Liability of insurer under public liability policy is restricted by specific compulsory excess clauses in the contract.

The deceased, Dasharathbhai Patel, died on November 2, 1997, due to electrocution while cleaning a sewer line when an iron rod contacted an underground live wire belonging to Surat Electricity Company (now Torrent Power Ltd., Defendant No. 4).

His heirs filed a civil suit (Special Civil Suit No. 390/1999) for compensation. On January 21, 2008, the Trial Court decreed the suit, awarding Rs. 7,44,000/- with 9% interest, holding the Appellant (Insurance Company) liable for the full amount.

The Appellant challenged this, contending its liability was limited by an insurance policy clause.

1. Whether the liability of the Insurance Company is limited to Rs. 6,44,000/- based on the "Compulsory Excess" clause in the Public Liability Insurance Policy.

2. Whether the Trial Court erroneously awarded compound interest.

The Court applied the principles of the Law of Contract regarding the interpretation of insurance policies.

Specifically, it relied on Clause 7.2 ("Compulsory Excess") of the insurance policy (Exh. 56), which stipulates that the Insured must bear a compulsory excess of 1/4% of the indemnity limit per accident, subject to a maximum of Rs. 1,000,000/-; the insurer's liability only attaches to claims exceeding this amount.

The Court examined the factual findings of the Trial Court regarding negligence and quantum, which were undisputed.

Upon perusing Clause 7.2 of the policy (Exh. 56), the Court observed that the Insured (Torrent Power Ltd.) was mandated to bear the first Rs. 1,00,000/- of any claim.

Consequently, the Insurance Company could only be held liable for the balance after deducting this excess from the total decretal amount of Rs. 7,44,000/-, resulting in an insurance liability of Rs. 6,44,000/-.

Regarding the interest rate, the Court clarified that the Trial Court's award of 9% p.a. was simple interest and should not be interpreted as compound interest.

The Insured (Torrent Power Ltd.) is liable to pay the remaining Rs. 1,00,000/- with 9% p.a. simple interest.

If the Appellant has already deposited/paid the full amount, it is granted the liberty to recover Rs. 1,00,000/- plus interest from Torrent Power Ltd.

The High Court partly allowed the appeal and modified the decree.