Arbitration Where Liability Is Not Admitted

1. In Oriental Insurance Company Limited v. Narbheram Power and Steel Pvt Ltd dated 2 May 2018 the Supreme Court has upheld the validity of a quantum-only arbitration clause and has affirmed that once an Insurer has denied liability, arbitration is no longer an option (unless Insurer and Insured come to an independent agreement to arbitrate).

Facts

1. The Insured was covered under a Fire Industrial All Risk Policy for its factory in Odisha. In October 2013, Cyclone Phailin caused damage. On 21 January 2017, and before a decision had been taken on the claim, the Insured served an arbitration notice.
2. OIC replied to the arbitration notice by denying liability and repudiating the claim on various specified grounds. In light of the denial of liability, OIC also denied the applicability of the Policy arbitration clause and rejected the arbitration notice under the Policy arbitration clause (Clause 13), which in material part was in the following terms: