Insurer cannot ignore document that it had itself called for from independent and impartial authorities

Cause Title : M/s. Isnar Aqua Farms Vs. United India Insurance Co. Ltd., Civil Appeal No. 1077 Of 2013, Supreme Court Of India

Date of Judgment/Order : 8/8/2023

Corum : A. S. Bopanna, J & Sanjay Kumar, J

Citied: 

1. General Assurance Society Limited Vs. Chandumull Jain and another [AIR 1966 SC 1644]
2. Jacob Punnen and another Vs. United India Insurance Company Limited [(2022) 3 SCC 655]
3. Modern Insulators Limited Vs. Oriental Insurance Company Limited [(2000) 2 SCC 734]

Background

The petitioner a prawn cultivation farm, obtained insurance coverage from the respondent Insurance Company for a period of five months from in relation to all the 37 ponds in its operation. 

Subsequently there was a major outbreak of a bacterial disease called ‘White Spot Disease’ along the east coast of Andhra Pradesh, which led to mass mortality of prawns in the area, including the appellant’s farm. This led to invocation of the insurance policy by the appellant. However, upon submission of a claim thereunder by the appellant and after two separate surveys were conducted at its own behest, the respondent insurance company repudiated the appellant’s claim in its entirety. According to the insurance company, there was a breach by the appellant of the policy conditions, inasmuch as records were not maintained properly and accurately; records were not produced at the time of the survey; and whatever records were produced were unsubstantiated.

The Petitioner approached the NCDRC and the Tribunal found favour with the Petitioner. However, as the amount ordered being insufficient, the Petitioner approached the Supreme Court. The SC remanded the matter back to NCDRC for reconsideration but the fresh order was also unsatisfactory. Therefore this appeal.

Judgment

The Supreme Court referring to the above judgments observed that it is the fundamental principle of insurance law that utmost good faith must be observed by the contracting parties. This obligation and duty would rest on both parties not only at the inception of the contract of insurance but throughout its existence and even thereafter.

The SC observed that the insurer having conducted the survey reports and with one of the surveyors finding that total loss was suffered by the appellant and the other actually quantifying the appellant’s loss at ₹.17,64,097/-, the respondent insurance company chose to repudiate the appellant’s claim in its entirety, basing on the wholly unfounded assertion that the appellant had failed to maintain and provide proper records.

Further, in its written statement filed before the NCDRC, the insurance company had itself stated that it was the duty of the claimant/insured to obtain the death certificate from the Marine Products Export Development Authority (MPEDA), Ministry of Commerce and Industry, Government of India, or from the State Fisheries Department. Reference was made by the insurance company to its letter dated 17.04.1995 addressed to the appellant, wherein it had pointed out that it was clearly mentioned in the claim form that the death certificate must be signed either by the MPEDA authorities or by the State Fisheries Department and called upon the appellant to obtain the certificate from either of the authorities and submit it to the company for further action. Such a certificate was obtained by the Appellant from the Directorate of Fisheries, Andhra Pradesh, Visakhapatnam.

Further, having attached great importance to the death certificate given by the MPEDA/State Fisheries Department in its policy and its prescribed claim procedure, the insurance company baldly brushed aside the said Death Certificate

The SC held that it is not open to an insurance company to ignore or fail to act upon a certificate or document that it had itself called for from independent and impartial authorities, subject to just exceptions, merely because it is averse to it or to its detriment. Having undertaken to indemnify an insured against possible loss in specified situations, an insurance company is expected to make good on its promise in a bonafide and fair manner and not just care for and cater to its own profits.