The Supreme Court of India, in a significant judgment on fire insurance law, has held that the precise cause of a fire is “immaterial” for settling a claim, provided there is no finding of fraud or that the insured was the instigator of the fire.
In a judgment dated October 30, 2025, a bench comprising Justice Dipankar Datta and Justice Manmohan ruled that if a loss by fire is established and fraud is not alleged, the fire “will have to be assumed and presumed… that the fire is accidental” and covered by the policy.
The Court set aside the repudiation of a claim by the National Insurance Co. Ltd., dismissing the insurer’s appeal and allowing the appeal filed by the insured, M/s Orion Conmerx Pvt. Ltd. The Court found the insurer’s rejection of the claim was “untenable in law and suffers from arbitrariness and perversity,” heavily criticizing the final surveyor’s report as having a “perverse approach.”
Background of the Case
The appeals challenged an order dated August 10, 2020, from the National Consumer Disputes Redressal Commission (NCDRC). The NCDRC had partly allowed the insured’s complaint over a fire incident on September 25, 2010. The National Commission held that the surveyor “had not proved that the fire was not accidental” and awarded ₹61,39,539/- (the amount assessed by the surveyor) with 9% simple interest from the date of repudiation.
The Insured (Orion Conmerx) appealed this order, seeking its full claim of ₹3.30 crore. The Insurance Company also appealed, challenging any liability.
The National Insurance Co. Ltd. had repudiated the claim vide a letter dated June 14, 2011, stating that the “nature of damage did not support the manifestation of an occurrence which could reasonably… be concluded as an occurrence within the terms and conditions” of the policies.
Arguments of the National Insurance Company
Ms. Shantha Devi Raman, counsel for the Insurance Company, submitted that the repudiation was justified.
- She stated that while a preliminary surveyor indicated an electrical short circuit as the “most probable cause,” the final surveyor concluded otherwise.
- The final surveyor’s report, after debris removal, found findings “which preclude the possibility of an accidental ignition of electrical origin.” The report noted that “walls and roof right above the electrical fitting had been spared almost completely” and that “thin plastic sheets and accessories such as buttons were intact.”
- The final surveyor concluded that “no accidental fire had occurred” and there was “manifestation of multiple sources of fire.”
- The insurer argued the insured “had not led evidence of any forensic expert” to disprove this finding.
- It was further contended that the policies did not provide coverage for ‘FFF’ (furniture, fixtures, and fittings).
- The insurer challenged the insured’s claim, arguing the supporting reports from an architect (M/s AURA) and a Chartered Accountant (M/s Tarun Gandhi & Co.) were mere “estimates” and “approximation,” not based on physical visits or substantiated data.
- The insurer also pointed out that the insured’s claim included samples, which its banker (Canara Bank) had excluded from its own stock valuation report.
- In the alternative, the insurer argued that if any amount was payable, it should be the net assessed loss (₹44,35,174) and not the gross loss (₹61,39,539) awarded by the NCDRC.
Arguments of the Insured (Orion Conmerx)
Mr. Ramesh Singh, learned senior counsel for the Insured, refuted the insurer’s contentions.
- He argued the fire was accidental, citing the preliminary surveyor’s report and a police investigation report which concluded the matter “has been found of accidental fire.”
- The final surveyor’s report was described as “inconclusive” and “flawed” for, among other things, failing to consider ventilation as a critical factor.
- The insured contended that the exclusion of ‘FFF’ was a “clear error,” pointing to Policy No. 360901/11/103400000092 which “clearly provided for ‘FFF’ which means furniture, fittings and fixtures.”
- The insured maintained its claim was substantiated by 5,855 pages of contemporaneous documents provided to the surveyor, including cost sheets, purchase orders, stock movement registers, and VAT returns.
- Mr. Singh argued the final surveyor’s assessment of stock loss was “clearly wrong” because it “completely left out the unidentifiable/unrecognizable goods” (i.e., those destroyed by fire) and only valued goods damaged by water.
