The Supreme Court has held that an insurance company cannot repudiate a claim for damage caused by fire on the ground that the proximate cause was attempted burglary—an excluded peril under the “Riots, Strike, Malicious Damage” (RSMD) clause—when “Fire” itself is a specified peril in the policy that does not exclude fire resulting from theft or burglary.
The Bench, comprising Justice J.K. Maheshwari and Justice Vijay Bishnoi, set aside the order of the National Consumer Disputes Redressal Commission (NCDRC) which had dismissed the insured’s complaint. The Court remitted the matter back to the NCDRC to assess the loss.
Background of the Case
The Appellant, Cement Corporation of India, held a “Standard Fire and Special Perils Policy (Material Damage)” issued by the Respondent, ICICI Lombard General Insurance Company Limited, for its Mandhar Cement Factory in Chhattisgarh.
On the morning of November 1, 2006, a fire incident occurred at the factory. According to the Surveyor’s report, thieves entered the premises intending to steal winding copper and transformer oil. They used bolt cutters and a blow torch/portable gas cutter, which triggered a fire in a transformer. The fire resulted in loss to the property.
The Appellant lodged a claim of Rs. 2,20,14,190. However, the Surveyor opined that the fire was a result of attempted theft. Based on this, the Insurance Company repudiated the claim on January 4, 2008, stating:
“…the proximate cause of loss was Burglary. Kindly note that this policy is a named peril policy and this peril is not covered under the policy (RSMD Exclusion Clause-D).”
Aggrieved, the Appellant approached the NCDRC. The Commission dismissed the complaint, holding that the proximate cause was burglary, which was not covered. The NCDRC relied on the Supreme Court’s decision in New India Insurance Company Limited Vs. Zuari Industries Limited (2009), ruling that the active and efficient cause was burglary, not fire. The Appellant then moved the Supreme Court.
Arguments of the Parties
The counsel for the Appellant argued that the policy protected against loss caused by “Fire,” a specified peril. It was submitted that under the “Fire” peril, the policy only excluded damage caused by spontaneous combustion/fermentation or burning by order of a Public Authority. The Appellant contended that since the policy did not list theft or burglary as an exclusion in the case of fire, the cause of the fire was irrelevant.
Conversely, the Respondent-Insurer argued that the policy was a “named peril policy” and specifically excluded loss from burglary under Clause V(d) (RSMD). The counsel submitted that the theft preceded the fire and was the “active and efficient cause” of the damage. Relying on Zuari Industries, the Respondent asserted that had the theft not occurred, there would have been no fire, and thus the claim was rightly repudiated under the exclusion clause.
Court’s Analysis
The Supreme Court examined the terms of the policy, noting that “Fire” was listed as Peril No. I. The Court observed that the exclusions specific to the “Fire” peril were limited to:
(a) fermentation, natural heating, or spontaneous combustion; and
(b) burning of property by order of any Public Authority.
Justice Vijay Bishnoi, writing for the Bench, observed:
“From the above, it is clear that burglary/theft are not included in the exclusion given in the specified peril ‘Fire.’… Once it is not disputed that the loss is caused by fire, then the cause igniting the fire becomes immaterial. The insurer cannot refuse to indemnify the damage caused by fire, which is a specified peril, on the ground that the proximate cause of fire was burglary/theft (which is excluded under the RSMD clause), particularly when no such exclusion is provided in the specified peril ‘Fire’.”
The Court emphasized that while the general exclusion in the policy excluded loss by theft “during or after the occurrence of the insured peril,” the policy was silent on burglary/theft preceding the insured peril.
Referring to legal precedents, the Court cited Sri. Balaji Traders vs. United India Insurance Co. Ltd. (2005) and the recent judgment in Orion Conmerx Pvt. Ltd. vs. National Insurance Co. Ltd. (2025), reiterating that the cause of fire is immaterial unless it is occasioned by the willful act of the insured.
The Court noted:
“It is now established that the loss caused to the Appellant was due to fire only and the incident of theft/ burglary merely preceded the incident of fire.”
Addressing the interpretation of exclusion clauses, the Bench relied on Texco Marketing Private Limited vs. Tata AIG General Insurance Company Limited (2023) and Shivram Chandra Jagarnath Cold Storage vs. New India Assurance Company Limited (2022), stating that exclusion clauses must be construed strictly and any ambiguity must be interpreted in favor of the insured.
The Court held:
“It is a trite law that the exclusions in the contract for insurance must be read strictly and, therefore, the exclusion provided under the RSMD clause would not oust the liability of the insurer when the loss or damage is attributable to the peril of fire which has its independent exclusions.”
Decision
The Supreme Court allowed the appeal and set aside the NCDRC’s impugned judgment dated July 16, 2015, and the Respondent’s repudiation letter.
The Court held that there was no justification for the Respondent to repudiate the claim. The matter has been remitted to the NCDRC to assess the loss pursuant to the claim filed by the Appellant. The Court directed the NCDRC to decide the issue expeditiously, “not later than six months from the date of receiving the certified copy of this judgment.”
Case Details:
Cement Corporation of India v. ICICI Lombard General Insurance Company Limited
Civil Appeal No. 2052 of 2016
Citation: 2025 INSC 1444
Coram: Justice J.K. Maheshwari and Justice Vijay Bishnoi
