The Supreme Court has held that in a fire insurance claim, once it is established that the insured suffered a loss due to fire and there is no allegation of fraud or that the insured caused the fire, the precise cause of the fire becomes immaterial for purposes of the insurance claim. In such circumstances, the insurer cannot refuse to indemnify the loss merely on the ground that the proximate cause of the fire is not specified in the policy’s defined perils.
A bench of Justices Dipankar Datta and Manmohan was hearing an appeal in a dispute where a company’s premises suffered significant damage in a fire. The insurer had repudiated the claim, contending that the fire was not shown to be accidental. The Supreme Court reiterated that a fire insurance policy is a contract of indemnity designed to restore the insured to the financial position they were in immediately before the loss. Once loss by fire is not disputed and no fraud or instigation is shown, the fire is presumed to be accidental and covered under the policy.
The Court observed that investigating the cause of fire beyond establishing that a fire occurred would defeat the object of fire insurance, which is to provide indemnity for loss by fire regardless of the underlying cause. It noted that unless the fire can be attributed to the deliberate or wilful act of the insured or someone acting with their consent, the focus should remain on the loss itself, not on how the fire started.
Accordingly, the Supreme Court allowed the insured’s claim and held that the insurer’s repudiation was unsustainable. The insurer was directed to indemnify the loss as per the terms of the policy, subject to proof of the extent of damage.
