Summary
The insurer completely repudiated liability for a bridge-construction loss under a policy allowing arbitration only over quantum where liability was admitted. The Supreme Court held that the conditional arbitration clause was not activated, set aside appointment of an arbitrator, and left the insured free to pursue a civil suit without deciding its merits or the cause-of-action issue.
Issues
- Whether a policy arbitration clause confined to quantum disputes where liability was admitted could support appointment of an arbitrator after complete repudiation.
Provisions considered
- Sections 11(4), 11(6) and 11(6A), Arbitration and Conciliation Act, 1996The amended appointment framework did not justify treating the mere presence of a conditional arbitration clause as sufficient when the dispute fell within its express exclusion. (¶¶ 1, 6, 11, 14, 15, 17)
Held
- The arbitration clause required strict construction. Unequivocal admission of liability was a prerequisite to arbitrating quantum; its express exclusion of disputes where liability was denied rendered a complete repudiation outside its scope. (¶¶ 10, 11, 13)
- The insurer’s communication of 21 April 2011 denied liability in its entirety, rather than merely disputing quantum. The High Court misapplied the general observations in Duro Felguera by declining to examine the clause’s conditional operation and the nature of repudiation. (¶¶ 11, 14, 15)
- The insured’s remedy was a civil suit. Whether the later communication declining reconsideration could constitute the cause of action for such a suit remained open, as did the merits of any civil proceedings. (¶¶ 16, 17)
Result
Appeal allowed; the arbitrator-appointment order was set aside and the original petition dismissed, with liberty to pursue a civil suit if advised. Merits and the suit’s cause-of-action question were left open. No costs.