Insurance Case Study

1. Burglary Insurance Policy District consumer disputes redressal forum-I, Chandigarh, has held United India insurance company of deficient in its services and directed it to pay a compensation of Rs 13,29,794 to the complainant. According to the complaint, Sameer Gupta, resident of Sector 18 and owner of an industrial unit, had got a burglary insurance policy from the United India Insurance for a sum assured of Rs 60 lakh. The policy was valid from March 31, 2009 to March 30, 2010; and it covered the risk of stock, raw material, semi finished and finished goods and also the machinery and the plant. "On March 23, 2010, a major theft was held at the factory of Sameer in Industrial Area, Phase-I in Chandigarh. A police case was registered and after evaluation it was found that the stock of zinc raw material, worth Rs 13-14 lakh was stolen," said the complainant's lawyer. He added, "We had submitted untraced report with the insurance company. The insurance company was also informed about the exact details of the loss. Besides, we submitted all the requisite documents to the surveyor, who assured expeditious settlement of the claim but the company started delaying the matter." They later repudiated the claim on various frivolous grounds and therefore we approached the forum. During the arguments, the insurance company's lawyer stated that the investigation has revealed that there was no use of force for entering the factory premises and the door was opened by one of the employee. There was a condition of the policy that the claim is only payable, when there is an application of force for entering the premises with a purpose of theft. However, after listening to the arguments, the forum held the insurance company guilty of being deficient in services and directed it to pay a compensation of Rs 13,29,794 to the complainant.

2. Travel insurance and exclusion for insurrection Mr B was stranded in Thailand in September of last year when the Phuket airport was closed due to an anti-government protest. As a result, Mr B had to purchase new flight tickets, and incurred additional costs. The member denied his claim on the basis that the proximate cause for the loss arose from an excluded clause in the policy that is a loss that arises from any act of war, or from a rebellion, revolution, insurrection or taking power by the military.

The policy however provided cover if Mr B could establish the incurred additional travelling expenses as a result of cancellation of public transport services caused by riot, strike or civil commotion.

The critical issue for determination was to whether the events giving rise to the claim should be categorised as a riot or civil commotion, or whether they should be categorised as an insurrection.

In order to support its case that the events giving rise to the claim should be categorised as an insurrection, the member provided the Financial Ombudsman Service with press reports from the New York Times, the Washington Post and other international newspapers, using terms like protest and the demonstrators.

In determining this dispute, the Financial Ombudsman Service considered it was important to examine the exclusion as a whole and to apply what is called the ejusdem generis rule of interpretation which requires the court or decision maker to interpret words in their context. In this regard, it was noted that other words used in the policy exclusion included war, rebellion, revolution, or taking of power by the military.

The Financial Ombudsman Service felt the term insurrection needed to be construed in that context i.e. a significant element of violence needs to be established. It was concluded from the press report that there was little evidence of violent revolution, at least as of 1 September which was the critical date in terms of the determination. It was decided that the events might more comfortably be described as a riot or civil commotion rather than an insurrection.

The Financial Ombudsman Service upheld Mr Bs claim.