbreviation

U/A UNDER ARTICLE

U/S UNDER SECTION
VS. VERSUS
A.I.R. ALL INDIA REPORT
ART. ARTICLE
CRPC CRIMINAL PROCEDURE CODE
ORS. OTHERS
SCC SC CASE
SEC. SECTION
NATIONAL CONSUMER DISPUTES REDRESSAL
NCDRC
COMMISSION
SC SC
HC HIGH COURT
UOI UNION OF INDIA
 Facts of Case

The case of Jaina Construction Company v. The Oriental Insurance Company

Limited and Ors. arose out of a dispute between Jaina Construction Company
and The Oriental Insurance Company Limited regarding the scope of the
insurance policy. The factual context of the case is as follows:
Jaina Construction was engaged in the construction of a bridge in the Indian
state of Haryana. The company has taken out an insurance policy with The
Oriental Insurance Company Limited to cover any damage or loss that may
occur during the construction of the bridge. The policy was an "all risks" policy,
covering all risks of loss or damage to property except as specifically excluded.

During construction, heavy rainfall occurred in the area, causing flooding and
damage to the bridge. Jaina Construction Company has filed a claim against The
Oriental Insurance Company Limited for damages caused by the floods.
However, the insurance company rejected the claim, arguing that the policy did
not cover flood damage.

Jaina Construction Company has filed a complaint with the National Consumer
Disputes Redressal Commission (NCDRC) against The Oriental Insurance
Company Limited alleging poor service and unfair trade practices. The NCDRC
held that the insurance policy was an "all risks" policy that covered all risks of
loss or damage to property except those specifically excluded. The policy did
not specifically exclude flood damage and thus the insurance company was
required to pay the claim amount.

Oriental Insurance Company Limited go to appellant court for the decision of

NCDRC to the SC of India, but the court did not make any change in the
decision of NCDRC and ruled in favour of Jaina Construction Company.
 Issues
Legal issues in the case of Jaina Construction Company v. The Oriental
Insurance Company Limited and Ors. the following:
1. Interpretation of Insurance Policy: The main legal issue in this case was
the interpretation of the insurance policy entered into by Jaina
Construction Company with The Oriental Insurance Company Limited.
The policy was an "all risks" policy, covering all risks of loss or damage
to property except as specifically excluded. The key issue was whether
the policy covered flood damage as the policy did not specifically
exclude flood damage.

2. Liability of the insurance company: The second legal issue was whether
The Oriental Insurance Company Limited should pay the claim amount
for the flood damage. If the policy is found to cover flood damage, the
insurance company will have to pay the claim amount.

There were no specific statutes or precedents that were directly relevant to this
case. However, the interpretation of the insurance policy was a key legal
question and the court relied on established principles of contract law to
interpret the policy. In addition, the court relied on past precedents related to
insurance policies and their interpretation to reach its decision.

Relevant Rules Applicable

It is not clear from the available information what specific rules or statutes were
at issue in Jaina Construction Company v. The Oriental Insurance Company
Limited and Ors. However, generally, insurance disputes in India may be
governed by the Insurance Act, 1938 and the Consumer Protection Act, 2019.
The Insurance Regulatory and Development Authority of India (IRDAI) also
issues guidelines and rules related to insurance policies and disputes. In
addition, the Indian Contract Act, 1872 and the Indian Evidence Act, 1872 may
be relevant to the terms and interpretation of insurance policies and the burden
of proof in disputes.
 Arguments from Petitioner and Respondents
The appellant, Jaina Construction Company, contended that the insurance policy
it had purchased from The Oriental Insurance Company was an "all risk" policy
covering all risks of loss or damage to the insured property except as
specifically excluded. The claimant argued that the policy did not contain any
exclusions for flood damage and therefore the insurance company was liable to
pay the claim amount.

The petitioner also argued that the insurance company is bound to fulfil its
obligations to the insured and pay the claim amount if the loss or damage is
covered under the policy. The applicant claimed that the insurance company
failed to meet its obligations and wrongfully denied the applicant a claim. The
petitioner alleged that the conduct of the insurance company was arbitrary,
unjust, and contrary to the principles of natural justice.

