Summary
The Supreme Court set aside appointment of an arbitrator under an insurance policy that limited arbitration to quantum disputes where liability was admitted and expressly excluded disputes when the insurer denied liability. The repudiation here rejected liability altogether, rather than merely disputing valuation. The Court found no ambiguity permitting the contractual exclusion to be rewritten. The insured’s remedy was a civil suit, with section 14 limitation benefit if filed within two months.
Issues
- Whether an express exclusion of arbitration upon denial of insurance liability barred appointment of an arbitrator.
- Whether the repudiation concerned liability or only the amount payable.
- What remedy and limitation protection remained for the insured.
Provisions considered
- Section 14, Limitation Act, 1963The Court directed that the insured receive the benefit of exclusion of time under section 14 if it instituted its civil suit within two months from this judgment. It did not adjudicate the substantive insurance entitlement. (¶ 26)
Held
- Clause 13 permitted arbitration of quantum only when liability was otherwise admitted. Its second part unequivocally excluded arbitration if the insurer disputed or did not accept liability. The condition requiring an award before suit did not render that exclusion ambiguous. (¶¶ 7, 8, 15, 16, 17, 18, 19, 24, 25, 26)
- Insurance contracts must be interpreted according to their agreed words. Courts cannot introduce equity by rewriting a clear commercial clause or create arbitral jurisdiction beyond the parties’ agreement. (¶¶ 9, 10, 11, 12, 24)
- The repudiation gave reasons denying any indemnity, including absence of actual covered loss and inherent vice. In context it rejected liability in toto, rather than accepting liability while contesting the quantum, and therefore fell within the express exclusion. (¶¶ 25, 26)
- Authorities on mere fraud allegations did not resolve this case, which concerned the contractual exclusion triggered by denial of liability. The Court did not decide whether the policy was void; the insurer had not taken that position. (¶¶ 21, 22, 23, 26)
- The insured could pursue a civil suit to establish its claim. If brought within two months, section 14’s benefit would apply. Setting aside the arbitration appointment did not itself decide the merits of the insurance dispute. (¶¶ 26, 27)
Result
Insurer’s appeal allowed; High Court order appointing an arbitrator set aside. Insured relegated to civil suit, with section 14 benefit if filed within two months. No order as to costs.