Holding

The term "impact" in Clause 5 includes damage caused by vibration from a vehicle driving close to the insured premises, and the claim is covered.

Summary

The respondent, a printer, claimed Rs.75,000 for damage to its building and machinery caused by vibration from a bulldozer operating on a nearby road. The insurance policy’s Clause 5 covered "impact by any rail/road vehicle or animal". The insurer argued that the damage was not an "impact" and denied the claim. The District Forum dismissed the complaint, but the State Consumer Disputes Redressal Commission interpreted "impact" broadly to include damage from vibration caused by a vehicle driving close to the building and ordered payment. The National Commission upheld this interpretation but reduced the amount. On appeal, the Supreme Court held that the word "impact" in Clause 5 has a wider meaning, includes damage from vibration, and must be construed against the insurer under the rule of contra proferentem. Consequently, the appeal was dismissed and the claim upheld.

Issues considered

Whether the term "impact" in Clause 5 of the insurance policy covers damage caused by vibration from a bulldozer driving close to the insured building.
Whether the policy should be interpreted narrowly or broadly in favour of the insured under the rule of contra proferentem.

Legislation cited

Consumer Protection Act, 1986s. 12

Subjects

insurance lawpolicy interpretationcontra proferentemimpact clausevibration damageconsumer protection

Judgment

UNITED INDIA INSURANCE CO. LTD. A
v.
M/S. PUSHPAL YA PRINTERS

FEBRUARY 25, 2004

-- [SHIVARAJ V. PATIL AND DR. AR. LAKSHMANAN, JJ.] B

Consumer Protection Act, 1986; Section I 2:

Insurance Policy-Damage caused to building and machinery due to
impact from operation of a bulldozer-Insurance claim-Insurance company C
repudiating the claim as not covered by terms of the policy-Complaint
dismissed by the District Forum-Reversed by the State Commission directing
payment of claim with interest thereon-Affirmed by the National Commission
reducing the amount of claim-On appeal, Held: Phrase 'impact by road
vehicle' in Clause 5 of the policy indicates damage caused to the building on D
account of vibration of the driving of vehicles close to the road-Interpreting
narrowly, damage to the building and machinery due to impact by any vehicle!
rail would not arise-Since the word impact having more than one meaning,
in the absence of exclusion clause it is reasonable and fair to construe the
same in favour of the insured-,--Interpretation of Statutes-Insurance Law.
E
Doctrine:

'rule of contra preferentem '-Meaning of in the context of interpretation
of the word 'impact' in insurance law.

Words and Phrases: F
'lmpact'-Meaning of in the context of insurance law.

The question which arose for consideration in this appeal was as to
whether the word 'impact' contained in Clause 5 of the insurance policy covers
the damage caused to the building and machinery of the insured due to driving G
of the bulldozer on the road close to the building.

Answering the question in the affirmative and dismissing the appeal,
the Court.

631 H
632 SUPREME COURT REPORTS [2004] 2 S.C.R.

A HELD: 1.1. Clause 5 of the insurance policy speaks of"impact" by any
rail/road vehicle or animal. If the appellant-insurer wanted to exclude any
damage or destruction caused on account of driving of vehicle on the road
close to the building, it could have expressly excluded. The insured possibly
did not understand and expect that the destruction and damage to the building
B and machinery is confined only to the direct collusion by vehicle moving OIJ
the road to the building or machinery. In the ordinary course, the question
of a vehicle directly dashing the building or the machinery inside the building
does not arise. Further, "impact" by road vehicle found in the company of
other words in the same clause 5 normally indicates that damage caused to
the building on account of vibration by driving of vehicle close to the road is .:..
C also included. In order to interpret this clause, it is also necessary to gather
the intention of the parties from the words used in the policy. If the word
"impact" is interpreted narrowly the question of impact by rail would not
arise as the question of a rail forcibly coming to the contact of a building or
machinery would not arise. In the absence of specific exclusion and the word
"impact" having more meanings in the context, it cannot be confined to
D forcible contact alone when it includes the meanings "to drive close", "effective
action of one thing upon another" and "the effect of such action", it is
reasonable and fair to hold in the context that the word "impact" contained
in clause 5 of the insurance policy covers the case of the respondent.
f635-F-H; 636-A-C]
E
1.2. It is settled position in law that if there is any ambiguity or a term
is capable of two possible interpretations, the one beneficial to the insured.
should be accepted consistent with the purpose for which the policy is taken,
namely, to cover the risk on the happening of certain event. Although there
is no ambiguity in the expression "impact", even otherwise applying the rule
F of contra preferentem the use of the word "impact" in clause 5 in the instant
policy must be construed against the insurer. Where the words of a document
are ambiguous, they shall be construed against the party who prepared the
document. The interpretation placed by the State Commission as well as by
the National Commission in relation to the expression "impact" is in order
G and appropriate. f636-C-E; 636-G]

General Assurance Society Ltd v. Chandumull Jain and Anr., (1966] 3 SCR
500, followed.

