The Gujarat High Court has held that an insurance company cannot resist a fire-loss claim through a technical interpretation of the policy when it failed to prove that interpretation by leading evidence before the trial court.

Justice J.C. Doshi dismissed an appeal filed by Oriental Insurance Company Limited against a decree in favour of Pooja Paper Tube Industries.

“The technical interpretation of proposal form as well as insurance policy without adducing evidence in that regards is not permissible.”

Why it matters. The ruling underscores that merely pleading a policy limitation in a written statement is not enough. Where the insured’s evidence and the insurer-appointed surveyor’s findings remain unrebutted, the insurer cannot build its defence for the first time through arguments in appeal.

A 1995 fire and an unrebutted claim

Pooja Paper Tube Industries manufactured paper tubes at its factory in Rajpur on the Mehsana Highway. Its stock was insured with Oriental Insurance for ₹5 lakh under a policy valid from August 12, 1994, to August 11, 1995. The company paid a premium of ₹2,616.

On April 14, 1995, a fire allegedly caused by an electrical short circuit destroyed kraft-paper stock kept in the factory compound and godown.

The insurer’s surveyor, P.J. Bhatt and Company, inspected the premises. The report recorded extensive fire and water damage, stated that the fire began in the open compound and spread to stock kept in a detached godown, and found that the insured had complied with the applicable warranties.

The manufacturer sued for ₹2.24 lakh. In 2018, the Ahmedabad City Civil Court awarded ₹2 lakh with 8% annual interest from the date of the suit until realisation.

Oriental Insurance appealed, arguing that the trial court had not adequately explained the quantum and that the stock’s location did not satisfy the policy conditions.

The reasoning

The High Court noted that Oriental Insurance neither cross-examined the plaintiff’s witness nor led any oral or documentary evidence. Its counsel had also not argued the matter before the trial court despite receiving opportunities.

The policy document produced before the court covered “stock and stock in process”. The surveyor’s report also confirmed the destruction and recorded compliance with the warranties.

The trial court relied on the insured’s bank stock statement, accounts, purchase and sale records, photographs, police papers and documents supplied to the surveyor. The records showed closing stock worth ₹17,28,526 on the date of the fire, from which the insured claimed that material worth ₹2 lakh had been destroyed.

The High Court therefore found no reason to disturb the finding that the insurer was liable for the fire loss.

Judgement

The High Court dismissed Oriental Insurance’s first appeal and discontinued any interim relief granted earlier.

The original decree consequently remains unchanged: Oriental Insurance must pay Pooja Paper Tube Industries ₹2 lakh with 8% annual interest from the date of the suit until realisation, besides bearing the plaintiff’s costs and its own costs. The judgment specifies no fresh payment deadline.

Any amount already deposited before the High Court or the executing court must be disbursed to Pooja Paper Tube Industries.