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Household insurance policies are not foolproof

Rosy Kumar

What's the first rule when buying insurance? That's easy: read the small print to avoid any nasty surprises.

Insurance companies are always looking for ways to limit their liability and sometimes that may mean that the insurance policy isn't really worth it.

Take, home insurance policies. "Enjoy complete peace of mind, whether you are at home or away," claim the general insurance companies. The advertisements state that their household insurance plans offer complete protection for practically everything in your home including furniture, fittings, electronic items, jewellery, silver and crystal ware.

There's also the option of insuring the building. The policy covers risks including fire and allied perils, earthquake, terrorism, burglary and housebreaking including larceny and theft.

By paying a small premium, you feel as if you have secured yourself against all type of situations mentioned in the advertisements, brochures and even in the policy documents.

Sadly, however, you could be mistaken.

Take the case of Surinder Singh Chauhan, a practising advocate in Himachal Pradesh. Chauhan had his household articles including jewellery and other valuables insured with the United India Insurance Company against the risk of theft. The policy was in force from November 8, 1997 to November 7, 1998.

On October 16, 1998, his household goods and other valuable articles worth Rs 27,400 were stolen. Investigations revealed that they were stolen by his domestic servant.

He filed a complaint at the Parwanoo police station, and also lodged a claim with the insurance company. A surveyor was appointed to assess the loss.

All the formalities were completed and Chauhan was waiting for the insurance claim cheque from the company.

Instead, he was shocked to receive a letter from the insurance company repudiating his claim.

Chauhan believed that the insurance company had rejected his claim arbitrarily and he filed a complaint before the district consumer disputes redressal forum at Solan. After examining the matter, the consumer court dismissed his complaint.

He then filed an appeal before the Himachal Pradesh State Consumer Disputes Redressal Commission at Shimla.

The State Commission went deep into the matter. But the insurance company argued that the policy against the risk of theft and housebreaking had an exception clause.

This excluded the liability of the insurance company in respect of loss or damage to the contents contained in the insured premises, if the loss or damage by burglary or housebreaking takes place "where any employee of the insured or member of the insured's family is concerned as principal or accessory".

The state commission decided that the insurance company was justified in rejecting Chauhan's claim. It passed an order dismissing the appeal on September 30, 2002.

As we all know, domestic servants are frequently involved in housebreaking and theft cases. An interesting question raised before the Himachal Pradesh State Commission in the above case was whether a domestic servant was an employee of the insured?

Reference on this behalf was made to Aiyer's Law Lexicon, the English Law Dictionary, 1997 edition, wherein an elaborate interpretation of the domestic servant is provided.

Reliance was also placed by the insurance company on the judgement handed down by the Supreme Court in the Pali Devi Vs Chairman, Managing Committee 1996 SCC (L&S) 704. It was observed that in legal parlance, the word servant "denotes a person in service of another, under any contract of hire, express or implied, oral or written, bringing into existence in favour of the employer the right to supervise and control the work done by the servant, against payment of salary or wages".

The state commission held that Surinder Singh Chauhan's complaint was rightly rejected by the district forum, and the insurance company was legally justified in repudiating his insurance claim.

With the above law, one wonders whether it is worth taking an insurance policy covering the theft of household goods, when such happenings in majority of cases take place with the connivance of the domestic servants employed by the insured?

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