I.C. Sharma vs The Oriental Insurance Co. Ltd. on 10 January, 2018



                                  IN THE SUPREME COURT OF INDIA

                                    CIVIL APPELLATE JURISDICTION

                                    CIVIL APPEAL NO. 3167 OF 2017

          I.C. Sharma                                                  …. Appellant(s)


          The Oriental Insurance Co. Ltd.                             … Respondent(s)


Deepak Gupta J.

1. This appeal filed by the complainant/consumer is directed

against the order dated 29.09.2014 passed by the National

Consumer Disputes Redressal Commission (for short ‘the National

Commission’), New Delhi, disposing of the revision petition filed by

the parties and also against the order dated 22.02.2016 disposing

of the review petition filed by the appellant.
Signature Not Verified

Digitally signed by

2. Briefly stated the facts of the case are that the appellant had
Date: 2018.01.10
16:57:08 IST

first purchased a householder insurance policy from the Oriental

Insurance Company (‘the Insurance Company’ for short) on

23.12.2000. This policy was renewed till 22.12.2005. As per this

policy the coverage of articles/items in the house of the appellant

was “as per list”. It is not disputed that thereafter the Insurance

Company discontinued “as per list” policies and instead started

issuing policies for consolidated amounts. The original policy had

expired on 22.12.2005 and fresh policy as per new scheme was

taken out on 19.01.2006 and this was renewed from time to time.

The last renewal was from 19.01.2007 to 18.01.2008.

3. The appellant had gone to the United Kingdom. Some time,

between 27.01.2008 to 30.01.2008, a burglary took place inside the

premises of the appellant, and he was informed about the same by

a neighbor on 31.01.2008. The appellant requested his nephew to

inform the Insurance Company and an FIR was also registered with

the Mehrauli Police Station in South Delhi. The Insurance

Company was also informed about the burglary on 31.01.2008 or

on the next day. The police could not trace out the crime.

4. The Insurance Company first offered a sum of Rs. 3,500/- to

the appellant sometime in November, 2008 which he refused to

accept. He, thereafter, met certain higher officials of the Insurance

Company and an amount of Rs.29,920/- was offered to him. Being

dissatisfied, the appellant filed a claim before the District Consumer

Disputes Redressal Forum (for short ‘the District Forum’), which

was disposed of by the District Forum on the ground that the

articles mentioned therein were not mentioned in the list.

Thereafter, the appellant filed an appeal before the State Consumer

Disputes Redressal Commission (for short ‘the State Commission’)

which was allowed on 15.01.2014 and he was awarded a sum of


5. Revision petitions were filed both by the appellant claiming

interest and compensation and by the Insurance Company against

the order of the State Commission. The main ground in the petition

filed by the Insurance Company was that a large number of items

which had been claimed to be stolen were not insured and there

was a lot of under-insurance. The National Commission held that

once the appellant had supplied a list of articles for the first policy,

if there was any change he should have filed a fresh list and since a

large number of articles were not mentioned in the list the claimant

was only entitled to an amount of Rs.21,000/- towards the value of

stolen gold articles; Rs.5,929/- towards the depreciated

value of Citizen watch; Rs.7,000/- for repair of door latches etc.;

and Rs.16,000/- towards the value of stolen clothes after making

appropriate deduction for under-insurance of clothing. The

complainant was also awarded compensation of Rs.5,000/- towards

the cost of litigation etc. The appellant filed an SLP before this

Court and he was granted liberty to file a review petition before the

National Commission mainly on the ground that the policy of

2008-2009 was not considered by the National Commission.