- The insured heavily criticized the surveyor for having “arbitrarily awarded a uniform compensation of ₹450/- for each damaged item,” irrespective of whether it was a “leather belt or leather jacket or polyester lining.”
- The insured sought its full claim and enhanced interest from three months after the incident.
Supreme Court’s Analysis and Findings
The Supreme Court, in its judgment authored by Justice Manmohan, systematically dismantled the insurer’s grounds for repudiation.
1. On the Cause of Fire: The Court first established the legal principle, stating the object of a fire policy is to protect against accidental fire. It held that the cause of the fire only becomes material if there is suspicion of a “wilful act of Insured” (fraud) or bad faith.
The bench cited New India Assurance Company Limited and Others vs. Mudit Roadways (2024), which held, “‘the precise cause of a fire… remains immaterial, provided the claimant is not the instigator of the fire’.”
Applying this, the Court delivered its primary finding: “…this Court is of the opinion that once it is established that the loss is due to fire and there is no allegation/finding of fraud or that the Insured is the instigator of the fire, the cause of fire is immaterial and it will have to be assumed and presumed that the fire is accidental…”
The Court found the final surveyor’s conclusion that the fire was “not accidental” to be “not correct.” It held that even if the surveyor found multiple sources, “the said finding cannot lead to the conclusion that the fire in question is not accidental.”
Crucially, the judgment noted: “the final Surveyor in its report has neither concluded that the incident of fire falls within the exception/exclusion clause… nor fraud, negligence or intentional damage by the Insured.”
The Court declared the basis for rejection as “contrary to record, untenable in law and suffers from arbitrariness and perversity.”
2. On ‘FFF’ (Furniture, Fixtures, and Fittings) Coverage: The Supreme Court agreed entirely with the insured. It found the policy “clearly provides for ‘FFF’ which can only mean furniture, fixtures and fittings.”
It chastised the surveyor for giving an “evasive reply” to interrogatories about the meaning of ‘FFF’, wherein the surveyor repeatedly answered, “The question calls for an argumentative reply.”
Furthermore, the Court held the NCDRC’s finding that “no premium had been paid” for FFF was “contrary to record.” Citing Canara Bank vs. United India Insurance Company Limited (2020), the bench reiterated that “coverage provisions should be interpreted broadly” in favor of the insured.
3. On Substantiation of Loss: The Court found the insured had substantiated its claims with “contrapuntal documents maintained in the regular course of business,” including details of cancelled orders from major clients like Levis Strauss, Benetton, and Gap.
It found the insurer’s argument that “cancellation of orders does not prove the actual loss” to be “erroneous.”
The judgment strongly criticized the final surveyor, stating he “has not dealt with the 5,855 (five thousand eight hundred fifty five) pages’ documents” and “has erroneously recorded in his report that ’till date insured have not submitted any reasonable or correlatable documentary evidence…'”
The Court described the surveyor’s method of assigning “an average uniform per unit price of Rs.450/-” for all stock as “arbitrarily assigned” and “deeply flawed,” as it ignored both the cost sheets and the nature of the stock.
Dismissing the insurer’s insistence that the insured’s experts should have physically visited the site as a “red herring,” the Court stated that the “quantity and value of the goods” were more reliably ascertained from “documents and evidence maintained by the Insured in normal course of business.”
The Court also found the surveyor’s calculations for depreciation and salvage to be “misconceived,” noting that leather products damaged by fire and water are “worthless.”
Conclusion and Final Order
The Court concluded that “the final Surveyor has not only misdirected itself in law, but has adopted a perverse approach…”
Stating that “the objective of the fire insurance policy is to restore the policyholder to the financial position before the loss,” the Supreme Court dismissed the appeal filed by the National Insurance Company.
The appeal filed by the Insured, Orion Conmerx Pvt. Ltd., was allowed. The Court modified the relief granted by the NCDRC, directing the insurer to pay the claim amount with simple interest at 6% per annum, calculated from three months from the date of the incident (September 25, 2010) until the date of payment.
