Law of Torts, MV Act and

Consumer Protection
eSeries
S.31
 Insurance Services
• Consider the case of HDFC Chubb General Insurance Co. Ltd. v. Ila Gupta and Ors. I(2007)C
PJ274(NC ):
[Facts:
The Complainant purchased a new Daimler Chrysler Mercedez car for a sum of Rs. 23,43,747 and insured
the same with the petitioner Insurance Company. He had taken a Temporary Registration Certificate
which was valid for a month and later on it was validated for another one month.
The car fell into a pot-hole incidentally in a flooded road and got damaged. It was repaired by M/s. Cama
Motors and the complainant claimed for recovery of the repair and parking charges.
The petitioner Insurance Company repudiated the claim on the ground that the vehicle did not have
Permanent Registration Number
Issue: Whether the Insurance Company was justified in repudiating the claim (deficiency in service)
Decision:
The State Commission had held deficiency in service. The NCDR noted that while issuing the cover note
and the policy, it has been mentioned in the relevant column for Registration that the Registration
has been applied for. The policy also indicates the brand and Model No., the Chassis No. and the
year of manufacturing etc. The entire description of the vehicle was given, only the Registration
Number has been shown as the Temporary Registration Number.

The Insurance company was well aware of this fact. If they were no concerned with a permanent
registration number then they should have cancelled the policy. In this context, the NCDR called the
ground taken by the Insurance Company as flimsy. The NCDR upheld the order of the State
Commission.
• Consider the case of United India Insurance Company Ltd. v. Orient Treasures Pvt. Ltd. I(2016)C PJ6(SC ):
[Facts:
The complainant runs a jewelry shop in Chennai; He had insured the jewelry in the shop with the opposite party
There was burglary at his shop in the night where the jewelry taken was that which was on display at the window of the
shop and display shelves;
The Insurance Company repudiated the claim as a clause in the insurance policy stated that window display at night will
not be covered by the policy and to maintain security, the insured had to take the jewelry away from display every
night and keep them safe
Issue: Whether the Insurance company was justified in repudiating the claim
Decision:
The NCDR held deficiency in service and asked the insurance company to make good the payment.
On appeal, the Supreme Court referred to Halsbury’s Laws of England in referring to the Contra proferentem rule i.e.
where there is ambiguity in the policy the court will apply the contra proferentem rule. Where a policy is produced
by the insurers, it is their business to see that precision and clarity are attained and, if they fail to do so, the
ambiguity will be resolved by adopting the construction favourable to the insured. Similarly, as regards language
which emanates from the insured, such as the language used in answer to questions in the proposal or in a slip, a
construction favourable to the insurers will prevail if the insured has created any ambiguity. This rule, however,
only becomes operative where the words are truly ambiguous; it is a rule for resolving ambiguity and it cannot be
invoked with a view to creating a doubt. Therefore, where the words used are free from ambiguity in the sense
that, fairly and reasonably construed, they admit of only one meaning, the rule has no application.
(Continued…)
In the instant case, the Supreme Court found no such ambiguity.
The Supreme Court held In order to claim benefit of the policy, it was
obligatory upon the complainant to have removed the insured items from
display window everyday after business hours and keep them inside safe
during night hours till opening of the shop next day. Like wise all insured
items in side the shop should also have been kept in side the safe everyday
after business hours till opening of the shop next day. It was, however, not
done by the complainant.
A contract of insurance is one of the species of commercial transaction
between the insurer and insured. It is for the parties (insurer/insured) to
decide as to what type of insurance they intend to do to secure safety of the
goods and how much premium the insured wish to pay to secure insurance of
their goods as provided in the tariff. If the insured pays additional premium
to the insurer to secure more safety and coverage of their insured goods, it is
permissible for them to do so. In this case, the complainant did not pay any
additional premium to get the coverage.
The Supreme Court allowed the appeal accordingly]
• Consider the case of Oriental Insurance Company Limited v. Mahendra Construction AIR2019SC
2182:
[Facts:
The complainant Mahendra Construction had purchased a hydraulic excavator machine in 2004-05. The
excavator was insured with New India Assurance Company Limited from 15 November 2004 to 14
November 2005. A claim was lodged under the insurance policy on 12 April 2005 on the ground
that the excavator had been set on fire by Naxalites. The claim was settled by the earlier insurer.
According to the Respondent, the machine was under repair until 10 October 2006.
On 10 October 2006, the excavator was insured with the Appellant from 11 October 2006 to 10 October
2007. A premium of Rs. 43,847 was paid to the Appellant for an insurance cover of Rs. 32 lakhs.
Five days after the issuance of the insurance cover, the excavator is alleged to have caught fire at a
work site on 15 October 2006. The insurer deputed a surveyor for a spot survey on 17 October
2006 and a report was submitted on 26 October 2006. It appears that other surveyors were also
appointed.
On 25 November 2008, the insurance claim was repudiated on the ground that all material facts which
were required to be disclosed through the proposal form to enable the insurer to assess the risk
profile had not been disclosed. More specifically, it was stated that in the printed proposal form,
the details of claims lodged during the preceding three years were required to be disclosed but
were not furnished and, in consequence, the insurer was deprived of the opportunity to assess the
risk profile of the vehicle at the time of accepting the proposal for insurance. This led to the
institution of a complaint before the SCDRC.
(Continued…)
Issue: Whether the Insurance company was justified in repudiating the claim
Decision:
The State Commission and the NCDR upheld deficiency in service stating that the prior
insurance and information related thereto could have been found through
ordinary diligence
The Supreme Court disagreed and stated that Insurance is governed by the principle
of utmost good faith, which imposes a duty of disclosure on the insured with
regard to material facts.
Referring to an earlier decision the Court emphasised that:
“It is well settled that a contract of insurance is contract uberrima fides and there
must be complete good faith on the part of the assured. The assured is thus under
a solemn obligation to make full disclosure of material facts which may be relevant
for the insurer to take into account while deciding whether the proposal should be
accepted or not. While making a disclosure of the relevant facts, the duty of the
insured to state them correctly cannot be diluted”
(Continued…)
Further:
“The duty to disclose material facts continues right up to the conclusion of the contract and also implies
any material alteration in the character of the risk which may take place between the proposal and
its acceptance. If there are any misstatements or suppression of material facts, the policy can be
called into question. For determination of the question whether there has been suppression of any
material facts it may be necessary to also examine whether the suppression relates to a fact which
is in the exclusive knowledge of the person intending to take the policy and it could not be
ascertained by reasonable enquiry by a prudent person.”

