In the recent case of Bajaj Allianz General Insurance Co. Ltd. v. Mukul Aggarwal on November 20, 2023, the Supreme Court reiterated the principle that an insured cannot claim more than what is covered by the insurance policy. The Court emphasized the need to interpret the terms of an insurance policy strictly to determine the liability of the insurance company.
Referring to the ruling in National Insurance Company Ltd. v. Chief Electoral Officer, the Supreme Court clarified that the rule of contra proferentem, which interprets ambiguous clauses against the party introducing them, does not apply to commercial
contracts like insurance. The Court, presided over by Justice Abhay S Oka and Justice Rajesh Bindal, highlighted that insurance contracts are bilateral agreements and must be treated like any other commercial contract.
The case involved an accident in Gurgaon where a BMW car, covered by a motor insurance policy from Bajaj Allianz General Insurance Company Ltd., suffered irreparable damage. The owner also had the BMW Secure Advance Policy. The owner claimed that if the car’s damage exceeded 75% of the Insured Declared Value (IDV), the insurer should provide a new car. The State Consumer Disputes Redressal Commission directed the insurer and BMW to replace the damaged car. Interpreting the insurance policy, the Court held that the insurer had the option to repair or replace the vehicle in case of total loss. The Court concluded that it was not the insured’s absolute right to claim replacement; rather, it was at the insurer’s discretion. Examining BMW’s policy, the Court found no specific provision for vehicle replacement in case of total loss or theft. The Court held BMW liable under BMW Secure only if the insurer accepted a case of total loss.
The Court rejected the grounds for repudiating the insurance policy, stating there was no substance to the repudiation grounds. The Court found a deficiency in service under the Consumer Protection Act, 1986, and awarded compensation to the owner. The Court quantified the insurer’s liability at Rs. 25, 83,012.45 under the Motor Insurance Policy. Additionally, the Court directed
the insurer to pay Rs. 3,74,012 as the difference in value between the damaged vehicle and a new car of the same make.
In summary, the appeals were partly allowed, and the direction to replace the car was substituted with a directive to pay monetary compensation.
