This appeal arose out of an insurance claim that was rejected on the ground that though the loss was caused by fire, insurer’s liability would not attach as the cause fell under the exclusion clause of the policy (“Standard Fire and Special Perils Insurance Policy”). A theft had taken place on the factory premises which preceded the fire. Being aggrieved by the repudiation of its claim, the Appellant filed a complaint before the National Consumer Disputes Redressal Commission (NCDRC). The NCDRC dismissed the complaint on the ground that the proximate cause of the loss was burglary and the insurance policy taken by the Appellant did not cover the loss on account of theft/ burglary. Aggrieved, the Appellant approached the Supreme Court.

A 2-Judges Bench of the Supreme Court held –

“20. … From the bare reading of the opening paragraph of the policy, it is clear that the Respondent had assured to indemnify the loss to the insured by any of the perils specified in the policy.”.

Fire was the first peril set out in the policy, certain exclusions were also mentioned therein. The Bench held that burglary/theft was not included in the exclusion given in the specified peril “Fire.”.

It was held –

“20. …Once it is not disputed that the loss is caused by fire, then the cause igniting the fire becomes immaterial. The insurer cannot refuse to indemnify the damage caused by fire, which is a specified peril, on the ground that the proximate cause of fire was burglary/theft (which is excluded under the RSMD clause), particularly when no such exclusion is provided in the specified peril “Fire”. Further, if we look into the general exclusion in the policy, loss by theft is excluded during or after the occurrence of the insured peril except as provided under the RSMD clause. Nonetheless, the policy is silent on the aspect of whether the burglary/ theft which precedes the insured peril is excluded or not.

21. The Respondent has repudiated the claim of the Appellant on the ground that since the theft preceded the fire, the claim for loss by the Appellant is not maintainable because under the RSMD clause, burglary/theft is an exclusion. The NCDRC had also upheld the said stand of the Respondent, however, in our considered view, the reason for repudiation of the claim of the Appellant is not justified.”.

The Bench reiterated the decision in Orion Conmerx Pvt. Ltd. vs. National insurance Co. Ltd., 2025 SCC OnLine 2309 and held “it is a settled position that if the damage is caused by fire, then the reason by which the fire took place becomes irrelevant” and “in case of insurance contracts, the exclusion clause must be construed strictly and wherever there is any ambiguity between two or more clauses in the contract, it must be interpreted in favour of the insured”.

It was further held –

            “28. … It is a trite law that the exclusions in the contract for insurance must be read strictly and, therefore, the exclusion provided under the RSMD clause would not oust the liability of the insurer when the loss or damage is attributable to the peril of fire which has its independent exclusions.”.

The Supreme Court allowed the appeal, set aside the repudiation and NCDRC judgment and remitted the matter to the NCDRC to assess the loss pursuant to the claim filed by the Appellant.