In a recent ruling, the Supreme Court has reaffirmed the principle that individuals holding insurance coverage are bound by the specific terms outlined in their policies. The Court stressed the importance of a stringent interpretation of these terms, emphasizing that the contra proferentem rule, which typically favors the party not introducing a clause in a contract, does not apply to commercial contracts such as insurance agreements.
The case in question centered around Mukul Aggarwal's BMW 3 Series 320D, extensively damaged in an accident. Bajaj General Insurance rejected Aggarwal's claim, citing delays in submission, lack of response to correspondence, inconsistencies in accident descriptions, and the discovery of blood stains in the vehicle. Dissatisfied, Aggarwal sought resolution through the State Consumer Disputes Redressal Commission (SCDRC), which ruled in his favor, instructing both Bajaj and BMW to compensate him under the BMW Secure Advance policy. Bajaj and BMW, discontented with this decision, appealed to the Supreme Court.
Bajaj argued that the rejection was primarily due to Aggarwal's significant delay in reporting the accident, a valid justification for repudiating the policy. BMW, on the other hand, challenged the jurisdiction of the State Consumer Disputes Redressal Commission and disputed the decision to replace the vehicle, asserting that it rested with the insurer, not the insured.
The Supreme Court bench, comprising Justice Abhay S. Oka and Justice Rajesh Bindal, clarified that the insured does not have an unconditional entitlement to demand a replacement unless explicitly stated in the insurance policy. In cases of total loss, the insurer has the discretion to provide the insured amount or furnish a new vehicle. The Court upheld the SCDRC's jurisdiction, citing the Consumer Protection Act, and affirmed Aggarwal's entitlement to compensation but ruled against the directive to replace the car, mandating monetary compensation instead.
The Court highlighted the need for a strict interpretation of insurance policy terms, referencing the recent case of National Insurance Company Ltd. vs. Chief Electoral Officer and Ors. It noted the absence of a specific provision in the BMW-issued policy addressing replacement in cases of total loss or theft. The appeals were partially granted, substituting the State Commission's directive to replace the car with an order for monetary compensation. This decision underscores the importance of adhering to the explicit terms of insurance policies in determining liability.
Case: Bajaj Allianz General Insurance Co. Ltd. vs. Mukul Aggarwal and Ors,
Civil Appeal No. 1544 of 2023.
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