Supreme Court Holds Insurer Cannot Invoke Exclusion Clause to Repudiate Boiler Explosion Claim – Kopargaon Sugar Factory v. National Insurance (2025)

Case Name: Kopargaon Sahakari Sakhar Karkhana Ltd. (now Karmaveer Shankarrao Kale Sahakari Sakhar Karkhana Ltd.) v. National Insurance Co. Ltd. & Anr.
Citation: Civil Appeal arising out of SLP (C) Nos. 1377–1378 of 2022; 2025 INSC 1315
Date of Judgment/Order: 13 November 2025
Bench: Hon’ble Mr. Justice Pamidighantam Sri Narasimha and Hon’ble Mr. Justice Manoj Misra

Held: The Supreme Court held that the insurer was not justified in repudiating the appellant sugar factory’s claim under its Boiler and Pressure Plant (BPP) insurance policy by invoking exclusion clause 5. The Court found that the insurer failed to establish any suppression, misrepresentation, or breach of disclosure obligations by the insured, particularly since the boiler was registered, certified fit, and insured during the validity of the boiler’s fitness certificate. The Court further noted that the insurance company neither denied the fact of explosion nor proved that corrosion or tube slippage pre-dated the accident, and held that exclusion clause 5 could not apply where defects or weaknesses surfaced only due to the explosion itself. Relying on established principles that exclusion clauses must not defeat the main purpose of insurance contracts, the Court held NCDRC erred in dismissing the claim solely on the basis of survey reports and exclusion clause 5.

Summary: The appellant sugar factory obtained a BPP policy for its boiler (GT-23) for ₹1.60 crore covering the period 01.02.2005–31.01.2006. On 12.05.2005, a blast occurred in the boiler causing two tubes to slip from their joints. Although the factory reported the incident promptly, the insurer repudiated the claim citing corrosion, tube aging, and exclusion clause 5, asserting that the damage was due to wear and tear rather than explosion. The State Commission held the repudiation unjustified and awarded ₹49 lakhs. On appeal, NCDRC reversed this finding, accepting the surveyor’s reports and holding that there was no explosion and that the loss stood excluded under clause 5. In appeal before the Supreme Court, it was argued that the insurer had issued the policy after relying on a valid boiler fitness certificate, and had failed to establish any misrepresentation or suppression by the insured. The Court accepted these contentions, observing that the insurer cannot rely on post-accident discoveries to deny liability, especially without proving fraud, breach of duty, or material non-disclosure by the insured.

Decision: The Supreme Court set aside NCDRC’s judgment and restored the sugar factory’s claims, holding that repudiation based on exclusion clause 5 was illegal and contrary to the principles of insurance law. However, since NCDRC had not adjudicated the quantum of compensation, the Supreme Court remitted the matter back to NCDRC solely for determining the amount payable. All other issues were treated as closed. The appeals were allowed, with parties bearing their own costs.