Supreme Court Declares: Electrical Short-Circuit, Not Negligence, Culminates in Upholding Rs. 6.57 Crore Insurance Claim”

In a significant judgment, the Supreme Court of India, on November 24, 2023, upheld a consumer’s right to insurance claim in the much-contested case of New India Assurance Co. Ltd. & Ors. Versus M/S. Mudit Roadways (Civil Appeal No. 339 of 2023). The apex court dismissed the appeal filed by New India Assurance, affirming the National Consumer Disputes Redressal Commission’s (NCDRC) directive to pay Rs. 6,57,55,155/- with interest for a fire insurance claim.

The bench, comprising Justices Hrishikesh Roy and Sanjay Karol, meticulously examined the multifaceted aspects of the case. At the core of the dispute was the cause of a devastating fire in a warehouse and whether it was covered under the insurance policy. The insurers challenged the claim, attributing the fire to negligence due to welding work during roof repairs, which they alleged was not covered under the policy.

However, in a decisive observation, the Court stated, “The significant time gap that exists between the welding work and the fire at 16:30 has no logical explanation. The basis of the repudiation accordingly appears to be un-reasonable and is not acceptable.” This critical observation shifted the narrative from negligence to an electrical short-circuit, as the more plausible cause of the fire.

The judgment also touched upon the valuation of the surveyor’s report in insurance claim disputes. The Court highlighted, “The surveyor’s report, although a prerequisite for claim settlement, is not absolute and may be challenged with other evidence.” This statement underlines the Supreme Court’s stance on the flexibility and non-absoluteness of surveyor’s reports in determining insurance claims.

Furthermore, the Court addressed the issue of customs duty and the concept of unjust enrichment in the context of insurance claims. It was determined that the customs duty component of the claim would be paid directly to the Customs Department, eliminating any concerns of unjust enrichment.

Date of Decision: 24th November 2023

NEW INDIA ASSURANCE CO. LTD. & ORS. VS M/S. MUDIT ROADWAYS