6. The National Commission in the review petition took into

consideration the fact that the new insurance policy did not require

a list of items to be given. It, thereafter, awarded amounts under

various heads as follows:-

i) Jewellery and valuables – Claimant claimed that the

jewellery lost was worth Rs.1,84,150/- but the insurance package

was only for Rs.1,00,500/-. The National Commission ordered the

Insurance Company to pay the amount after making adjustment for


ii) Two cutlery sets in silver valuing Rs.31,000/- – The

National Commission held that these items were not insured and

did not fall under the heading of ‘kitchenware/crockery/cutlery


iii) Clothing – The insured value of clothing was

Rs.55,000/- and the claimant claimed Rs.87,000/-. The National

Commission directed payment of this amount after making

adjustment for under-insurance.

iv) Electrical/Mechanical appliances – The appellant

claimed a sum of Rs.66,000/- for loss of electrical and mechanical

appliances, as against the coverage of Rs.1,82,500/-. This claim

was rejected on the ground that the claimant failed to produce bills

of invoices towards this amount.

v) Miscellaneous items – The appellant claimed

Rs.28,000/- for loss of miscellaneous items including watches

valuing Rs.20,000/- as against the coverage of Rs.41,000/-. He

has been awarded only Rs.8,000/- and the claim for watches of

Rs.20,000/- has been rejected on the ground that he failed to

produce purchase invoices.

vi) Repair of locks, doors, latches, safe etc. – The appellant

was awarded Rs.7,000/- for repair of locks, doors, latches, safe etc.,

as claimed by him.

vii) The claimant was also awarded compensation of

Rs.10,000/- and interest @ 9% per annum.

7. Aggrieved, the appellant is before this Court.

8. The only legal issue which arises for consideration is “what is

under-insurance – and the effect thereof?”. Under-insurance

basically means that the insured has taken out an insurance policy

in which he has valued the insured items for a sum which is less

than the actual value of the insured item. In a country like India

this is normally done to pay a lesser premium. This is, in fact,

harmful to the policy holder and not to the Insurance Company

because even if the entire insured property is lost, the policy holder

will only get the maximum sum for which the property has been

insured and not a paisa more than the sum insured. To give an

example, in case a person takes out the householder policy covering

fire insurance and gives the value of the structure of his house and

goods stored therein at Rs.50,00,000/- even though the value of the

same is Rs.1,00,00,000/- then even if the entire house and goods

are completely lost in a fire, he cannot get an amount above

Rs.50,00,000/- even though the value may be more.

9. If all the insured goods are lost then there is no problem. The

insured is entitled to the amount for which the goods were insured

even if that be less than the actual value of the goods. In case a

person gets a painting insured for Rs.1,00,000/- though the value

of the same is Rs.10,00,000/-, if the painting is lost the insured is

entitled to Rs.1,00,000/- only. If all the insured goods falling under

one head are stolen or lost then the insurance company cannot

apply the principle of averaging out because, though the loss may

be Rs.10,00,000/-, the claimant will get only one Rs.1,00,000/-as

per the value assessed and the insurance premium paid by him.

10. The Insurance Company can however apply the principle of

averaging out when all the goods are not destroyed. Supposing the

entire house was insured for Rs.50,00,000/-, but on valuation it is

found that the value of the structure and the goods was

Rs.1,00,00,000/- and if the policy holder claims that he has

suffered loss of Rs.40,00,000/- then he will be entitled to only

Rs.20,00,000/-, by applying the principle of averaging out. What

this means is that if the value of the goods is more than the sum for

which they are insured then it is presumed that the policy holder

has not taken out insurance policy for the un-insured value of the

goods. The claim is allowed by applying the principle of averaging

out, i.e. the insured is paid an amount proportionate to the extent

of insurance as compared to the actual value of the goods insured.

11. To clarify the matter further, we may give another example.

Supposing, the insurer owns two paintings of Rs.5,00,000/- each

but pays premium for insurance cover of Rs.1,00,000/- for both the

paintings. If one painting is lost, even though the value of the

painting may Rs.5,00,000/- he will not get Rs.1,00,000/- but will

get only Rs.50,000/-, as proportionate amount. Therefore, when a

group of items is insured under one heading and only some of the

items and not all items are lost/stolen then the principle of

under-insurance will apply. However, if all or most of the items of

value covered under the policy are stolen, then the insurance

company is bound to pay the value of the goods insured.

