“It is my belief that it is very unfair to have a clause limiting the period of time to three months for an aggrieved party to seek redress from court, when that party has been deprived of his benefits under an insurance policy”, stated Colombo Commercial High Court Judge K. T. Chitrasiri in his judgement given against the Sri Lanka Insurance Company (earlier Corporation).

In this case the plaintiff Kewood Industries, filed action against Sri Lanka Insurance claming a sum of Rs. 13,877,903 together with interest as damages caused consequent to a fire which occurred in their factory premises in January 2003.

The Defendant Insurer denied liability on several grounds among other grounds, including the quantum of the damages sustained, and further alleged it was a breach of Uberrimae Fidei, due to the failure by the plaintiff to inform the insurer of another policy which was in existence at the same time, but which was due to expire soon.

The learned judge held in favour of Kewood on both these matters with regard to the quantum of damages. He accepted the evidence of the plaintiff”s witnesses Aelian Gunawardana and Lakmal Perera, with regard to the loss caused and held that defendant had accepted and acted upon the particulars of the loss supplied by the plaintiff, and cannot now deny them.

The judge also held that no false information is contained in the claim made with regard to the failure to disclose the earlier existing policy. He pointed out that the insured had in fact conveyed this to the agent of Insurance Company who had filled the form.

The judge further held that conveying this to the agent of the insurer, should be considered as a information passed on to the principal.

With regard to three months time limit, the judge held that a clause in an insurance policy that any action be brought with a period of three months, imposes an unreasonable condition, and hence was invalid. That clause was not a valid and enforceable term of contract.

Clause 13 should not be a bar to come before court within a reasonable period of time. He also held that under both the English law and the Roman-Dutch Law, the ultimate position was to view the matter liberally because of its consonance with fair play.

In order to ascertain whether the said clause 13 could be disregarded on the ground of unreasonableness, the judge stated a short period of three months to prepare for litigation for cause of action similar to the one in this instance, may be inadequate. It involves large scale of documentation. Preparation of pleading needs careful consideration by a counsel. Therefore it is unreasonable to have a clause requiring an insured to file action within short period of three months, from the time of repudiation of the claim.
The judge gave judgement as prayed for by the plaintiff, together with cost.

Shibly Aziz PC appeared for plaintiff with Rajindra Jayasinghe, S. L. Gunasekera with Priyantha Jayawardana appeared for the defendant, Sri Lanka Insurance. (SS)

****