National Insurance Co. Ltd. v. Harsolia Motors
A commercial entity that takes an insurance policy to indemnify its business assets is a 'consumer'; the 'commercial purpose' bar applies only when the goods/services are themselves used in profit-generating commercial activity.
Facts
Business entities, including motor dealers, took insurance policies to cover their commercial premises, stock and vehicles. When claims were repudiated, they approached the consumer fora. The insurer contended that since the insured were running commercial enterprises and the policies related to commercial assets, they availed the service for a 'commercial purpose' and were therefore not 'consumers'.
Issues
- Whether a company/firm availing an insurance policy for its business assets avails the service for a 'commercial purpose' so as to be excluded from the definition of 'consumer'?
Arguments
The insurer argued that policies obtained by commercial concerns to protect business assets were availed for a commercial purpose, taking the insured outside the definition of consumer. The insured argued that an insurance contract of indemnity does not itself generate profit; it merely protects against loss, and is therefore not a service availed for a commercial purpose.
Held
The Supreme Court, affirming the line of NCDRC reasoning, held that the question whether a service is availed for a 'commercial purpose' is one of fact, turning on whether the service has a close and direct nexus with a profit-generating activity. A contract of insurance is one of indemnity that only compensates the assured against loss and does not itself yield profit; obtaining such a policy is therefore not availing a service for a commercial purpose. Hence the insured commercial entities were 'consumers' and their complaints were maintainable. The mere fact that the insured carries on commercial activity does not, by itself, exclude it.
Ratio decidendi
The exclusion of 'commercial purpose' applies only where the goods/services have a direct nexus with profit generation; an insurance policy taken to indemnify business assets is not availed for a commercial purpose, so even commercial entities are 'consumers'.
Significance
Authoritatively settles that companies/firms taking indemnity insurance for business assets are consumers, approving Harsolia Motors and clarifying the 'commercial purpose' test for the 2019 Act as well; widely relied on in insurance consumer disputes.
Related
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