CIVIL APPELLATE JURISDICTION Civil Appeal No. 391 of \
H 1999.
- UNITED INDIA INSURANCE CO LTD r PUSHPALYA PRINTERS [PATIL J.] 633

From the Judgment and Order dated 30.5.1997 of the National
Consumers, Disputes Redressal Commission, New Delhi in R.P. No. 830 of
A

1996.

H.K. Puri, for the Appellant.

A.D.N. Rao for the Respondent. B
The Judgment of the Court was delivered by

SHIV ARAJ V. PATIL, J. The respondent filed a complaint before the
District Consumer Disputes Redressal Forum (District Forum) under Section
12 of the Consumer Protection Act, 1986 (for brevity 'the Act') praying for C
settlement of an insurance claim at Rs. 75,000/- along with interest at the rate
of 18% per annum. The appellant repudiated the claim on the ground that
damage caused to the building and printing press of the respondent was not
covered by Clause 5 of the insurance policy. The District Forum accepting
the contention urged on behalf of the appellant held that there was no D
deficiency of service on the part of the appellant and dismissed the complaint
as not maintainable. The respondent filed appeal before the State Consumer
Disputes Redressal Commission (State Commission) against the order of the
District Forum. The State Commission, on interpretation of the word "impact"
contained in Clause 5 of the insurance policy, allowed the appeal, set aside
the order of the District Forum and granted relief to the respondent directing E
the appellant to pay a sum of Rs.75,000/- with interest at the rate of 12% per
annum with effect from 18.10.1994 till the date of payment. The appellant,
dissatisfied with the order of the State Commission, filed revision petition
before the National Consumer Disputes Redressal Commission (National
Commission). The National Commission, while accepting the interpretation p
given by the State Commission, however, reduced the amount of payment to
the respondent from Rs.75,000/- to Rs.56,000/-. Aggrieved by said order of
the National Commission, this appeal is brought before this Court by the
appellant.

Before us, learned counsel for the parties in their arguments reiterated G
their respective contentions, which were urged before all the forums. In order
, to consider the respective contentions urged on behalf of the parties, it is both
necessary and useful to quote the relevant portions from the insuran~e policy:-

"IN CONSIDERATION OF THE insured named in the Schedule
hereto having paid to United India Insurance Company Limited H
634 SUPREME COURT REPORTS [2004] 2 S.C.R.

A (hereinafter called THE COMPANY) the premium me'ntioned in the
said schedule. Till company agrees, (subject to the condition and
exclusion contained herein or endorsed or otherwise expressed hereon)
that if after payment of premium the property insured described in
the said schedule or any part of such property, be destroyed or damaged
by the following: -
B
I.

2.

3.
c 4.

5. Impact by any rail/road vehicle or animal."

In the order of the District Forum it is noticed that the appellant contested
the claim by filing written objection contending that the damage caused due
D to vibration from the operation of bulldozer was not an incident of impact by
any road vehicle, as per Clause 5 of the insurance policy for risk, and so the
complaint was not maintainable. Para 4 of the order of the District Forum
reads: -

"4. Neither party led any evidence because it was admitted by the
E
Opposite Party that in connection with a road construction with the
help of a bulldozer near the complainant's printing press in question
there was damage to that building. And, both parties agreed that-it all
depends upon the interpretation of the tenn (5) of the Insurance
Policy."
F
Thus, from the order of the District Forum it is clear that the appellant did
not dispute as to damage caused to the building and machinery of the
respondent on account of the bulldozer driven close to the building on the
road for the purpose of road construction and that both the parties agreed that
the sustainability of the claim depended upon the interpretation of Clause 5
G of the insurance policy. The District Forum took a narrow view that the word
"impact" contained in clause 5 of the insurance policy covered risk of only
contingent impact of a road vehicle forcibly coming in contact with another.
It held that the damage caused to the building and machinery in the instant
case was not due to such forcible contact but it was due to the consequential
H effect of vibration on account of operating of a bulldozer by the side of the
-- UNITED INDIA INSURANCE CO. LTD. ''· PUSHPALYA PRINTERS [PATIL, .I.] 635

respondent's printing press building and as such it was not covered by clause
5 of the insurance policy; thus, there being no deficiency of service on the
A

part of the appellant the complaint filed by the respondent was not
maintainable.

