Delhi High Court: Insurance Policy Is To Be Referred To Arbitration When Only One Head Of The Claim Is Disputed And Not The Entire Liability

The Delhi High Court in the case Shivalaya Construction Co. Pvt Ltd. v. National Insurance Company Ltd observed and has held that the ordinarily the dispute which being under insurance policy claimed that it would not be referred to arbitration when the reference is limited to quantum of compensation and the insurer disputes liability.
The bench headed by Justice Prateek Jalan in the case observed and has distinguished between a situation wherein the insurer denied the entire liability and where the entire liability is not disputed but only claims as stated under one of the heads is being disputed as the same being outside the scope of reference. The court in the case observed and has held that there cannot be any arbitration in the first scenario. Further, the second issue would not put the dispute beyond the ambit of the arbitration clause and thus, it would be proper for the respondent in order to raise such objections before the arbitrator. The court in the case also observed that the respondent has not entirely dismissed the claims of the petitioner but only denied arbitration on the grounds that one of the claims raised by the petitioner is not covered by the insurance policy. Therefore, the curt in the case distinguished the judgments of various courts on the ground that in all those cases, the insurer denied the liability in toto.
The court observed and has distinguished between a situation wherein it has been denied by the insurer the entire liability and where the entire liability is not being disputed but only claims which are under one of the heads is disputed as being outside the scope of reference and it has been held that it is not a case of denial of liability but only a case where one of the heads of the claim is being disputed as not following within the policy. The court in the case observed and has held that there cannot be any arbitration in the first scenario, thus, the second issue being would not put the dispute beyond the ambit of the arbitration clause and it would be proper for the respondent to raise such objections before the arbitrator.
Further, the court in the case observed that in another claim between the same parties. It has also been agreed by the respondent in the case to the dispute being referred to arbitration.
Accordingly, the court allowed the petitioner and the court appointed the sole arbitrator and directed the arbitration to be conducted under the Aegis of DIAC Rules.
The counsel, Advocates, Mr. Shishir Mathur, Ms. Muskan Tyagi appeared for the petitioner.
The counsels, Advocates, Mr. Prateek Mishra, Mr. Mohit Kumar represented the respondent.

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