In insurance claim if damage caused by fire, reasons how fire took place are irrelevant

In an insurance claim if it is established that damage was caused by fire, then reasons by which the fire took place becomes irrelevant.

In a recent judgment, Hon’ble Supreme Court has held that in an insurance claim if damage is caused by fire, then the reason by which the fire took place becomes irrelevant. In case of ambiguity between two or more clauses in the contract, it must be interpreted in favour of the insured.

ABCAUS Case Law Citation:
4939 (2025) (12) abcaus.in SC

In the instant case, the appellant company had challenged the judgment of National Consumer Disputes Redressal Commission (NCDRC) denying the appellant any reimbursement/claim from the Respondent-Insurance Company.

The Appellant was a Government company which after inviting tender for insurance for its various Units/Dumps/Offices etc. awarded the contract to the respondent insurance company.

A theft and fire incident occurred at the factory of the Appellant where some petty thieves entered the premises of the Appellant company to steal copper and transformer oil but it triggered a fire in the transformer and resulted in a fire in the factory premises.

The Insurance company rejected the claim of the appellant on the ground that the fire resulted due to attempted theft and this peril was not covered under the Policy as the cause of the loss was covered under the exclusion clause of Riots Strike, Malicious and Damage.

The NCDRC vide the impugned judgment dismissed the complaint on grounds that the proximate cause of the loss to the Appellant was burglary and the insurance policy taken by the Appellant did not cover the loss on account of theft/ burglary.

The Hon’ble Supreme Court observed that the principles governing “Fire Insurance” have been very succinctly laid down by it holding that if there was a fire and something was on fire which ought not to be on fire and such a fire was not caused by the wilful act of the insured, then any loss attributable to fire would be covered under the policy.

The Hon’ble Supreme Court observed that it is a settled position that if the damage is caused by fire, then the reason by which the fire took place becomes irrelevant. In the instant case, it was established that the loss caused to the Appellant was due to fire only and the incident of theft/ burglary merely preceded the incident of fire. 

The Hon’ble Supreme Court further observed that in case of insurance contracts, the exclusion clause must be construed strictly and wherever there is any ambiguity between two or more clauses in the contract, it must be interpreted in favour of the insured.

The Hon’ble Supreme Court noted that in terms of the policy, the burglary/theft was not an exclusion under the specified peril “Fire”. Even, the general exclusions to the policy do not cover theft which precedes the insured peril as an exclusion and the said exclusion is only provided under the RSMD clause. Therefore, the exclusion provided under the RSMD clause would not oust the liability of the insurer when the loss or damage is attributable to the peril of fire which has its independent exclusions. 

Accordingly, the Hon’ble Supreme Court set aside the impugned judgment of NCDRC and matter was remitted back to the NCDRC to assess the loss pursuant to the claim filed by the Appellant. 

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