Collateral lies Don’t Void In Coverage – PH HC on Insurance Repudiation
Judgment dated 31.7.2025 of the Punjab and Haryana High Court in RSA-146-2017 (O&M) of United India Insurance Company Ltd Vs. Aagosh Polyfoams Pvt Ltd with connected matter.
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On 20.1.1999, there was fire in the premises of the plaintiff. The original machines were destroyed and new machines of Indian make were installed.
On 31.12.1999, the policy was issued, after the inspection of the premises including condition of the building and verification of the stocks, plant and machinery. The cover note was issued on the same dayfor insurance of Rs.1.25 crores.
On 7.4.2000, there was fire. On 8.4.2000, the surveyor of the Insurer visited the factory and loss in the premises was photographed.
On 13.4.2000, the plaintiff submitted the claim.
On 18.4.2000, the plaintiff submitted the list of plant and machinery destroyed in the fire was given to the Surveyor.
Plaintiff filed the suit for Rs.1 crore insurance claim with interest.
The Insurer repudiated the claim. It was claimed that the bills of reinstallation of two machines damaged in January 1999 fire, were found to be fake.
The trial Court declined claim for two machines but decreed the suit for Rs.56,73,531.32 ps.
At the time of accepting premium the insurer visited the premises and assessed value of stocks, building and machinery. Premium qua the machinery was accepted. The risk was insured. Had the insured not submitted fake invoices, insurer was still liable to indemnify him for the loss suffered and damage caused by fire including the cost of plant and machinery assessed by insurer at the time of accepting premium.
There is no evidence that the fire of 7.4.2000 was the result of foul play.
It may be a case of collateral lies and embellishment of the claim at the hands of the claimant, but cannot be said to be a case of fraudulent claim.
HELD that the law of insurance being concerned more with controlling the I impact of the breach of the good faith on the risk rather than the punishment of misconduct, the repudiation of whole claim at the hands of insured cannot be sustained.
The Insurer contended that once the insured submitted fake claims to support exaggerated, whole claim needs to be repudiated as a fraudulent claim and relied on the judgment of English Court in popularly known case of Star Sea (2001) 1 ALL ER 743. This has been clarified by the UK Supreme Court in Versloot Dredging BV case 2016 (3) WLR that fraudulent claim has been distinguished from the collateral lies.