The Supreme Court stated that the burden of establishing that the insured made a false representation
and suppressed material facts lies on the insurer.

The burden cannot be cast upon the insurer to follow up on an inadequate disclosure by conducting a
line of enquiry with the previous insurer in regard to the nature of the claims, if any, that were
made under the earlier insurance policy. On the contrary, it was the plain duty of the Respondent
while making the proposal to make a clear and specific disclosure.
Thus, where the complainant had merely enclosed the earlier policy, did not satisfy the requirement of
disclosure. The fact that the insured had suppressed a payment of Rs.36 lakh from the earlier
insurance was insufficient disclosure.

The Supreme Court thus allowed the appeal]

• Consider the case of The Branch Manager, National Insurance Co. Ltd. v. Mousumi Bhattacharjee
and Ors. AIR2019SC 1570:
[Facts:
The complaiants are spouse and father of one Debashis Bhattacharjee. Debashish had applied for a
housing loan from the Bank of Baroda on 16 June 2011. The loan was sanctioned and was
repayable in monthly installments
Incidental to the loan, he availed of the facility of an insurance scheme called "National Insurance
Home Loan Suraksha Bima". On 25 August 2011, a policy was issued to cover the loan amount with
a term of 20 years commencing on 25 August 2011. A single premium was paid against the policy
Section I of the policy insured the house against fire and allied perils, including earthquakes. Section II
insured the borrower against personal accidents.
Debashish was working as a Manager of a Tea Estate in Assam. He thereafter took up employment in
2012 as a Manager of a Tea Factory at Cha-De-Magoma, District Gurue, Province-Zambezia,
Republic of Mozambique. During his stay in Mozambique, the insured was admitted to the hospital
on 14 November 2012. He was diagnosed with encephalitis malaria and died on 22 November 2012
due to multi-organ failure
The complainants sought to recover under Section II of the policy stating that disease fell under
personal accident; The insurers did not agree and repudiated the claim
Issue: Whether the insurer was justified in repudiating the claim
(Continued…)
Decision:
The District Forum held that death from mosquito bite was an accident and ordered the insurer to make good payment.
The State Commission and NCDR upheld this decision
The Supreme Court stated:
“As the law of insurance has developed, there has been a nuanced understanding of the distinction between an
accident and a disease which is contracted in the natural course of human events in determining whether a policy
of accident insurance would cover a disease. At one end of the spectrum is the theory that an accident postulates
a mishap or an untoward happening, something which is unexpected and unforeseen. This understanding of what
is an accident indicates that something which arises in the natural course of things is not an accident. This is the
basis for holding that a disease may not fall for classification as an accident, when it is caused by a bodily infirmity
or a condition. A person who suffers from flu or a viral fever cannot say that it is an accident. Of course, there is an
element of chance or probability in contracting any illness. Even when viral disease has proliferated in an area,
every individual may not suffer from it. Getting a bout of flu or a viral illness may be a matter of chance. But a
person who gets the flu cannot be described as having suffered an accident: the flu was transmitted in the natural
course of things. To be bitten by a mosquito and be imbued with a malaria parasite does involve an element of
chance. But the disease which is caused as a result of the insect bite in the natural course of events cannot be
regarded as an accident. Particularly, when the disease is caused in an area which is malaria prone. On the other
hand, there may well be instances where a bodily condition from which an individual suffers may be the direct
consequence of an accident. A motor car accident may, for instance, result in bodily injuries, the consequence of
which is death or disability which may fall within the cover of a policy of accident insurance. Hence, it has been
postulated that where a disease is caused or transmitted in the natural course of events, it would not be covered
by the definition of an accident. However, in a given case or circumstance, the affliction or bodily condition may be
regarded as an accident where its cause or course of transmission is unexpected and unforeseen”
(Continued…)
Accordingly, the Supreme Court held that malaria is most
commonly transmitted to humans through malaria virus
infested mosquito bites, and when a virus is contracted
through normal means brought about by everyday life it
cannot be deemed to be an unexpected or unforeseen
accident
The Supreme Court clarified that since the insurer had