According to the State Commission the only point, which arose for
decision in the appeal was whether the damage caused to the building and the.· B
machinery of the respondent was the resultant of the impact by the bulldozer.
Considering the meaning of the word "impact" given in various dictionaries
the State Commission took the view that when the word "impact" has got
meanings more than one and the word "impact" not only means "coming
forcibly in contact with another", it also means "to drive close", "effective C
action of one thing upon another" and "effect of such action". The "impact"
covered damage caused to the building and machinery in view of the admitted
fact that such damage was caused because of close drive by the bulldozer on
the road. Expressing thus the State Commission set aside the order of the
District Forum and granted relief to the respondent.
D
The National Commission concurring with the view expressed by the
State commission interpreting the expression "impact" observed that the said
word has to be construed liberally and in its wider sense.

The only point that arises for consideration is whether the word "impact"

- contained in clause 5 of the insurance policy covers the damage caused to the E
building and machinery due to driving of the bulldozer on the road close to
the building. It is evident from the terms of the insurance policy that the
property was insured as against destruction or damage to whole or part. The
appellant company agreed to pay towards destruction or damage to the property
insured to the extent of its liability on account of various happenings. In the F
present case both the parties relied on clause 5 of the insurance policy.
Clause 5 is also subject to exclusions contained in the insurance policy. That
a damage caused to the building or machinery on account of driving of
vehicle on the road close to the building is not excluded. Clause 5 speaks of
"impact" by any rail/road vehicle or animal. If the appellant company wanted
to exclude any damage or destruction caused on account of driving of vehicle G
on the road close to the building, it could have expressly excluded. The
insured possibly did not understand and expect that the destruction and damage
to the building and machinery is confined only to the direct collusion by
vehicle moving on the road to the building or machinery. In the ordinary
course, the question of a vehicle directly dashing the building or the machinery H
636 SUPREME COURT REPORTS [2004) 2 S.C.R.

A inside the building does not arise. Further, "impact" by road vehicle found
in the company of other words in the same clause 5 normally indicates that
damage caused to the building on account of vibration by driving of vehicle
close to the road is also included. In order to interpret this clause, it is also
necessary to gather the intention of the parties from the words used in the
B policy. If the word "impact" is interpreted narrowly the question of impact
by any rail would not arise as the question of a rail forcibly coming to the
contact of a building or machinery would not arise. In the absence of specific
exclusion and the word "impact" having more meanings in the context, it
cannot be confined to forcible contact alone when it includes the meanings
"to drive close", "effective action of one thing upon another" and "the effect
C of such action", it is reasonable and fair to hold in the context that the word
"impact" contained in clause 5 of the insurance policy covers the case of the
respondent to say that damage caused to the building and machinery on
account of the bulldozer moving closely on the road was on account of its
"impact". It is also settled position in law that if there is any ambiguity or
a ,term is capable of two possible interpretations one beneficial to the insured
D should be accepted consistent with the purpose for which the policy is taken,
namely, to cover the risk on the happening of certain event. Although there
is no ambiguity in the expression "impact", even otherwise applying the rule
of contra proferentem, the use of the word "impact" in clause 5 in the instant
policy must be construed against the appellant. Where the words of a document
E are ambiguous, they shall be construed against the party who prepared the
document. This rule applies to contracts of insurance and clause 5 of the
insurance policy even after reading the entire policy. in the present case
should be construed against the insurer. A Constitution Bench of this Court
in General Assurance Society Ltd. v. Chandumull Jain and Anr., (1966] 3
SCR 500 has expressed that "in a contract of insurance, there is requirement
F of uberrima tides, i.e. good faith on the part of the assured and the contract
is likely to be construed contra proferentem i.e. against the company in case
of ambiguity or doubt."

In the light of what is stated above, no fault can be found with the
impugned order. The interpretation placed by the State Commission as well
G as by the National Commission in relation to the expression "impact" is in
order and appropriate. Hence the point is answered in the affirmative.

Under the circumstances we find no merit in the appeal. Consequently
it is dismissed. No costs.

H S.K.S. Appeal dismissed.