The Supreme Court reaffirmed the principle that an insured individual is limited to claiming only what is explicitly covered by the insurance policy. Emphasizing the importance of a strict interpretation of the terms within an insurance policy, the Court clarified that the rule of contra proferentem, which dictates that any ambiguous clause in a contract should be interpreted against the party introducing it, does not apply to commercial contracts such as insurance agreements. Justices Abhay S Oka and Rajesh Bindal, presiding over the bench, stated that unlike other contracts, an insurance contract is bilateral and mutually agreed upon, thus exempting it from the application of the contra proferentem rule.
Brief Facts of the Case:
The dispute revolved around an irreparably damaged BMW 3 Series 320D owned by Mukul Aggarwal. Following an accident, Aggarwal's insurance claim with Bajaj General Insurance was denied due to claim submission delays, non-response to insurer letters, discrepancies in accident descriptions, and the discovery of blood stains in the vehicle. Dissatisfied with this denial, Aggarwal sought recourse through the State Consumer Disputes Redressal Commission (SCDRC), which ruled in his favor. The SCDRC directed both Bajaj and BMW to indemnify Aggarwal for the car's replacement under the BMW Secure Advance policy. Bajaj and BMW, aggrieved by this decision, appealed to the Supreme Court.
Contentions of the Parties:
Bajaj General Insurance, the insurer, contended that the primary basis for repudiating the insurance policy was Aggarwal's significant delay in informing the insurer of the accident. Bajaj argued that this delay was a valid reason for policy repudiation. On the other hand, BMW Pvt Ltd., the car manufacturer, contested the jurisdiction of the State Consumer Disputes Redressal Commission over the Gurugram accident claim. BMW asserted that the State Commission had erred in entertaining the complaint, challenging its adherence to Section 17(2)(b) of the Consumer Protection Act, 1986. Additionally, BMW disputed the finding that the insured, Aggarwal, was entitled to a replacement of the car, contending that the option to replace the vehicle rested with the insurer, not the insured, in cases of total loss or constructive total loss.
Observations of the Court:
The Supreme Court bench, comprising Justice Abhay S. Oka and Justice Rajesh Bindal, emphasized that the insured does not have an absolute right to claim a replacement when the insurance policy lacks provisions for such a scenario. The court noted that in cases of total loss or constructive total loss, the insurer has the option to either pay the insured amount or replace the vehicle with a new one. This clarified that the decision to replace the car is at the discretion of the insurer and not an inherent right of the insured.
The Supreme Court upheld the jurisdiction of the SCDRC, citing the Consumer Protection Act, 1986, and clarified that the State Commission had the territorial jurisdiction to preside over the accident claim. Additionally, the Court affirmed that the insured, Mukul Aggarwal, was entitled to compensation but clarified that the direction to replace the car was not sustainable. Instead, the Court directed the payment of monetary compensation. The Supreme Court reiterated that an insured cannot claim more than what is covered by the insurance policy. Referring to a recent case of National Insurance Company Ltd. vs. Chief Electoral Officer and Ors., the Court emphasized the need to strictly interpret the terms of an insurance policy to determine the liability of the insurance company.
Analyzing the terms of the BMW-issued policy, the court noted the absence of a specific provision addressing the replacement of a vehicle in the event of total loss, constructive total loss, or theft. Additionally, the court asserted that BMW's liability under the BMW Secure would only be triggered if it was established that the insurer under the motor insurance policy had acknowledged a case of total loss or constructive total loss of the vehicle.
Decision of the Court:
Consequently, the appeals were partially granted, and the directive from the State Commission, affirmed by the National Commission, to replace the car was replaced with an instruction to provide monetary compensation.
Case Name: Bajaj Allianz General Insurance Co. Ltd. vs. Mukul Aggarwal and Ors.
Coram: Hon'ble Mr. Justice Abhay S Oka and Mr. Justice Rajesh Bindal
Case No.: Civil Appeal No. 1544 of 2023
Citation: 2023 Latest Caselaw 874 SC
Advocates of the Appellant: Ms. Anisha Upadhyay, AOR and Mr. Karun Mehta, AOR
Advocates of the Respondents: Mr. Vinay Kumar Misra, Adv. Mr. Devendra Singh, AOR Mr. Zahid Ahmad, Adv. Ms. Nikita Sharma, Adv. Mr. Karun Mehta, AOR Ms. Anisha Upadhyay, AOR Ms. Shagun Matta, AOR
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