You've taken out home insurance and think that you are now protected against burglars who break into your house and make off with your most treasured possessions. But are you protected against a servant who makes off with your gold jewellery, cash or even the DVD player?

Surinder Singh Chauhan, an advocate in Solan, Himachal Pradesh, had insured everything in his house including jewellery and other valuables with United India Insurance.

While the policy was still in force objects worth Rs 27,400 were stolen by his maidservant. An FIR was lodged with the police and a claim was filed with the insurance company.

It was rejected by the insurance company on the ground that the insurance policy had a clause excluding the liability of the company if an employee of the insured was involved.

Chauhan filed a complaint before the Solan District Consumer Disputes Redressal Forum. However, the forum upheld the insurance company's decision and dismissed the complaint.

Chauhan filed an appeal before the Himachal Pradesh State Commission, which by its order dated September 30, 2002, held that the district forum rightly rejected Chauhan's complaint. The court observed that, "in ordinary parlance, an employee would always include a domestic servant".

At a slightly different level, what happens if a security guard is involved in the theft? Should the guard also be treated as an employee of the person who has taken out an insurance policy?

In Oriental Insurance Company vs Bhatter Silver Smith Pvt Ltd, the complainants were engaged in the business of fabrication of silver jewellery. They had taken a 'Jewellers Block Insurance Policy' from Oriental Insurance Company, covering stocks for Rs 50,000 and cash and currency notes of Rs 200,000.

The insurance policy covered fire, explosion, lightening, riot, strike, burglary, housebreaking, theft and larceny. On the night of May 10, 1999 some miscreants entered the premises and stole Rs 291,465 and 11 kg of silver articles.

A claim was lodged with the insurance company and an FIR was also filed with the police in which it was mentioned that the guard on the night shift was missing. When police searched his house they found Rs 95,000.

However, the insurance company repudiated the claim on the grounds that exclusion clause 8(b) of the insurance policy laid down that the company would not be liable for theft committed by or brought about by any servant in the exclusive employment of the insured.

The jewellers filed a complaint before the Delhi District Consumer Disputes Redressal Forum, which held the company guilty of deficiency in service and directed it to make good the loss to the insured. The company then filed an appeal before the Delhi State Consumer Disputes Redressal Commission.

In its order dated November 3, 2003 the state commission noted that the security guard Chander Bahadur was hired by the complainant from Cat-Eye Security and Detective Agency and on the relevant date he was acting as an employee of that security agency.

The court observed that there did not therefore exist any relationship of 'master and servant' between Chander Bahadur and the complainant. Thus, it upheld the decision of the district forum.

From the above cases, the legal position which emerges is that:

• Insurance companies are not liable to make good the loss to the insured in the event of housebreaking or theft brought about by his employees or servants either by themselves or through their connivance;
• The domestic servants employed in the household are the employees of the insured; and that
• Security guards hired by business establishments or even at the residential premises would not be treated as the employees of the hirers.

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