12. Applying this principle we may now deal with this case.

i) Jewellery and valuables – The entire jewellery and

valuables were insured for Rs.1,00,500/- but the claimant claimed

that the value of jewellery stolen was Rs.1,84,150/-. In this case

the entire jewellery was stolen. Therefore, the averaging out clause

will not apply and the claimant is entitled to a sum of Rs.1,00,500/-

under this head.

ii) Silver cutlery sets – The case of the claimant is that

these were insured under the head of ‘kitchenware/crockery/

cutlery’ items. According to him, the value of these sets is

Rs.31,000/-. Obviously kitchenware/crockery/cutlery will include

many other items lying in the kitchen and in the dining room.

Silver cutlery sets would normally fall under the head ‘jewellery and

valuables’ and since the claimant has been awarded the maximum

amount payable under that head, now he cannot divert the claim

for silver cutlery to the head ‘kitchenware/crockery/cutlery’. This

Court can take judicial notice of the fact that in any middle class

household kitchenware/crockery/cutlery would value more than

Rs.18,000/-. It is obvious that silver cutlery valuing Rs.31,000/-

could not be insured under the head kitchenware/crockery/cutlery’

which was valued only for Rs.18,000/-. Therefore, the National

Commission was right in holding that there was no coverage for this


iii) Clothing – The appellant claims that he has suffered a

loss of Rs.87,000/- , as against the coverage of Rs.55,000/-.

However, on perusing the statement of the appellant himself we find

that he has shown Rs.87,000/- to be the value of only six items of

clothing. There must have been many other items of clothing in the

house and when all the clothing has been insured under one

heading, it will include clothing items of all types, both expensive

and in-expensive. Admittedly, all items of clothing were not stolen

and, therefore, in this case the principle of under-insurance will

have to apply and the National Commission was right in directing

that the payment be made after applying principle of



iv) Electrical/Mechanical appliances – The coverage

under this head was Rs.1,82,500/- and the claimant claimed only

Rs.66,000/- and he gave the details of the items. This claim has

been rejected only on the ground that he had not produced invoices

of the same. The case of the appellant was that those items were

gifted by his son. The items such as CD changer, video camera,

DVD player, Camera etc. could be found in any middle class

household. It is not the case of the Insurance Company that these

items were not stolen. The claim should not have been rejected

only on the ground that invoices were not produced. The affidavit

of the appellant clearly indicates both the nature of the items lost

and the value thereof. This is supported by corroborative evidence

of the list of items given to the police. Once the insurance company

itself changed its policy from ‘as per list policies’ to ‘policies for

consolidated amounts’, then an insured is not expected to give the

item-wise details along with the valuation. We may also add that if

the insurance company desires that item-wise valuation should be

given for items over and above a certain value then it is the duty of

the insurance company to advise the insured at the time of issuing

the first policy of insurance and at the time of each renewal. The

insurance company must at the time of accepting the premium

advise the policy holder properly. The insurance company cannot

accept the premium without asking for any details and later deny

its liability on the ground that such details were not given.

Therefore, we accept the claim of the claimant and he is entitled to

Rs.66,000/- under this head.

v) Miscellaneous items – On the same reasoning as

given for electrical/mechanical appliances we accept the claim of

the appellant of Rs.20,000/- for loss of four watches and, therefore,

he is entitled to Rs.28,000/- under this head.

vi) Repair of locks, doors, latches, safe etc. – The claimant

has already been awarded Rs.7,000/-under this head.

13. In addition thereto, we are of the view that the claimant

should be awarded Rs.25,000/-towards compensation and

litigations expenses etc. On the aforesaid amounts the appellant

shall be entitled to an interest @12% per annum w.e.f. 01.01.2009

till payment. The Insurance Company shall be entitled to

adjust/deduct the amounts already paid/deposited by it.

14. The appeal is disposed of in the above terms. Pending

applications, if any, shall also stand disposed of.

15. The Registry is directed to send a certified copy of this

judgment to the appellant, who appeared in person.


(Madan B. Lokur)


(Deepak Gupta)

New Delhi
January 10, 2018

Article source: Supreme Court

WP Socializer Aakash Web