Insurance Company Cannot Unilaterally Delete Policy Terms To Reduce Coverage

In CIVIL APPEAL NO. 1128 OF 2019, M/S TWENTY FIRST CENTURY MEDIA PRIVATE LIMITED vs NEW INDIA ASSURANCE COMPANY LTD., appeal was filed against the decision of the High Court both single bench as well as the division bench from interfering in the dispute on the ground that it was a contractual issue involving disputed question of facts only.

The issue was the decision of the insurance company in deleting the expressions "floods, rains" from the policy issued by it. The insurer had earlier issued issued the policy  covering cricket matches to the appellant with the deleted expressions and the appellant had raised claim on the insurer on the said grounds.after the match at Kochi was abandoned. The insurer after settling the claim, apprehending that similar claims may be made in future qua other matches, unilaterally deleted from the policy, the expression “floods, rains, etc.” 

The appellant initially approached the high court stating that the action of the insurance company was arbitrary and affects its fundamental right under Article 14 of the Constitution of India and finally reached the Supreme Court.

The Supreme Court setting aside the decision of the high court held that there is no dispute whatsoever that the action in the present case by the respondent was wholly arbitrary and violated the appellant’s fundamental right under Article 14. No disputed question of fact is raised, and it is settled by several decisions of this Court that even within the contractual sphere, the State, as defined under Article 12 of the Constitution, cannot be arbitrary.