UNITED INDIA INSURANCE CO. LTD.

A v.

M/S. PUSHPAL YA PRINTERS

FEBRUARY 25, 2004

[SHIVARAJ V. PATIL AND DR. AR. LAKSHMANAN, JJ.] B

Consumer Protection Act, 1986; Section I 2:

Insurance Policy-Damage caused to building and machinery due to impact from operation of a bulldozer-Insurance claim-Insurance company C repudiating the claim as not covered by terms of the policy-Complaint dismissed by the District Forum-Reversed by the State Commission directing payment of claim with interest thereon-Affirmed by the National Commission reducing the amount of claim-On appeal, Held: Phrase 'impact by road vehicle' in Clause 5 of the policy indicates damage caused to the building on D account of vibration of the driving of vehicles close to the road-Interpreting narrowly, damage to the building and machinery due to impact by any vehicle! rail would not arise-Since the word impact having more than one meaning, in the absence of exclusion clause it is reasonable and fair to construe the same in favour of the insured-,--Interpretation of Statutes-Insurance Law.

Doctrine:

'rule of contra preferentem '-Meaning of in the context of interpretation of the word 'impact' in insurance law.

Words and Phrases:

'lmpact'-Meaning of in the context of insurance law.

The question which arose for consideration in this appeal was as to whether the word 'impact' contained in Clause 5 of the insurance policy covers

the damage caused to the building and machinery of the insured due to driving G of the bulldozer on the road close to the building.

Answering the question in the affirmative and dismissing the appeal, the Court.

631 H

A HELD: 1.1. Clause 5 of the insurance policy speaks of"impact" by any rail/road vehicle or animal. If the appellant-insurer wanted to exclude any damage or destruction caused on account of driving of vehicle on the road close to the building, it could have expressly excluded. The insured possibly did not understand and expect that the destruction and damage to the building B and machinery is confined only to the direct collusion by vehicle moving OIJ

the road to the building or machinery. In the ordinary course, the question of a vehicle directly dashing the building or the machinery inside the building does not arise. Further, "impact" by road vehicle found in the company of other words in the same clause 5 normally indicates that damage caused to the building on account of vibration by driving of vehicle close to the road is .:..

C also included. In order to interpret this clause, it is also necessary to gather the intention of the parties from the words used in the policy. If the word "impact" is interpreted narrowly the question of impact by rail would not arise as the question of a rail forcibly coming to the contact of a building or machinery would not arise. In the absence of specific exclusion and the word

"impact" having more meanings in the context, it cannot be confined to forcible contact alone when it includes the meanings "to drive close", "effective action of one thing upon another" and "the effect of such action", it is reasonable and fair to hold in the context that the word "impact" contained in clause 5 of the insurance policy covers the case of the respondent. f 635-F-H; 636-A-C]

1.2. It is settled position in law that if there is any ambiguity or a term is capable of two possible interpretations, the one beneficial to the insured. should be accepted consistent with the purpose for which the policy is taken, namely, to cover the risk on the happening of certain event. Although there is no ambiguity in the expression "impact", even otherwise applying the rule F of contra preferentem the use of the word "impact" in clause 5 in the instant policy must be construed against the insurer. Where the words of a document are ambiguous, they shall be construed against the party who prepared the document. The interpretation placed by the State Commission as well as by the National Commission in relation to the expression "impact" is in order G and appropriate. f 636-C-E; 636-G]

General Assurance Society Ltd v. Chandumull Jain and Anr., (1966] 3 SCR 500, followed.

CIVIL APPELLATE JURISDICTION Civil Appeal No. 391 of

H 1999. \

From the Judgment and Order dated 30.5.1997 of the National A Consumers, Disputes Redressal Commission, New Delhi in R.P. No. 830 of 1996.

H.K. Puri, for the Appellant.

A.D.N. Rao for the Respondent.

The Judgment of the Court was delivered by

SHIV ARAJ V. PATIL, J. The respondent filed a complaint before the District Consumer Disputes Redressal Forum (District Forum) under Section

12 of the Consumer Protection Act, 1986 (for brevity 'the Act') praying for C settlement of an insurance claim at Rs. 75,000/- along with interest at the rate of 18% per annum. The appellant repudiated the claim on the ground that damage caused to the building and printing press of the respondent was not covered by Clause 5 of the insurance policy. The District Forum accepting the contention urged on behalf of the appellant held that there was no D deficiency of service on the part of the appellant and dismissed the complaint as not maintainable. The respondent filed appeal before the State Consumer Disputes Redressal Commission (State Commission) against the order of the District Forum. The State Commission, on interpretation of the word "impact" contained in Clause 5 of the insurance policy, allowed the appeal, set aside the order of the District Forum and granted relief to the respondent directing E the appellant to pay a sum of Rs.75,000/- with interest at the rate of 12% per annum with effect from 18.10.1994 till the date of payment. The appellant, dissatisfied with the order of the State Commission, filed revision petition before the National Consumer Disputes Redressal Commission (National Commission). The National Commission, while accepting the interpretation p given by the State Commission, however, reduced the amount of payment to the respondent from Rs.75,000/- to Rs.56,000/-. Aggrieved by said order of the National Commission, this appeal is brought before this Court by the appellant.

