Is an insurer entitled to reject an insurance claim without further ado where the insured makes false averments to bolster the claim?

Paragraph 31In any event, apart from the possibility of arson or, at the very least, the respondent’s lack of sincerity in fighting the fire, there are other factors which decisively tilt the balance against it, viz. the breach of the policy conditions. In that regard, Policy Condition No. 6 of the fire insurance policies issued by the appellant to the respondent reads as follows: ‘6.(i) On the happening of any loss or damage the insured shall forthwith give notice thereof to the company and shall within 15 days after the loss or damage, or such further time as the company may in writing allow in that behalf, delivered to the company.

Paragraph 32On facts, we find that the above two conditions of the insurance policies were clearly breached by the respondent. Policy Condition No. 6 required the respondent to make an honest and full disclosure of all relevant aspects while Policy Condition No.8 posited that it make no false declarations. However, the misstatements made by the management of the respondent, referred to hereinbefore, categorically demonstrate that they willfully resorted to making incorrect factual statements to buttress the respondent’s insurance claim. If an insured makes false averments to bolster its claim, contrary to the policy conditions, the insurer would be lawfully entitled to reject such claim on that ground without further ado. In this regard, we may also note that the final surveyor recorded the statements of workers/labour at the respondent’s factory. One Kamal Singh, Supervisor, stated that the raw material was unloaded into the two pucca godowns routinely and it was not stocked in the tin shed which had caught fire. He further stated that the raw material was directly shifted to the pulp section from the pucca godowns only. These statements were directly contrary to those of Gagandeep Singh, the Vice President, and Rajiv Aggarwal, the General Manager, who had said that unloaded raw material was stocked in the tin shed. The statements of the workers/supervisors showed that only waste material which was unusable was stocked in the tin shed and this was the practice since before the factory was taken over by the new management in 2005. They also confirmed that, after taking over the factory, the new management did not unload the raw material into the tin shed and did not lift any raw material from the tin shed. This evidence, which was not even challenged by the respondent in its complaint case, clearly demonstrates that false declarations were made on its behalf by Gagandeep Singh, its Vice President, and Rajiv Aggarwal, its General Manager, to the effect that usable raw material was stocked in the tin shed that caught fire, laying foundation for the insurance claim. On the other hand, the statements of the workers/labour, supported by the finding of the surveyor that the burnt material was very old and with cobwebs, confirming its vintage, put it beyond the pale of doubt that a false claim was sought to be projected by the respondent by declaring that usable raw material was stocked in the burnt tin shed and not the unusable scrap which had accumulated there since before the new management took over the factory. Danish and Sandeep Shami, Accountants, confirmed the version of the workers that only unusable waste paper, after segregation, was stored in the tin shed and such segregated unusable waste paper had been destroyed in the fire. Sandeep Shami also confirmed that the said stock of unusable waste paper used to be stored in the tin shed from before the factory was taken over by the new management. All of them confirmed that the said stock had been lying in the tin shed for a long time.