,contract of insurance A standard format is prepared by the insurer on which the consumer is asked to sign. He has little choice or option to negotiate the terms of the contract, other than signing the dotted lines. The insurer, who, being the principal party, sets its terms, leaves it to the consumer, to either take it or leave it. Such contracts are clearly one-sided, in favor of the insurer because of the weak bargaining power of the consumer,” the bench said.
The top court observed that the concept of freedom of contract loses importance in the contract of insurance.
“Such contracts demand a very high level of discretion, goodwill, disclosure and notice on the part of the insurer as to various aspects of the principle of fairness. However, a contract of insurance is a voluntary act on the part of the consumer, with a clear intention to do so in the future. To cover any contingencies that may occur.
“A premium is explicitly paid for that purpose, as there is a legitimate expectation of reimbursement when an act of God occurs. Therefore, an insurer is expected to have that purpose in mind, And that too from the point of view of the consumer, to cover the risk, against a plausible rejection,” it said.
In this case, the appellant Texaco Marketing Pvt. Ltd. has secured a policy from Tata AIG General Insurance Company Limited And was to cover a shop located in the basement of the building.
However, the exclusion clause of the contract specified that it did not cover basements.
The shop was properly inspected and not only this shop of the appellant, but also another shop located in a similar manner was insured by the insurer.
The shop caught fire, for which the appellant claimed. However, the claim was denied by taking umbrage under the exclusion clause.
The top court said the terms of the contract were unfair, especially the exclusion clause.