The applicant further argued that the burden of proving that an event or
circumstance is excluded by the insurance policy is on the insurer. Therefore,
the insurance company had to prove that the flood damage was excluded under
the policy. The claimant argued that the insurance company failed to meet its
burden of proof and wrongly denied the claimant's claim.

In general, the plaintiff argued that the insurance company wrongfully denied
the plaintiff's claim and that the policy was "all risk," covering all risks of loss
or damage to the insured property, except as specifically excluded. The
applicant also argued that the insurance company is bound to fulfil its
obligations to the insured and pay the claim amount if the loss or damage is
covered under the policy.
 Arguments of Respondents
The respondents in Jaina Construction Company v. The Oriental Insurance
Company Limited and Ors. argued that the insurance policy purchased by the
petitioner did not cover the flood damage. The respondents argued that the
policy contained an exclusion clause specifically excluding flood damage and
therefore the insurance company was not liable to pay the claim amount.

The respondents also argued that the applicant was aware of the exclusion
clause at the time of purchasing the policy and accepted the terms of the policy.
The defendants argued that the plaintiff had failed to disclose the flood risk at
the time the policy was purchased and therefore the insurance company was
entitled to deny the claim.

The respondents also argued that the burden of proving that an event or
circumstance is covered by the insurance policy is on the insured. Therefore, the
claimant had to prove that the flood damage was covered by the policy. The
defendants argued that the plaintiff failed to meet its burden of proof and
wrongly sought compensation for flood damage.

In general, the respondents argued that the insurance policy did not cover the
damage caused by the floods and the applicant failed to meet its burden of
proof. Therefore, the insurance company should not have paid the claim amount
and the claimant was rightly denied.

It may be documented that there being a conflict of decisions of the Bench of 2

Judges of Court in case of- Om Prakash vs. Reliance General Insurance &
Another and in case of Oriental Insurance Company Limited vs. Parvesh
Chander Chadha, on the question of whether the delay occurred in informing
the Insurance Company about the happing of the theft of the vehicle, though the
FIR was registered immediately, would disentitle the claimant of the insurance
claim, the matter was referred to a 3 Judge Bench. The 3 Judge Bench in case
of Gurshinder Singh vs. Shriram General Insurance Company Ltd. & Another
reported in 2020 (11) SCC 612 in similar case as on hand
 Ratio of Judgement
A judgment quotient refers to a legal principle or rule established by a court
decision. In the present case the sentence ratio is:
• All risk insurance policies cover all risks of loss or damage to the insured
property, unless specifically excluded.
• Exclusion clauses in insurance policies must be strictly construed and any
ambiguity must be resolved in favour of the insured.
• Insurance companies are required to fulfil their obligations to the insured and
pay the claim amount if the loss or damage is covered by the policy.
• The indemnity principle requires that the owner of the insurance policy be
compensated for the loss suffered and not be entitled to profit from the
insurance claim.
• The insurer bears the burden of proving that an event or circumstance is
excluded by the policy.
Overall, the attitude of the decision confirms the importance of strict
interpretation of insurance policies and ensuring that insurance companies fulfil
their obligations to the insured. The decision also strengthens the principle of
indemnification and provides protection for the insured parties.

Analysis
The National Consumer Disputes Redressal Commission (NCDRC) was the
lower court that initially heard the case of Jaina Construction Company v. The
Oriental Insurance Company Limited and Ors. The NCDRC held that the
insurance policy taken out by Jaina Construction Company was an "all-risk"
policy that covered all risks of loss or damage to the property, except those
specifically excluded. The policy did not specifically exclude damages caused
by floods, and therefore, the insurance company was liable to pay the claim
amount.

