In United India Insurance Co. Ltd. v. M/s Hyundai Engineering & Construction Co. Ltd. & Ors. [2024] 6 S.C.R. 355 : 2024 INSC 431 matter pertained to the correctness of the decision by NCDRC which directed the appellant-insurer to release and pay an insurance claim to the respondent-contractor for the collapse of the bridge. The Supreme Court in para 16 & 17 held that exclusion clauses in insurance contracts need to be interpreted strictly and against the insurer as they have the effect of completely exempting the insurer of its liabilities. The aforesaid paras of the judgment are as follows:
“16. Insurance is a contract of indemnification, being a contract for a specific purpose, which is to cover defined losses. The courts have to read the insurance contract strictly. Essentially, the insurer cannot be asked to cover a loss that is not mentioned. Exclusion clauses in insurance contracts are interpreted strictly and against the insurer as they have the effect of completely exempting the insurer of its liabilities.
17.In Texco Marketing P. Ltd. v. TATA AIG General Insurance Company Ltd. while dealing with an exclusion clause, this Court has held that the burden of proving the applicability of an exclusionary clause lies on the insurer. At the same time, it was stated that such a clause cannot be interpreted so that it conflicts with the main intention of the insurance. It is, therefore, the duty of the insurer to plead and lead cogent evidence to establish the application of such a clause. The evidence must unequivocally establish that the event sought to be excluded is specifically covered by the exclusionary clause.“