Insurer Cannot Repudiate Claim Saying Damage In Equipment Was Discovered Only After Policy Was Issued : Supreme Court

The Supreme Court on Thursday (November 13) allowed the insurance claim of a company whose boiler had exploded, rejecting the insurer's contention that it was not liable to indemnify the loss since the defect in the boiler was discovered only after the insurance policy had been issued.

“A subsequent discovery of damage or corrosion cannot be a ground to repudiate an insurance claim, as it would defeat the very purpose of the insurance contract,” observed a bench of Justices P.S. Narasimha and Manoj Misra while hearing a case in which the insurer-National Insurance Co., had denied liability based on defects discovered in the boiler after the accident.

Rejecting this approach, the Court held that an insurer cannot escape its obligation to compensate the insured by relying on its own fai