If an insurance policy states that repudiation of a claim or denial of the insurer’s liability cannot be referred to arbitration, the insured person cannot invoke arbitration and the remedy is a civil suit. The Supreme Court declared so last week while quashing the judgment of the Orissa High Court in the case, Oriental Insurance Co vs Narbheram Power and Steel Ltd. The company had taken an all-risk policy for its factory. In a cyclone it suffered damage, leading to the claim. The insurance company rejected it. The power company moved the High Court for arbitration. The High Court appointed a retired judge as arbitrator. Oriental appealed to the Supreme Court successfully. One of the terms of the policy was that “no difference or dispute shall be referable to arbitration if the company has disputed or not accepted liability”. The judgment stated denial of the claim itself would not amount to a ‘dispute’ which calls for arbitration. The court did not examine the question whether such a condition was void as it was not argued.
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