Security Guard Not Covered Under Insurance Policy; Terms of Private Contract Must Be Strictly Construed: Bombay High Court

In a significant pronouncement delineating the scope of insurer liability under private insurance contracts, the Bombay High Court (Aurangabad Bench) has held that an insurer cannot be fastened with liability to pay compensation under the Employees' Compensation Act if the category of the deceased employee is not covered under the policy.

The Court was deciding New India Assurance Co. Ltd. v. Kuntabai w/o Indar Khedekar & Ors., First Appeal No. 2789 of 2024, challenging an order of the Commissioner under the Employees’ Compensation Act that had directed the insurer and the employer to jointly pay compensation to the family of a deceased Security Guard.

Justice S.G. Chapalgaonkar, setting aside the Commissioner's finding to the extent it made the insurer jointly liable, observed: "The insurance contract being a private contract between the insurer and employer establishment, terms of contract will have to be strictly construed. There is no scope to adopt a broad interpretation to include a Security Guard within coverage restricted for cleaners or supervisors. Such interpretation would be absurd."

The Court concluded that as the security guard was not expressly covered under the categories listed in the insurance policy, the insurer could not be held liable.

The deceased Indar Khedekar was employed as a Security Guard with Bal Road Lines Pvt. Ltd. and died in an accident while on duty when an iron rod fell on him. His dependents filed a claim under the Employees’ Compensation Act. The Commissioner awarded ₹6,77,760 in compensation, holding both the employer and insurer jointly liable, and imposed a penalty of ₹3,38,880 on the employer.

The insurer challenged the award, arguing that the policy covered only 'cleaners' and 'supervisors' and did not mention 'security guards.'

The Court examined the insurance policy (Exh. 31) in detail, which showed coverage for 23 cleaners and 4 supervisors. There was no mention of any security guard.

Rejecting the argument that the insurer had already deposited the awarded amount and was therefore liable, the Court held: “Such deposit is not voluntary. The insurance policy is not a statutory one. The principle of 'pay and recover' does not apply in case of a private contract where the insurer had no contractual obligation to indemnify.”

Justice Chapalgaonkar further noted: “Neither the employer intended to obtain cover for security guards, nor was such risk covered under the contract. In absence of express inclusion, the insurer cannot be fastened with liability. To do so would be rewriting the contract.”

The Court allowed the insurer’s appeal and modified the award. It directed the employer, Inderjit Singh of Bal Road Lines Pvt. Ltd., to solely bear the burden of compensation and penalty. The insurer, New India Assurance Co. Ltd., was held not liable. The Court directed refund of the amount deposited by the insurer within 8 weeks.

The Bombay High Court reaffirmed the settled principle that contracts of insurance must be interpreted strictly in accordance with their terms and cannot be broadened by implication.

"The principle of liberal construction has no place where the contract is specific. A person not covered by the contract cannot be brought within its ambit merely because he was employed by the insured.”

Date of Decision: April 9, 2025