Page 60 - Insurance Times November 2022

Insurance Caselaws

SC rules consumer forum can't order if the appellant had gone to the civil court, they could have
even summoned the surveyor and cross-examined him on
forensic test of surveyor's report
every minute detail. But in a complaint before the Consumer
Forum, a consumer cannot succeed unless he establishes
Khatema Fibres Ltd.
deficiency in service on the part of the service provider".
vs.
The top court judgment came on an appeal of firm Khatema
New India Assurance Company Ltd. and Ors.
Fibres Ltd challenging the NCDRC order, which held that its
IV(2021)CPJ1(SC)
insurer, New India Assurance Company Ltd, was obligated
to pay Rs 2.86 crore as insurance claim, according to the
The Supreme Court on Tuesday ruled that a consumer forum
report submitted by the surveyor.
is primarily concerned with an allegation of deficiency in
service and cannot subject the surveyor's report to forensic A fire had broke out in the factory premises on November
examination. 15, 2007, and the firm claimed the quantity of waste paper
destroyed was 8,500 MT and valued it at Rs 13 crore.
A bench of Justices Hemant Gupta and V. Ramasubramanian
said: "Once it is found that there was no inadequacy in the
Rule of contra proferentem
quality, nature, and manner of performance of the duties
and responsibilities of the surveyor, in a manner prescribed Haris Marine Products
by the Regulations as to their code of conduct and once it is vs.
found that the report is not based on adhocism or vitiated
Export Credit Guarantee Corporation (ECGC) Ltd.
by arbitrariness, then the jurisdiction of the Consumer Forum
Civil Appeal No. 4139/2020
to go further would stop."
The bench noted the present case is not a case where the The Supreme Court delved into the term business common
insurance company has repudiated the claim of the
sense to interpret terms of a credit risk insurance policy. The
appellant arbitrarily or on unjustifiable grounds. This is a case
Court relied on the UK Supreme Court's judgment in Arnold
where the claim of the appellant has been admitted, to the
v. Britton [2015] UKSC 36 and observed that the business
extent of the loss as assessed by the surveyor, it added.
common sense was a decisive method was suggested to
The bench said: "A consumer forum which is primarily construe the ambiguity of a term used in a commercial
concerned with an allegation of deficiency in service cannot contract. On contra proferentem, the Court observed that
subject the surveyor's report to forensic examination of its an ambiguous term in an insurance contract is to be
anatomy, just as a civil court could do." construed harmoniously by reading the contract in its
entirety. If after that, no clarity emerges, then the term
The top court's judgment assumes significance, against the
must be interpreted in favour of the insured, i.e., against
backdrop that the firm sought increasing the insured
the drafter of the policy. The Rule of contra proferentem
amount, pointing that loss of articles was not properly
thus protects the insured from the vagaries of an
assessed.
unfavourable interpretation of an ambiguous term to which
The bench upheld the findings of the National Consumer
it did not agree. Importantly, the Court emphasized the role
Disputes Redressal Commission (NCDRC), which said that the
of contra proferentem in standard form insurance policies,
firm was "not entitled to succeed unless they were able to
called contract d' adhesion or boilerplate contracts, in which
establish any deficiency in service on the part of the
the insured has little to no countervailing bargaining power.
insurance company."
Accordingly, ECGC was held to have incorrectly interpretated
The bench said since the claim was admitted, then the an ambiguous term and was directed to pay the claim
jurisdiction of the special forum constituted under the amount to the insured since the parties had transacted on
Consumer Protection Act, 1986 is limited. It added, "perhaps several previous occasions.
54 November 2022 The Insurance Times