IN THE HIGH COURT OF JAMMU AND KASHMIR AT JAMMU. CIMA no. 85-A of 2001 M/S Oriental Insurance Co. Ltd. Petitioner Sham Lal Matoo Respondent ! Mrs. Zainab Shamas Watali, Advocate for Petitioner. ^ Mr. P. N. Raina, Advocate for Respondent. Coram : Hon'ble Mr. Justice B. A. Khan, Chief Justice (A) Hon'ble Mr. Justice Nirmal Singh Dated : 20/12/2005 : JUDGMENT :
Khan CJ(A)):
This appeal is directed against the judgment / order of the State Consumer Protection
Commission (for brief “the Commission”) allowing the respondent’s complaint and directing the
appellant to pay him Rs.2, 87, 775 with 12 % interest.
The respondent had lodged a complaint with the Commission claiming that he owned a
residential house in Degam Nagbal, Tehsil Shopian which he had insured with the Appellant
Company on 25th March, 1997 under an insurance policy which was valid till 24th May, 1998.
He was a migrant and while he was in Jammu he learnt about this house having been destroyed in
fire. So he, accordingly, lodged a claim before the Appellant Company which was not settled for
one reason or the other and also on the objection that the house in question was jointly owned by
him and his brother, Omkar Nath. His further case in the complaint was that his brother had died
on 16th March, 1993 and he had taken his daughter in adoption. Moreover, he had taken the
insurance policy much after in 1997and that there was no claim from any legal heir of his brother
as he had not left behind one.
This complaint was resisted by the Appellant Company on several grounds and, primarily, on the
plea that the respondent had failed to disclose the material fact of half of the house being owned
by his brother, Omkar Nath, while taking the insurance policy. Therefore, it was to be deemed
that he had insured only half of the building and not the full and that he would be entitled only to
half of the loss assessed.
The other objections taken by the Appellant Company are not material for our purpose and no
reference is required to be made to these.
The Commission, on this, took the view that the respondent had insurable interest in the property
and that his claim could not be denied on the basis that he had not full ownership of the house.
Since the Appellant Company accepted the premium of insurance cover of the whole property, it
could not dispute that the respondent was not the sole owner.
It was on this premise that the Commission allowed the respondent’s claim and directed the
Appellant Company to pay him Rs.2, 87, 775 with 12 % interest.
The Commission held as under:
“We have given deep thought to these arguments and have examined
section 2 of the Insurance Act. Section 2 lays stress only on insurable interest.
According to this section it is not necessary that the insured should be wholly and
solely owner of the house. It is not restricted to the ownership of the whole house
but it is restricted, according to section 2, only to insurable interest. Insured must
have some interest for the preservation of the property which he is going to insure
with the Company. In the present case admittedly the claimant is the owner of the
half of the property. So it can definitely be said that he has got insurable interest in
the property. The claim cannot be denied on the basis that the claimant is not the
full owner of the house. It is exercise in futility on behalf of Insurance Company to
open the Pandora box at the time of accepting the claim whether insured was sole
owner of the property or not. They have accepted the premium of insurance cover
of the whole property. They cannot, later on, dispute that the claimant is not the
sole owner”.
The appellant is questioning this judgment / order passed by the Commission. Its counsel, Mrs.
Zainab Watali, submits that a contract of insurance was a contract of faith and since the
respondent had failed to furnish the requisite information and had failed to disclose the material
particulars about the ownership of the house, which he was sharing with his brother, the insurance
contract became voidable and so was the insurance policy vitiated. She referred to some
provisions of the Contract Act to suggest that such a contract, which was tainted by
misrepresentation, mis-description and non-disclosure becomes voidable which would have the
consequence of discharging the Appellant Company of its hasility.
In contra, Mr. P. N. Raina, representing the respondent, contended that Insurance cover obtained
by the respondent was for the property i.e. the house and that ownership of the house had nothing
to do with that. The Company had only mixed up the issue of insurable interest with ownership of
the house when it could not compel the insured- respondent to furnish the proof of ownership of
the house. All that was needed to settle the claim was whether respondent had taken the insurance
cover and whether he had an insurable interest in the house in question.
A contract of insurance is undoubtly a contract of utmost good faith on the part of the insured. It
surely enjoins upon the insured to make full disclosure of all material facts which would have a
bearing on the insurer’s mind to go for the contract or otherwise. It is also undisputed that in
insurance contracts the principle of caveat emptor has no place and that non-disclosure of a
material fact is regarded as vital to the validity of the transaction.
