In a significant legal ruling, the Supreme Court of India has asserted that an insurance claim cannot be denied solely on the basis of an ambiguous policy term. This decision came during a recent appeal case, highlighting the importance of clear and unambiguous language in insurance policies.
The Case in Question: The case at the center of this ruling revolves around Mehta Jewelers, a Pune-based jewelry showroom, and their insurance policy with the National Insurance Company Limited. The policy was intended to provide coverage for the valuable ornaments in their possession. In 2007, a burglary occurred, resulting in the theft of numerous gold ornaments.
However, the insurance claim was initially denied by the insurance company on the grounds that the stolen items were not stored in a burglar-resistant safe but rather in a steel safe of local make. This denial led the appellant, Mehta Jewelers, to challenge the decision before the State Consumer Disputes Redressal Commission.
The State Commission ruled in favor of the appellant, directing the insurance company to pay ₹28,95,600 along with interest as compensation. Dissatisfied with this decision, the insurance company then appealed to the National Commission.
The Contested Decision: The National Commission, in its decision, sided with the insurance company’s argument, contending that a standard steel almirah cannot be deemed a “safe.” They argued that a “safe” is commonly understood to be a robust metal cabinet equipped with a specialized locking mechanism for safeguarding valuables. To support this viewpoint, the National Commission referred to definitions of “safe” found in reputable dictionaries such as the Oxford Dictionary and Webster’s Dictionary.
Supreme Court’s Verdict: In a crucial judgment, the Supreme Court intervened and allowed the appeal filed by Mehta Jewelers. The Court ruled that it was unjustifiable for the insurance company to repudiate the claim based on the ambiguity surrounding the term “safe.” Consequently, the Supreme Court upheld the original decision of the State Commission, ensuring that the appellant received the claimed amount as compensation.
In essence, this landmark ruling by the Supreme Court emphasizes the significance of clear and precise language in insurance policies. It sets a precedent that an insurance claim should not be denied solely due to an unclear or ambiguous policy term, ensuring that policyholders are protected and treated fairly under the law.