Before us, learned counsel for the parties in their arguments reiterated G their respective contentions, which were urged before all the forums. In order , to consider the respective contentions urged on behalf of the parties, it is both necessary and useful to quote the relevant portions from the insurane policy:-

"IN CONSIDERATION OF THE insured named in the Schedule hereto having paid to United India Insurance Company Limited H

(hereinafter called THE COMPANY) the premium me'ntioned in the said schedule. Till company agrees, (subject to the condition and exclusion contained herein or endorsed or otherwise expressed hereon) that if after payment of premium the property insured described in the said schedule or any part of such property, be destroyed or damaged by the following: -

Impact by any rail/road vehicle or animal."

In the order of the District Forum it is noticed that the appellant contested the claim by filing written objection contending that the damage caused due D to vibration from the operation of bulldozer was not an incident of impact by any road vehicle, as per Clause 5 of the insurance policy for risk, and so the complaint was not maintainable. Para 4 of the order of the District Forum reads: -

"4. Neither party led any evidence because it was admitted by the Opposite Party that in connection with a road construction with the help of a bulldozer near the complainant's printing press in question there was damage to that building. And, both parties agreed that-it all depends upon the interpretation of the tenn (5) of the Insurance Policy."

Thus, from the order of the District Forum it is clear that the appellant did not dispute as to damage caused to the building and machinery of the respondent on account of the bulldozer driven close to the building on the road for the purpose of road construction and that both the parties agreed that the sustainability of the claim depended upon the interpretation of Clause 5 G of the insurance policy. The District Forum took a narrow view that the word

"impact" contained in clause 5 of the insurance policy covered risk of only contingent impact of a road vehicle forcibly coming in contact with another.

It held that the damage caused to the building and machinery in the instant case was not due to such forcible contact but it was due to the consequential H effect of vibration on account of operating of a bulldozer by the side of the

respondent's printing press building and as such it was not covered by clause A 5 of the insurance policy; thus, there being no deficiency of service on the part of the appellant the complaint filed by the respondent was not maintainable.

According to the State Commission the only point, which arose for decision in the appeal was whether the damage caused to the building and the.· B machinery of the respondent was the resultant of the impact by the bulldozer.

Considering the meaning of the word "impact" given in various dictionaries the State Commission took the view that when the word "impact" has got meanings more than one and the word "impact" not only means "coming forcibly in contact with another", it also means "to drive close", "effective C action of one thing upon another" and "effect of such action". The "impact" covered damage caused to the building and machinery in view of the admitted fact that such damage was caused because of close drive by the bulldozer on the road. Expressing thus the State Commission set aside the order of the District Forum and granted relief to the respondent.

The National Commission concurring with the view expressed by the State commission interpreting the expression "impact" observed that the said word has to be construed liberally and in its wider sense.

The only point that arises for consideration is whether the word "impact" contained in clause 5 of the insurance policy covers the damage caused to the E building and machinery due to driving of the bulldozer on the road close to the building. It is evident from the terms of the insurance policy that the property was insured as against destruction or damage to whole or part. The appellant company agreed to pay towards destruction or damage to the property insured to the extent of its liability on account of various happenings. In the F present case both the parties relied on clause 5 of the insurance policy.

Clause 5 is also subject to exclusions contained in the insurance policy. That a damage caused to the building or machinery on account of driving of vehicle on the road close to the building is not excluded. Clause 5 speaks of "impact" by any rail/road vehicle or animal. If the appellant company wanted to exclude any damage or destruction caused on account of driving of vehicle G on the road close to the building, it could have expressly excluded. The insured possibly did not understand and expect that the destruction and damage to the building and machinery is confined only to the direct collusion by vehicle moving on the road to the building or machinery. In the ordinary course, the question of a vehicle directly dashing the building or the machinery H

A inside the building does not arise. Further, "impact" by road vehicle found in the company of other words in the same clause 5 normally indicates that damage caused to the building on account of vibration by driving of vehicle close to the road is also included. In order to interpret this clause, it is also necessary to gather the intention of the parties from the words used in the B policy. If the word "impact" is interpreted narrowly the question of impact by any rail would not arise as the question of a rail forcibly coming to the contact of a building or machinery would not arise. In the absence of specific exclusion and the word "impact" having more meanings in the context, it cannot be confined to forcible contact alone when it includes the meanings "to drive close", "effective action of one thing upon another" and "the effect C of such action", it is reasonable and fair to hold in the context that the word

"impact" contained in clause 5 of the insurance policy covers the case of the respondent to say that damage caused to the building and machinery on account of the bulldozer moving closely on the road was on account of its "impact". It is also settled position in law that if there is any ambiguity or a , term is capable of two possible interpretations one beneficial to the insured D should be accepted consistent with the purpose for which the policy is taken, namely, to cover the risk on the happening of certain event. Although there is no ambiguity in the expression "impact", even otherwise applying the rule of contra proferentem, the use of the word "impact" in clause 5 in the instant policy must be construed against the appellant. Where the words of a document E are ambiguous, they shall be construed against the party who prepared the document. This rule applies to contracts of insurance and clause 5 of the insurance policy even after reading the entire policy. in the present case should be construed against the insurer. A Constitution Bench of this Court in General Assurance Society Ltd. v. Chandumull Jain and Anr., (1966] 3 SCR 500 has expressed that "in a contract of insurance, there is requirement F of uberrima tides, i.e. good faith on the part of the assured and the contract is likely to be construed contra proferentem i.e. against the company in case of ambiguity or doubt."

In the light of what is stated above, no fault can be found with the impugned order. The interpretation placed by the State Commission as well G as by the National Commission in relation to the expression "impact" is in order and appropriate. Hence the point is answered in the affirmative.

Under the circumstances we find no merit in the appeal. Consequently it is dismissed. No costs.

H S.K.S.

Appeal dismissed.