In an important decision, the Supreme Court has held that no insurance claim can be made if loss or damage is caused only due to theft (without being accompanied by any violence or forcible entry) if the insurance was under “Burglary and House Breaking Policy”. This direction was contained in the case of Industrial Promotion & Investment Corporation of Orissa Ltd. v. New India Assurance Company Ltd. [CIVIL APPEAL No. 1130 of 2007], decided on August 22, 2016 by a 2-judge bench of the Supreme Court comprising of Justice Anil R. Ddave and Justice L. Nageswara Rao. [Full judgment given below.]
In this case, the appellant had insured certain assets with Respondent No. 1 for a sum of Rs. 46,00,000/-, inter alia, under the “Burglary and House Breaking Policy”. Subsequently, while the policy was still valid, some parts of the plant and machinery were missing from the factory premises which were insured. The Appellant registered an FIR with the Remona Police Station, Balasore, regarding the theft/burglary of the plant and machinery. Thereafter, the Appellant informed Respondent No. 1 about the theft and requested for issuance of a claim form. A claim was lodged with Respondent No. 1 for an amount of Rs. 34,40,650/- under the Burglary and House Breaking Policy. However, the claim of the Appellant was rejected by Respondent No. 1 on the ground that the alleged loss did not come within the purview of the insurance policy.
The Appellant filed compensation application under Section 12-B read with Section 36-A of the Monopolies and Restrictive Trade Practices (MRTP) Act, 1969, which was rejected by the MRTP Commission, New Delhi. Against this, the Appellant approached the Supreme Court.
The Supreme Court noted that the scope of the policy was stated as under:
“SCOPE OF COVER
This Insurance Policy provides cover against loss or damage by Burglary or House breaking i.e. (theft following an actual, forcible and violent entry of and/or exit from the premises) in respect of contents of offices, warehouses, shops, etc. and cash in safe or strong room and also damage caused to the premises, except as detailed below:”.
It was contended on behalf of the Appellant that the words ‘theft following an actual forcible and violent entry/or exit from the premises’ are with reference only to house breaking and not burglary. According to him, forcible and violent entry is not necessary for making a valid claim under the policy. It would be sufficient that there is theft of certain goods from the factory premises, which fact has been proved by the Appellant.
However, the Supreme Court rejected this contention. It was held that:
“It is clear from the facts of the present case that the Appellant has made out a case of theft without a forcible entry. The case of the Appellant is that forcible entry is not required for a claim to be made under the policy. Following the well-accepted principle that a contract of insurance which is like any other commercial contract should be interpreted strictly, we are of the opinion that the policy covers loss or damage by burglary or house breaking which have been explained as theft following an actual, forcible and violent entry from the premises. A plain reading of the policy would show that a forcible entry should precede the theft, and unless they are proved, the claim cannot be accepted.”
The Supreme Court relied upon the observations in an earlier judgment in the case of United India Assurance Co. Ltd. v. Harchand Rai Chandan Lal, (2004) 8 SCC 644, to the following effect:
“The policy is a contract between the parties and both parties are bound by the terms of contract. As per the definition of the word “burglary”, followed with violence, makes it clear that if any theft is committed it should necessarily be preceded with violence i.e. entry into the premises for committing theft should involve force or violence or threat to insurer or to his employees or to the members of his family. Therefore, the element of force and violence is a condition precedent for burglary and housebreaking. The term ‘burglary’ as defined in the English Dictionary means an illegal entry into the building with an intent to commit crime such as theft. But in absence of violence or force the insurer cannot claim indemnification against the insurance company. The terms of the policy have to be construed as it is and we cannot add or subtract something. Howsoever liberally we may construe the policy but we cannot take liberalism to the extent of substituting the words which are not intended. It is true that in common parlance the term “burglary” would mean theft but it has to be preceded with force or violence. If the element of force and violence is not present then the insurer cannot claim compensation against theft from the insurance company. This expression appearing in the insurance policy came up for interpretation before the English Courts and the English Courts in no uncertain terms laid down that burglary or theft has to be preceded with force or violence in order to be indemnified by the insurance company. In this connection reference may be made to the statement of law as summarized in Halsbury’s Laws of England Fourth Edition (2003 Reissue) Para 646. It reads as under:
“646. Forcible and violent entry. The terms of a burglary insurance may exclude liability in certain circumstances unless there is forcible and violent entry into the premises. If so, the entry must be obtained by the use of both force and violence or the definition is not satisfied and the policy does not apply. An entry obtained by turning the handle of an outside door or by using a skeleton key, though sufficient to constitute a criminal offence, is not within the policy since the element of violence is absent. However, an entry obtained by picking the lock or forcing back the catch by means of an instrument involves the use of violence and is therefore covered. The policy may be so framed as to apply only to violent entry from the outside; or the violent entry into a room within the insured premises may be sufficient. In any case, the violence must be connected with the act of entry; if the entry is obtained without violence, the subsequent use of violence to effect the theft, as for instance where a show-case is broken open, does not bring the loss within the policy.””
It was further held that it is well-settled law that there is no difference between a contract of insurance and any other contract, and that it should be construed strictly without adding or deleting anything from the terms thereof. On applying the said principle, there is no doubt that a forcible entry is required for a claim to be allowed under the policy for burglary/house breaking.
The court also observed that if there is any ambiguity or doubt the clause in the Policy should be interpreted in favour of the insured. But there was no ambiguity in the relevant clause of the policy and the rule of contra proferentem is not applicable. Accordingly, the appeal of the Appellant was dismissed by the Supreme Court.
The full judgment of Supreme Court is reproduced below:
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