Supreme Court rules insurance company cannot deny boiler explosion claim using exclusion clause when boiler was government-certified and registered - insurer bears heavy burden to prove fraud or material non-disclosure.
If your certified and registered boiler explodes during the insurance policy period, can the insurance company deny your claim by pointing to corrosion or wear-and-tear discovered after the explosion?
No, the insurance company cannot arbitrarily deny your claim on these grounds.
The Supreme Court has ruled that when a boiler is certified and registered under the Indian Boilers Act, and the insurance company accepts the risk after this certification, they bear a heavy burden to prove fraud or material non-disclosure. Post-accident discovery of corrosion or wear cannot be used to deny a claim unless the insurer can prove the insured suppressed material information or committed fraud.
Boiler Certified: Boiler Inspector examined and certified boiler GT-23 as fit for use with valid certificate
Insurance Policy Issued: National Insurance Company issued policy covering boiler for Rs. 1.60 crores
Boiler Explosion: Explosion occurred in boiler GT-23 during policy period
Claim Repudiated: Insurance company denied claim citing exclusion clause for wear and corrosion
State Commission Ruling: Maharashtra State Commission awarded Rs. 49 lakhs compensation to sugar factory
NCDRC Overturns: National Commission set aside award, accepting insurance company's exclusion clause argument
Supreme Court Restores Claim: "Certified boiler explosion covered - exclusion clause cannot defeat main purpose"
| Legal Principle | What It Means | Application in This Case |
|---|---|---|
| Utmost Good Faith | Insurance contracts require complete disclosure from both parties | Insurer also has duty to conduct due diligence before accepting risk |
| Indian Boilers Act Protection | Registered boilers presumed fit for use during certificate period | Boiler was certified and registered, creating presumption of fitness |
| Exclusion Clause Interpretation | Exclusion clauses interpreted narrowly against insurer | Clause 5 exclusion cannot be used to deny explosion claim |
| Burden of Proof | Insurer bears burden to prove fraud or material non-disclosure | Insurance company failed to prove any suppression by insured |
Legislation regulating boiler manufacture, installation, and operation in India. Requires registration and periodic certification of boilers.
Contractual provision that excludes certain types of losses or damages from insurance coverage.
Legal principle requiring complete honesty and disclosure in insurance contracts from both parties.
Failure to disclose information that would influence a prudent insurer's decision to accept risk or set premium.
A hidden flaw or weakness that is not discoverable by reasonable inspection and may only become apparent after failure.
"When an insurer accepts the risk on a boiler that is certified and registered under the Boilers Act, it cannot later wriggle out of its liability by relying on defects that become apparent only after an explosion. The very purpose of insurance is to provide protection against unforeseen events, and exclusion clauses cannot be used as an escape route when the insurer failed to conduct proper due diligence before accepting the premium."
This judgment protects businesses and industries that rely on certified equipment by ensuring that insurance companies cannot use technical exclusion clauses to deny legitimate claims, especially when the equipment was government-certified and the insurer had every opportunity to inspect it before accepting the risk.
This content is for informational purposes only and does not constitute legal advice. Consult a qualified legal professional for specific legal guidance. The information provided is based on judicial interpretation and may be subject to changes in law.
Making Supreme Court judgments accessible and actionable for every Indian citizen navigating legal challenges.
This analysis decodes a complex insurance dispute to help businesses understand their rights when facing claim denials for certified equipment and how to challenge improper application of exclusion clauses.