Page 55 - Insurance Times January 2024

Insurance Caselaws

BMW Car Damage : Supreme Court vehicle with a new one. Thus, it is not the right of the
insured under the policy conditions to always claim
Refuses Claim For Replacement; Says replacement of the car. It is at the option of the insurer.”
Insured Can't Claim Anything More the Court concluded, interpreting the policy.

Than Insurance Policy Coverage Interpreting the policy issued by BMW, the Court found that
The Supreme Court on Monday (20.11.2023) reiterated that there was no specific provision in the policy for replacement
an insured cannot claim anything more than what is covered of a vehicle in case there is a total loss or constructive total
by the insurance policy. The Court also said the terms of an loss or theft of the vehicle. The Court also held that, BMW
insurance policy, which determine the liability of the can be held liable under the BMW Secure, when it is
insurance company, must be read strictly. established that the insurer under the motor insurance
policy has accepted the case of total loss or constructive total
Referring to the recent ruling in National Insurance loss of the vehicle.
Company Ltd. v. Chief Electoral Officer, the Apex Court said
that the rule of contra proferentem would not be applicable Examining the issue of whether the repudiation of the
to a commercial contract like a contract of insurance. This insurance policy by the insurer was valid, in detail, the court
rule says that if any clause in the contract is ambiguous, it concluded that none of the grounds of repudiation had any
must be interpreted against the party that introduced it. substance.
However, for a contract of insurance, this would not apply Thus, the Court held that there was a deficiency in service
since an insurance contract is bilateral and mutually agreed rendered by the insurer and BMW under clause (g) of Section 2
upon, like any other commercial contract, a bench of Justice of the Consumer Protection Act,1986. Therefore, the owner was
Abhay S Oka and Justice Rajesh Bindal observed. entitled to compensation from both of them, the Court held.
According to the facts of the case, the owner of a BMW car As per clause (3) of the Motor Insurance Policy, the
met with an accident at Gurgaon due to which the car was constructive total cost of the vehicle, the liability of the
damaged beyond repair. He had taken two protections: one insurer would not exceed the IDV of the vehicle minus the
was a motor insurance policy of Bajaj General Insurance value of the wreck the court highlighted. Accordingly the
Company Ltd. (the insurer), and the other was the BMW amount payable by the insurer was quantified at
Secure Advance Policy (the BMW Secure). Rs.25,83,012.45 by the Court.

The case of the owner was that on a conjoint reading of The Court also held that since it was not pleaded by BMW
the two policies, if the car suffers damage of more than 75% that the vehicle of the same make was not available or, if it
of Insured Declared Value (IDV), a new car must be provided was available, what was the cost of the vehicle on that day,
to the insured. The owner approached the State Consumer a reasonable amount will have to be granted on account of
Disputes Redressal Commission, Delhi which directed the the difference in the value of the vehicle involved in the
insurer and BMW to indemnify the owner for a total loss of accident and the value of a new car of the same make. The
the BMW 3 Series 320D car by replacing the car with a new
Court accordingly directed the insurer to pay a difference
car of the same make/model. The insurer and BMW then of Rs.3,74,012/- to the owner.
approached the NCDRC which dismissed their appeals.
Subsequently, they approached the Apex Court. Hence the appeals were partly allowed and the direction of
the State Commission, confirmed by the National
Interpreting clause (3), of the insurance policy of the insurer, Commission to replace the car was substituted by a direction
the court held that an option is available to the insurer to
to pay monetary compensation.
repair the vehicle or replace the vehicle. “In case of total
loss/constructive total loss, instead of paying the amount as Case Title: Bajaj Allianz General Insurance Co.Ltd. V. Mukul
aforesaid, the insurer has an option available to replace the Aggarwal, CIVIL APPEAL NO.1544 OF 2023

The Insurance Times January 2024 49