Courts Cannot Relax the Terms of Insurance Policy NCDRF [FCS Deepak P. Singh]


FIRST APPEAL NO. 12 OF 2016         




BRIEF FACTS: of the case are that complainant , M/s.Dharmanandan Dismonds Pvt. Ltd. has given diamonds to one commission agent Mr. Arjanbhai Mangukia to show the diamonds to the prospective buyers by issuing “Janghad slip” on 10.06.2002.  However, on 11.06.2002, it was informed by the police that Mr. Arjanbhai  Mangukia was murdered and he did not possess the diamonds.  On 11.06.2002 the complaint was lodged with the police.  On 12.6.2002, the Insurance Company was also informed about the incident.  The police did not lodge the FIR and therefore, criminal complaint was lodged with Additional Chief Metropolitan Magistrate. The claim for Rs.78,62,388/- was lodged with the Insurance Company. 

The Insurance Company appointed a surveyor who has assessed the loss to the tune of Rs.55,19,316/- . 

The Insurance Company repudiated the claim on the following grounds on 19.07.2007:-

  1. The absence of safe at the Brokers premises is a breach of warranty material to the loss, as the loss could have been averted had the packets of diamonds been kept in a standard safe.
  1. The change of address was not made in the policy.  This is crucial for the loss as the entrustment was made from the new address, which was not covered by the policy.


The complainant then filed a consumer complaint before the State Commission being complaint no.40 of 2007. The complaint was resisted by the Insurance Company on the same grounds on which the repudiation letter was issued.  However, the State Commission allowed the complaint and passed the following order:-

  1. Complainant's complaint is partially allowed.

  2. Insurance Company is hereby ordered to pay applicant Rs.55,19,316/- i.e. Rs. Fifty five lacs Nineteen thousand three hundred sixteen in words with 9% interest from the date of repudiation. 

  3. Opponent Insurance Company is also ordered to pay Rs.5000/- towards the cost of complaint."  


Both the parties filed appeals against the order dated 30.10.2015 of the State Commission passed in complaint No.40/2007.

THE NCDRF - Heard the learned counsel for both the parties and perused the record.  The parties are being referred to as complainant and the opposite party for clarity.  The learned counsel for the opposite party/ Insurance Company stated that the commission agents are covered under Section II of the Policy and the following warranty is mentioned for this Section:-

"Warranted that if insured property with any one person specified in Section II of the schedule exceeds Rs.2 Lacs, the same shall be placed in an inbuilt locker of a steel cupboard.  But if the property exceeds Rs.10 Lacs it must necessarily be secured in a safe of standard make."

From the above warranty, it is clear that the insured property was required to be kept in a safe lock of a standard make.  The commission agent has been murdered at Mumbai residence and the insured property has not been recovered from there. It means that the insured property was not kept inside a safe lock as required under the warranty clause.  It was also argued by the learned counsel that it was not correct to say that commission agent was to return the insured property by the evening of the same day. 

The complainant   in the consumer complaint has itself mentioned the following:-

"10. Arjanbhai used to travel regularly in the morning from Surat to Mumbai and use to stay in Mumbai from Monday to Saturday and for his stay he rented one small Mezanine compartment, 306, 3rd Floor, Building No.42/276, Nanubhai Desai Marg, Suttar Gali, Mumbai-4 and he used to stay there alone from Monday to Saturday and used to have food on different lodges and on Friday or Saturday evening he used to return home to Surat and stay with his family."

THE FORUM observed that para 6 of the complaint, the complainant has mentioned that the commission agent takes the diamond and returns the same on the same day by evening.  These two averments made in the complaint are contradictory to each other.  The complainant had admitted that the commission agent Mr. Arjanbhai Mangukia was staying at Mumbai residence for five days and that he was coming back to Surat on weekends.  Thus, it was not possible for the commission agent to have come back and to have returned the insured property on the same day.  Thus, if the case property was to be kept for more time at the residence of commission agent at Mumbai, it was required to be kept in the safe as per the warranty clause.  This warranty has been clearly breached and therefore, the claim is not payable.  Though, the surveyor has assessed the loss, however, the surveyor has not given any observation on the adherence to the warranty clause.  Clearly, the surveyor has omitted his comment on warranty either purposely or inadvertently, therefore, fact of assessment of the loss by the surveyor cannot be read in favour of the complainant.

DECISION OF NCDRF- It seems that the State commission has agreed with the assertion of the complainant that the condition of the warranty was impractical and could not be observed as main work of the commission agent was to show the diamonds to prospective buyers and therefore, it was not possible to keep the diamonds in standard safe all the time, said NCDRC.

It said the argument did not hold good in the case, as the diamonds were given to the commission agent at Surat, from where the precious stones were brought to Mumbai, where the agent was to stay for the whole week. Clearly, when the diamonds were to be kept at a residence, they were required to be kept under locked safe of standard make as per the warranty condition of the policy, but there was no safe at Mumbai premises of the deceased agent, it adde

We are of the considered opinion that the warranty mentioned in the policy has been breached and therefore, the insurance claim is not payable,” by the insurance company and the insurance company has rightly repudiated the claim of insurance on the basis of violation of warranty mentioned in the Insurance Policy.

CONCLUSION:  as you know that warranties in an insurance policy is some terms and conditions , the fulfilment of those are necessary to bind both parties on contract of insurance. It is utmost important to follow and fulfil warranty and any breach of warranty may lead to termination or avoidance of contract by he insurance company.  

A warranty in an insurance policy is a promise by the insured party that statements affecting the validity of the contract are true. A promissory warranty is a statement about future facts or about facts that will continue to be true throughout the term of the policy.

A warranty by which the assured undertakes to do or not to do a particular thing, or satisfy a particular condition and whereby he affirms or negated the existence of a particular state of facts.

A warranty is either an undertaking by the assured that some particular thing shall or shall not be done or that some condition shall be fulfilled, or it is a statement which affirms or negatives the existence of a particular state of facts. A warranty is a condition precedent to the policy, and whether material to the risk or not must ,unless waived , be fulfilled with the most scrupulous exactness.

DISCLAIMER:  case law produced here is only for information of readers. The view expressed are personal views of the author and and same should not be considered as professional advice.

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