Insurers cannot defeat covered fire claims through unsupported technical interpretations of policy terms.

The respondent–plaintiff, engaged in manufacturing paper tubes, insured its stock and stock-in-process with the appellant–insurance company under a fire insurance policy providing coverage of Rs.5,00,000 for the period 12 August 1994 to 11 August 1995.

On 14 April 1995, a fire allegedly caused by an electrical short circuit damaged stock stored in the factory compound and godown.

The police prepared a panchnama and the insurer’s surveyor inspected the premises and assessed the loss.

The plaintiff claimed Rs.2,24,000.

An earlier ex parte decree was set aside and the suit was restored.

The insurer contested liability, asserting negligence on the plaintiff’s part and contending that the loss was outside the policy terms.

The insurer, however, neither cross-examined the plaintiff’s witnesses nor led oral or documentary evidence.

The City Civil Court, Ahmedabad, partly decreed the suit for Rs.2,00,000 with interest at 8% per annum from the date of suit until realization.

The insurer challenged that decree under Section 96 of the Code of Civil Procedure, 1908.

Whether the insurer was liable under the fire insurance policy to compensate the plaintiff for stock damaged in the fire.

Whether the plaintiff was entitled to recover Rs.2,24,000, or any lesser amount, as compensation for the damaged stock.

Whether the Trial Court erred in awarding Rs.2,00,000 without sufficient evidentiary or contractual basis, particularly when the insurer contended that the stock was stored in a location not covered by the policy.

The appeal was examined under Section 96 of the Code of Civil Procedure, 1908, which permits an appellate challenge to an original decree.

The Court applied the principles governing enforcement of an insurance contract: liability depends upon the coverage granted by the policy, and the insurer bears the burden of establishing an exclusion, limitation, or breach of a policy condition when such defence is specifically relied upon.

The Court further treated the surveyor’s report and the unrebutted documentary evidence as relevant evidence of the occurrence and extent of the insured loss.

A technical interpretation of the proposal form or policy, without proving the relevant terms and producing rebuttal evidence, could not defeat a claim where the policy record covered “stock and stock-in-process”.

The Court found that the policy was in force when the fire occurred and that the insured stock was covered up to Rs.5,00,000.

The surveyor’s report recorded extensive damage to kraft-paper stock lying in the open compound and in a detached godown, and stated that the policy covered the relevant stock.

The plaintiff had produced the police records, panchnama, correspondence with the insurer and surveyor, stock statements, and supporting financial documents.

Although the insurer argued that the proposal form limited coverage according to the place of storage, it neither produced evidence proving that interpretation nor rebutted the plaintiff’s evidence by cross-examination or independent evidence.

The Trial Court’s assessment of Rs.2,00,000 was supported by the stock statements, the plaintiff’s claim of loss, the panchnama, and the surveyor’s assessment, and remained substantially unrebutted.

Accordingly, the High Court held that the insurer could not avoid liability through an unproved technical construction of the policy.

The First Appeal was dismissed, and the Trial Court’s decree directing payment of Rs.2,00,000 with interest at 8% per annum from the date of suit until realization was affirmed.

Any amount deposited pursuant to the decree was directed to be disbursed to the original plaintiff.