In a recent ruling by the Supreme Court of India, in the case of United India Insurance Co. Ltd. v. Contractors of NH-76 Bridge Construction Project, a detailed examination of the insurance claim dispute was conducted. The judgment delves into the responsibility for the bridge collapse that resulted in the tragic loss of lives during construction. Stay tuned for insights into the interpretation of exclusion clauses in insurance contracts and expert reports’ evidentiary value.
Facts
- The appellant, United India Insurance Co. Ltd., contested a decision by the NCDRC regarding a Consumer Complaint.
- The NCDRC’s order dated 16.01.2023 directed the appellant to pay an insurance claim of Rs. 39,09,92,828.
- The construction project involved a joint venture responsible for design, construction, and maintenance of a bridge across the river Chambal on NH-76 at Kota, Rajasthan.
- The collapse of a part of the bridge during construction resulted in the death of 48 workmen in 2009.
- An Expert Committee was formed to investigate the cause of the collapse, with charges filed against officials of the joint venture companies under relevant provisions.
- The committee report highlighted deficiencies in workmanship and design, contributing to the collapse.
- NHAI informed the insurance company about the incident and sought indemnification for the loss.
- The bridge was inaugurated in 2017 and has been in operation since then.
- The insurance claim was repudiated by the appellant based on the surveyor’s report and findings of the Expert Committee.
- The appellant reaffirmed the repudiation after considering various documents and reports submitted by the contractors and technical experts.
- The NCDRC concluded that there was no fault in the design of the bridge based on reports from technical experts and the NHAI’s decision.
- The NCDRC directed the appellant to pay a sum of Rs. 151,59,94,542/- along with interest to the contractors based on the revised claim amount.
- The NCDRC dismissed the objection regarding the limitation for filing the complaint, stating the period started from 17.04.2017.
- Various agencies involved in the project were allocated responsibilities for the collapse by the NCDRC, including M/s SYSTRA and M/s COWI.
- NHAI issued a show-cause notice to the contractors but eventually permitted them to continue with the remaining part of the project.
- The surveyor’s final report assessed the total loss at Rs. 39,09,92,828/-, and the NCDRC found the Expert Committee’s report inconclusive.
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Arguments
- The NCDRC rejected the preliminary objection of the appellant regarding the summary jurisdiction under the Consumer Protection Act, 1986.
- Mr. Dama Seshadri Naidu, representing the respondents, could not support the judgment amending paragraphs 28 and 29, directing the payment of the revised amount of Rs. 151,59,94,542/-.
- Mr. Naidu referred to the judgment in Texco to highlight the burden exclusionary clauses place on insurance companies.
- He reiterated the NCDRC’s finding that the evidence presented was inconclusive and amounted to mere opinion.
- The appellant relied on the affidavit of evidence by Mr. S. Anantha Padmanabhan, examined as RW 2 to justify their repudiation.
- The appellant produced the surveyor’s report and the Expert Committee’s report as Ex. RW 2/2.
- The independent experts’ reports relied upon by the respondents were not marked as exhibits as they were not adduced in evidence.
- Mr. Naidu attempted to use the reports of independent experts on design to show that the respondents were not at fault.
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Analysis
- Insurance is a contract of indemnification for defined losses, to be read strictly by courts.
- Expert reports by Mr. Jacques Combault, M/s SETRA/CETE, M/s Halcrow Group Ltd., and AECOM Asia Co. Ltd. were not examined by NCDRC.
- Variations in construction sequence without consulting design consultants highlighted.
- Insurer cannot be asked to cover losses not mentioned in the contract.
- Discrepancies between approved drawings and actual construction noted.
- Design aspects leading to collapse, responsibility attributed to contractors and design consultants.
- Surveyor’s report considered credible evidence in absence of contradicting evidence.
- Exclusion clauses in insurance contracts interpreted strictly against insurer.
- The Expert Committee’s report and surveyor’s findings supported repudiation of claim.
- Changes on-site without design checker approval, lack of co-ordination among joint venture partners discussed.
- In Texco Marketing P. Ltd. v. TATA AIG General Insurance Company Ltd., the burden of proving the applicability of an exclusionary clause lies on the insurer.
- The burden has been discharged by the appellants in National Insurance Company Ltd. v. Vedic Resorts and Hotels Pvt. Ltd.
- Evidence must unequivocally establish that the event sought to be excluded is specifically covered by the exclusionary clause.
- It is the duty of the insurer to plead and lead cogent evidence to establish the application of such a clause.
- The NHAI’s decision to continue the contract with the respondents does not impress the court.
- The continuation of work by the respondents may have various reasons.
- An economic decision by NHAI cannot serve as a valid reason for not applying the contractual clause.
- The NCDRC made errors in law and fact in allowing the consumer complaint.
- The court rejected the preliminary objection of the appellant and conducted a detailed examination of the facts.
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Decision
- The evidentiary value of the reports was examined in detail
- The scope and ambit of the reports were analyzed
- The contents of the reports were scrutinized
- The appeal was allowed and the impugned order dated 16.01.2023 was set aside
- Pending applications will be disposed of
Case Title: UNITED INDIA INSURANCE CO. LTD. Vs. M/S. HYUNDAI ENGINEERING AND CONSTRUCTION CO. LTD. (2024 INSC 431)
Case Number: C.A. No.-001496 – 2023