Having said all this, in the present case, we are not seized of breach of any policy condition taken
by the respondent or any misrepresentation or suppression of material fact made by him. Because
it does not appear to us that it was obligatory for the respondent to disclose the ownership
particulars of the house in question while taking the insurance its failure to do so could not vitiate
the insurance contract and absolve the Appellant Company of satisfying his claim. Because
admitedly his brother, Omkar Nath, who is said to have owned the other part of the house had
died on 16th March, 1993 without leaving behind any legal heir when the respondent had taken
the insurance policy about four years later on 25th March, 1997. He had, therefore, no obligation
to disclose the ownership particulars at the time he took the policy, nor could his failure to do so
defeat his claim arising out of the insurance cover.
A contract of fire insurance as in the present case requires an insurable interest in the subject
matter and the test of determination of that interest is whether the loss of property would cause a
pecuniary loss to the insured and whether he would have attained any pecuniary benefit or
advantage from preservation of the insured property. If the insured would suffer the loss or derive
the benefit he would be having an insurable interest in the subject matter of the insurance contract
which was good enough to entitle him to the assessed loss. What was the extent of his interest and
whether he was with full or part of the property was irrelevant for purposes of settling his claim.
Because the Insurance of the subject matter and its ownership may not necessarily go together.
They may be insurance to cover the interest of others and the person insuring the interest may not
be the owner of the property. This finds support from the Supreme Court judgment in New India
Assurance Co. Ltd v G. N. Sainani, (1997) 6 SCC 383 holding:
” To put it in other words, insurable interest in property would be such
interest as shall make the loss of the property to cause pecuniary damage to the
assured. To come under the scope of the word ‘consumer’ as defined in the Act it
should be possible for the assured to assign his insurable interest in the goods
subject matter of the policy for the assignee as a consumer to enjoy the benefit of
the policy with reference to the goods which are insured. What has been assigned in
the present case is the amount of loss suffered by the assured on account of
shortlanding of the goods, meaning thereby that right to recover the loss is assigned
to the assignee and not that any service is to be rendered under the policy by the
insurer with reference to the goods. We are looking at the whole thing from the
point of the consumer under the Act. Unless the assignee has some insurable
interest in the property subject matter of the insurance up till the time the policy
terminates, he cannot be beneficiary of any service required to be rendered by the
insurer under the policy”.
It may also be advantageous to clarify any cobwebs in this regard by quoting the following
passage from Banerjee’s Law of Insurance:
“Insurable interest is not synonymous with legal interest. Thus an interest
on an agreement to purchase is an insurable interest. A warehouse man who has
assumed the obligation to insure the goods while in his possession has an insurable
interest. Even the interest of a bailee is sufficient to establish an interest and an
unpaid vendor of goods as an insurable interest in the property. Similarly, a
husband has an insurable interest in his wife’s property and a wife in turn has an
insurable interest in the property of her husband. So also a landlord may insure his
rent which he may lose through the destruction of his premises, a tenant of premises
has an insurable interest founded upon the beneficial enjoyment of the premises,
which he loses in the event of their destruction, so also a tenant renting a furnished
house has an insurable interest in the furniture. Likewise a creditor whose debt is
secured by legal or equitable mortgage upon any specific property has an insurable
interest in that property. So also a mortgagor has an insurable interest in the
property mortgaged. A bankrupt remaining in possession of his estate has an
insurable interest in it. A man may also insure the profits which he expects from
some undertaking or adventure or from the carrying on a business”.
All this leaves no scope for doubt that the ownership issue racked up by the Appellant Company
was not relevant for purposes of settling the respondent’s claim. Moreso, when there was no rival
claimant to the insurance amount payable and when the respondent’s brother had not left behind
any legal heir. The Appellant Company also on no logic could withhold or retain the other half of
the insurance amount which according to it would have gone to the deceased brother of the
respondent. This, in our view, appears to be illogical on the face of it, because the Company was
under an obligation to pay to the insured who was holding the policy and who had the insurable
interest in the property. It can’t be denied that he was interested in the presentation of the insured
house and would suffer a loss for any damage caused to the house. He had the requisite
insurable interest. It was, therefore, duty bound to pay the assessed loss to the holder of the
policy and could not retain or withhold any amount on the plea that the property was in the joint
ownership of the respondent and his deceased brother. This, in our view, was the ipse dixit of the
Appellant Company which had only resulted in avoidable litigation, forcing the respondent to
approach the Commission and this Court.
Learned counsel for Appellant made a last minute prayer for reduction of the rate of interest
awarded by the Commission. We find it difficult to do so, more particularly because the
Appellant Company had dragged the Consumer / respondent to litigation for all these years and
on an irrelevant issue.
On this parity of reasoning, we find ourselves in accord with the view taken by the Commission
and affirm its order dated 28th March, 2001.
Appeal is, accordingly, dismissed.
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