PROCEEDINGS BEFORE THE SUPREME COURT

IPIC approached the Supreme Court and appraised the Court about the scope of cover of the proposal form for the Burglary Insurance. It was argued that the rule of contra proferentem would be applicable to the present case and placed reliance on the Supreme Court decision of United India Insurance Co Ltd v Orient Treasures (P) Ltd reported at (2016) 3 SCC 49.

IPIC further argued 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.”

On the other hand NIA argued that a standard policy was issued to IPIC and “… .that an insurance policy is akin to a commercial contract and has to be construed strictly. ……a forcible entry and/or exit is compulsory for maintainability of a claim under the policy.”

The Court while reaching its conclusion relied on the its earlier judgment of United India Insurance Co v Harchand Rai Chandan {(2004) 8 SCC 644} where it was observed by the Supreme Court that:

“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. ……. 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.”

“Following the well accepted principle that a contract of insurance which is like any other commercial contract should be interpreted strictly, the Court was 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 Court after considering the submissions of both the parties upheld the decision of the MRTP. The Court said 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. Therefore, following the well accepted principle that a contract of insurance which is like any other commercial contract should be interpreted strictly, the Court was 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 Court also said that the terms of insurance must be construed strictly without adding or deleting anything from the terms. Therefore, applying the said principle, the Court said that: “we have no doubt that a forcible entry is required for a claim to be allowed under the policy for burglary/house breaking.”

In relation to ambiguity in the policy wording relied on authorities and the Supreme Court cases and was of the view that if there is any ambiguity in the wording then it should be interpreted in favour of the insured. However, “we see no ambiguity in the relevant clause of the policy and the rule of contra proferentem is not applicable.”