Insurance Company liable to pay reinstatement value of insured property if it is unable to repair it: Supreme Court

The Supreme Court noted that as per the true interpretation of insurance policy, two options are given to the insurance company:

– First, it can reinstate or replace property damaged or destroyed instead of paying the amount of loss or damage; or

– Second, it can pay such sum as would be requisite to reinstate or repair such property.

After analyzing the same, the Court was of the view that the present case fell under the second category and, therefore, held that the insurance company shall be liable to pay the reinstatement value of the property insured to repair such property.

While restoring the order of the SCDRC, the Court observe that:

“Therefore, as per second part of Clause 9 of Section 2 of the policy, the complainant shall be entitled to the reinstatement value and not the depreciated value. The NCDRC has mis­interpreted and mis­read the Clause 9. The NCDRC has seriously erred in observing and holding that the insurance company shall be liable to pay the depreciated value only and not the reinstatement value. The State Commission was absolutely justified in awarding the reinstatement value,” the Court ordered.

Source: Barandbench