Supreme Court: Fire Policy Covers Accidental Fire; Insurer Cannot Deny Claim for Lack of Cause Proof

Cross appeals were filed against a National Consumer Disputes Redressal Commission (NCDRC) order dated 10 August 2020 in a dispute between M/s Orion Conmerx Pvt. Ltd. and National Insurance Co. Ltd. The company’s factory caught fire on 25 September 2010, damaging stocks, furniture, plant, and machinery. The insurer rejected and challenged the claim, alleging the fire was not accidental, relying on a final surveyor’s report that doubted the possibility of electrical short-circuiting. The NCDRC found the insurer’s surveyor had not proved that the fire was non-accidental, directed payment of Rs. 61.39 lakh with 9% interest, and dismissed the company’s demand for full compensation.

The insured appealed, claiming entitlement to Rs. 3.30 crore supported by audit, architectural, and accounting reports, while the insurer challenged liability altogether, insisting that the final surveyor’s findings were conclusive. 

Issue Raised: Whether an insurer can deny a fire insurance claim on the ground that the fire was not accidental, in the absence of proof of fraud or willful conduct by the insured, and whether “FFF” coverage extends to furniture, fixtures, and fittings under the fire insurance policy.

SC Decided: The Hon’ble Apex Court held that the fire was accidental and squarely covered under the policy. Once a fire and loss are proven and no fraud or deliberate act by the insured is established, the cause of the fire is immaterial. The Court termed the final surveyor’s conclusion “untenable, arbitrary, and perverse,” noting it failed to demonstrate reasoning or evidence of intentional fire. It reaffirmed that insurance contracts must be interpreted in favour of the insured when ambiguity exists and that coverage provisions should be construed broadly.

The Court also ruled that “FFF” in the policy clearly denoted furniture, fixtures, and fittings, thereby entitling the insured to corresponding losses. It found that Orion Conmerx substantiated its Rs. 3.30 crore claim with contemporaneous records, cost sheets, and cancelled orders, while the surveyor ignored over 5,800 pages of supporting documents.

Thus, upholding NCDRC’s finding but enhancing relief, the Court dismissed the insurer’s appeal, allowed the insured’s appeal, and directed payment with simple interest at 6% per annum from three months after the incident until full payment.

To Read Full Judgment, Download Attached PDF Below