Most people who take out an insurance policy don't know the implications of the exclusion clauses. In fact they rarely read them, as they are often in fine print, or illegible.

Consequently, they suffer heavily when insurance companies repudiate genuine claims by referring to an exclusionary clause.

Take the example of Public Type College, which purchased an electronic plain paper copier for Rs 140,000 and insured it against burglary with the National Insurance Company.

During the subsistence of the insurance policy, the copier was stolen. The locks on the shop's door had been opened either with duplicate keys or with a set of keys which the owner had earlier lost.

The insurance claim was rejected on the grounds that the theft was not due to burglary or housebreaking, which according to the insurance company meant a forcible and violent entry.

A complaint filed before the District Consumer Disputes Redressal Forum culminated in an order to the insurance company to pay Rs 140,000 with 18 per cent interest to the complainant.

The Haryana State Commission, on appeal by the insurance company, upheld this decision and the insurance company finally took the matter to the National Commission.

Adopting a pragmatic approach, the National Commission observed that "in common parlance burglary is understood as theft."

Once again, in 2003, the National Commission found in Konark Roller Flour Mills vs New India Assurance Co. that insurance companies were taking shelter in the tricky language used in insurance documents. In this case the complainant's factory was insured against the risk of burglary and housebreaking.

On October 29, 1999 the coastal areas of Orissa were hit by a cyclone, causing widespread havoc. On October 31, a mob of people forcibly entered the complainant's factory, broke down the shutters and looted stocks from the godowns.

A claim of Rs 47 lakh was lodged with the insurance company whose surveyors assessed the loss at Rs 34.95 lakh.

The New India Assurance Company, however, repudiated the claim mainly on the plea that the burglary/theft loss "has arisen out of cyclonic situation" and is not directly relatable to the burglary of the nature covered under the policy.

A complaint was filed before the National Commission. By its order dated August 4, 2003 the apex commission while directing the insurance company to pay a compensation of Rs 34.95 lakh along with 9 per cent interest observed that "in our view, a wholly wrong meaning is attempted to be given to this clause without appreciating the spirit of the burglary policy with the sole objective of ousting the claim of the insured."

Recently, the Supreme Court directed insurance companies to redefine the term "burglary" used in insurance policies. In the case under consideration, M/s Harchand Rai Chandan Lal of Delhi had taken out a policy with United India Insurance Company for a sum of Rs 7 lakh against burglary and/or housebreaking with effect from September 22, 1991.

On July 2, 1992, one of the firm's partners discovered the theft of 197 bags of gwar from the godown and claimed compensation under the policy. The insurance company rejected the claim saying it was not covered under the policy as the theft was not presented by violence or force.

After going into the definition of "burglary and housebreaking" as contained in the policy, the Supreme Court, in its judgement on September 24, 2004 in United India Insurance Co. vs M/s Harchand Rai Chandan Lal, said: "In absence of violence or force, the insured cannot claim indemnification against the insurance company."

The court went on to state that "it is true that in common parlance the term "burglary" would mean theft...." but added that "if the element of force or violence is not present then the insured cannot claim compensation."

Pursuant to the directive issued by the Supreme Court, the insurance companies will soon have to redefine the burglary clauses.

While so doing they must bear in mind that the common man by taking a policy against burglary and housebreaking understands that he has taken a policy against theft and doesn't realise that the incident of theft should involve violence or force.

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