Page 29 - The Insurance Times November 2024

two hotel buildings at the said resort with stock. As per the
case of the Insured, and the FIRs filed by the Insured and the
subsequent police investigation, it appears that severe loss
and damage was caused to the property on account of a mob
of 200-250 people who were chasing a criminal and his asso-
ciates who started firing and hurling bombs when a football
match was going on at a local stadium. The FIRs and the
police investigation further revealed that the criminals took
shelter in the resort and subsequently there were weapons
and ammunition found from the electrical storeroom of the
Insured hotel. The Surveyor assessed a loss aggregating to
Rs.202.216 lakhs under both policies. However, the Insurance
company repudiated the claim on the ground that the claim
was an outcome of malicious act which fell within the exclu-
sion under the subject polices.

The Supreme Court, upon hearing held that if the Insurer
(Chesterhall) Ltd v Finney Lock Seeds Ltd. (1983) Law Re-
alleges that loss/damage was caused by any malicious act,
ports Q.B. 284)
the burden of proving that it was caused due to malicious
acts would be upon the insurer. The Insurer had not pro-
"None of you nowadays will remember the trouble we had -
duced any evidence to show that the incident (attack on the
when I was called to the Bar - with exemption clauses. They
football field) and the resultant damage (insured property)
were printed in small print on the back of tickets and order
was caused by the malicious act of the management of the forms and invoices. They were contained in catalogues or
Insured. Even operating under the assumption that the al-
timetables. They were held to be binding on any person who
legations against the criminal were true, it was inconceiv-
took them without objection. No one ever did object. He never
able that the damage caused by the crowd to the property read them or knew what was in them. No matter how un-
in chasing the criminals was a 'malicious' act on the part of
reasonable they were, he was bound. All this was done in the
the management of the Insured and therefore excluded
name of "freedom of contract." But the freedom was all on
under the policy. the side of the big concern which had the use of the printing
press. No freedom for the little man who took the ticket or
Adhesion Contract order form or invoice. The big concern said, "Take it or leave

Black's Law Dictionary defines "Adhesion Contract" as: it." The little man had no option but to take it. The big con-
"A standard-form contract prepared by one party, to be cern could and did exempt itself from liability in its own inter-
signed by the party in a weaker position, usually a consumer, est without regard to the little man. It got away with it time
who has little choice about the terms. Also termed Contract after time. When the courts said to the big concern, "You
of adhesion; take it or leave it contract; leonine contract." must put it in clear words," the big concern had no hesita-
tion in doing so. It knew well that the little man would never
These contracts are prepared by the insurer having a stan- read the exemption clauses or understand them. It was a
dard format upon which a consumer is made to sign. He has bleak winter for our law of contract "
very little option or choice to negotiate the terms of the
contract, except to sign on the dotted lines. The insurer For example, in Glynn v. Margetson & Co. [1893 AC 351
who, being the dominant party dictates its own terms, leav- (HL)], AC at p. 357, Lord Halsbury, L.C. stated : (AC p. 357)
ing it upon the consumer, either to take it or leave it. Such ' It seems to me that in construing this document, which
contracts are obviously one sided, grossly in favour of the is a contract of carriage between the parties, one must in
insurer due to the weak bargaining power of the consumer. the first instance look at the whole instrument and not at
one part of it only. Looking at the whole instrument, and
Lord Denning succinctly and most aptly describes the fal- seeing what one must regard as its main purpose, one
lacy in making an inadequate disclosure in George Mitchell must reject words, indeed whole provisions, if they are in-

26 November 2024 The Insurance Times