The NCDRC reasoned that the insurance policy was a comprehensive policy
that covered all risks, and the damages caused by the flood were not excluded in
the policy. The NCDRC stated that since the policy did not have any exclusions
related to damage caused by floods, the insurance company was liable to pay
the claim amount for the loss suffered by the Jaina Construction Company. The
NCDRC also noted that the insurance company had failed to provide any
evidence to support their argument that the policy did not cover damage caused
by floods.

Overall, the NCDRC's decision was based on a straightforward interpretation of

the insurance policy and the absence of any exclusions related to flood damage.
The NCDRC's reasoning was later upheld by the SC of India, which confirmed
that the policy covered the damage caused by floods during the construction of
the bridge.

The SC of India upheld the decision of the National Consumer Disputes

Redressal Commission (NCDRC) and ruled in favor of Jaina Construction
Company. The court rejected the arguments made by The Oriental Insurance
Company Limited and provided the following reasoning and analysis that led to
the decision:

Interpretation of the insurance policy: The court examined the insurance policy
and noted that it was an "all-risk" policy, which covered all risks of loss or
damage to the property, except those specifically excluded. The court observed
that the policy did not specifically exclude damages caused by floods, and
therefore, the insurance company was liable to pay the claim amount.

Exclusion clauses: The court examined the exclusion clauses in the insurance
policy and noted that none of the clauses specifically excluded damages caused
by floods. The court held that exclusion clauses must be interpreted strictly and
that any ambiguity in the clauses should be resolved in favor of the insured.

Principle of indemnity: The court noted that the principle of indemnity is a

fundamental principle of insurance law, which requires an insurer to indemnify
the insured for the loss suffered by them. The court held that the insurance
company could not rely on an exclusion clause that did not specifically exclude
damages caused by floods, and that the policy was an "all-risk" policy, which
covered all risks of loss or damage to the property, except those specifically
excluded.
Public policy: The court noted that insurance contracts should be interpreted in
a manner that is consistent with public policy. The court held that if the
insurance company's interpretation of the policy was accepted, then it would be
against public policy as it would defeat the very purpose of an "all-risk" policy.

In conclusion, the SC of India upheld the decision of the lower court and held
that The Oriental Insurance Company Ltd was held liable to pay the claimed
amount to Jaina Construction Company. The court relied on established
principles of insurance law and contract law to interpret the policy and arrive at
its decision.

Principle laid in the case

The principle enunciated in Jaina Construction Company v. The Oriental
Insurance Company Limited and Ors. is that "all risk" insurance policies cover
all risks of loss or damage to the insured property, unless specifically excluded.
The decision also states that exclusion clauses in insurance policies must be
strictly construed and any ambiguity must be resolved in favour of the insured.
The decision reinforces the principle of indemnity and provides protection to
insured persons by requiring insurance companies to fulfil their obligations and
pay the amount of the claim if the loss or damage is covered by the insurance
policy. In addition, the decision clarifies that the burden of proving that an event
or circumstance is excluded by the insurance policy is on the insurer.

Conclusion
In conclusion, the SC in Jaina Construction Company v. The Oriental Insurance
Company Limited and Ors. held that the insurance policy purchased by the
petitioner did not cover damages caused by floods. The court found that the
policy contained an exclusion clause that specifically excluded damages caused
by floods, and the insurance company was not liable to pay the claim amount.

The court also held that the burden of proving that an event or circumstance is
covered under an insurance policy lies on the insured. Therefore, it was the
petitioner's burden to prove that the damages caused by floods were covered
under the policy. The court found that the petitioner had failed to discharge its
burden of proof and had wrongly claimed the damages caused by floods.
The court further noted that the insurance company had acted fairly and
reasonably in denying the claim made by the petitioner. The court found that the
insurance company had fulfilled its obligations to the insured and had rightly
denied the claim made by the petitioner.
Therefore, the SC dismissed the appeal filed by the petitioner and upheld the
decision of the lower courts. The court held that the insurance policy did not
cover damages caused by floods, and the petitioner had failed to discharge its
burden of proof. The insurance company was not liable to pay the claim
amount, and the petitioner's claim was rightly denied.