made the payment, no recoveries shall be made and that
they had embarked on the present exercise since the
issue raised in the present case will have a bearing on
similar questions of interpretation in policies of insurance
envisaging an accident cover]
 Railway Services
• Consider the case of B. Vaidyan Athan, Secretary, Consumer Protection
Council, Rourkela v. General Manager, Southern Railway I(1996)C
PJ273(NC ):
[Facts:
The complainant was utilising the services of Alleppy Bokaro/Tata Express as a
bona fide passenger, for visiting Madras, which is his native place
The grievance is that after more than decades of running a train from or
through Madras Central the Railways had taken a decision to divert the said
Bokaro /Tata-Allepy Express via Perambur instead of touching Madras
Central
The complainant then compares in his complaint the situation, location,
covered platform, retiring room, cafeteria, etc., facilities available at Madras
Central and the location of that at Perambur to highlight the difficulties that
are being experienced by the complainant and the other consumers
Towards this he alleged deficiency in service and pleaded restoration of route
(Continued…)
Issue: Whether complaint can be entertained by the Consumer Fora and if there is
deficiency in service
Decision:
The NCDR stated that view that the expression "service” contained in Section 2(1)(o)
of the Act specifically includes within its scope the provisions of facilities in
connection with transport. The Railway Administration is providing transport
facilities to passengers for consideration paid by them by way of fare, levied for
the ticket. The facilities of transportation by rail provided by the Railway
Administration is a service rendered for consideration as defined in the Act.
But in the instant matter, the NCDR said that complaint does not pertain to any
deficiency in the rendering of the service by Railway Administration. It challenges
the commercial decision of the Railway Administration to divert the said train via
Perambur, instead of touching Madras Central. The management of the Traffic is
within the province of the Railway Administration and cannot be a subject matter
of consumer dispute before the Redressal Forums. There is no hiring of service for
consideration in the decision of the management of the Traffic by the Railway
Administration]
• Consider the case of Divisional Railway Manager v. Abhishankar Adhikari
IV(2005)C PJ79(NC ):
[Facts:
The complainant was travelling on 4th September, 2001 by Delhi-Kalka Mail an AC-3
Tier Coach. At about 5.45 a.m. he was the only passenger in his coupe, when he
left his berth for brushing his teeth and washing his mouth at the wash-basin
provided in the coach
When he came back to his birth he found that his VIP Trolley Suitcase, containing one
camera, one cell phone, Rs. 5,500/- in cash and some other belongings, was
missing
He drew the attention of the coach attendant who took it in a very casual manner. He
lodged a complaint with GRPS, Howrah. According to the complainant, the loss of
the suitcase was caused by the entry of unauthorized persons into the coach

Issue: Whether the complaint can be entertained by the Consumer Fora and if there is
deficiency in service
(Continued…)
Decision:
The District Forum has held deficiency in service and the same was upheld by the State Commission
The NCDR on the point of jurisdiction of the Consumer Fora, relied on the Railway Claims Tribunal Act,
1987 under which S.15 says there is a bar on jurisdiction of any Court or other authority over
claims pertaining to S.13
According to the NCDR loss of luggage does not fall under S.13 of that Act, and therefore the consumer
complaint will be maintainable
The NCDR then noted that among the other duties of the coach attendant, he had to prevent entry of
unauthorized persons in the coach and the TTE was supposed to ensure that the attendant
performed his job; The TTE himself was supposed to be vigilant that no entry would be given to any
person who was not a reserved ticket holder
The NCDR noted that the passenger was not expected to carry his luggage to the bathroom; neither
could be have locked the coupe as it could only be locked from the inside
Further, since he was alone in the coupe, the facts point to theft by an unauthorised person or by the
coach attendant/TTE
Thus, the NCDR upheld deficiency in service Considering compensation, the NCDR stated that common
men do not preserve the bills of each and every item to pile up unnecessary papers expecting that
some day a theft may take place and he would be required to produce those documents. In
ordinary course his affidavit should be accepted and acted upon keeping some margin of
exaggeration of claims. In such a situation, one has also to keep in mind probable depreciated
value of the articles lost.
The NCDR upheld the intial award of Rs.40,000 made by the District Forum]