The Bombay High Court has clarified that an insurance company cannot evade liability under a worker compensation policy merely by disputing the precise location of an accident or by relying on technical exclusions for subcontractor employees. Where the policy covers all civil construction workers at a site, and no conclusive evidence proves the deceased was employed by a subcontractor, the insurer remains liable.
Background & Facts
The Dispute
The widow of a 68-year-old construction worker, Phulki Ramesh Dhondiya, filed an application under Section 22 of the Employees' Compensation Act, 1923 seeking compensation after her husband died in an accident at a construction site in Goregaon, Mumbai. The insurer, Bajaj Allianz General Insurance, denied liability on two grounds: first, that the accident occurred at Goregaon (West), while the policy covered only Goregaon (East); and second, that the deceased was employed by a subcontractor, Dashrath Patel, whose workers were explicitly excluded under the policy terms.
Procedural History
- February 2022: Deceased died at Empire Tower, Goregaon, while working on the second floor.
- 2023: Widow filed compensation claim before the Commissioner under the EC Act.
- 2024: Trial Court held both the employer (M/s Aditri Enterprises) and insurer jointly and severally liable for Rs. 7,45,275/-.
- 2025: Insurer filed First Appeal under Section 30 of the EC Act, challenging the liability determination.
- February 2026: Bombay High Court heard the appeal on substantial questions of law.
Relief Sought
The appellant insurer sought to overturn the Trial Court’s order, arguing it was not contractually or statutorily liable. The respondent widow sought confirmation of the compensation award against both the employer and insurer.
The Legal Issue
The central questions were: (1) Whether an insurance company can be held liable under the Employees' Compensation Act, 1923 for compensation when its policy covers the risk location and type of work, even if the employer denies employment; and (2) Whether exclusion clauses for subcontractor employees apply when there is no proof the deceased was employed by such a subcontractor.
Arguments Presented
For the Appellant
The insurer argued that: (i) The policy explicitly excluded employees of contractors or subcontractors unless listed in the Schedule; (ii) The accident occurred at Goregaon (West), while the policy covered Goregaon (East); (iii) The deceased was employed by Dashrath Patel, as evidenced by the FIR naming him as accused; and (iv) The Trial Court erred in applying Section 12 of the EC Act, which deals with contracting out, and misappreciated evidence. It relied on New India Assurance Co. Ltd. v. Harshadbhai Amrutbhai Modhiya to argue that insurers are not statutorily liable.
For the Respondent
The widow’s counsel contended that: (i) The FIR recorded the accident location as Goregaon (East), aligning with the policy; (ii) The policy covered "all employees engaged in construction," not just payroll employees; (iii) No documentary evidence proved the deceased worked for the subcontractor; and (iv) The Supreme Court in Alok Kumar Ghosh v. New India Assurance affirmed that insurers can be made parties in EC Act proceedings if liability arises under contract. He cited National Insurance Co. Ltd. v. Shaikh Hasina Sharfuddin to show that policy language must be interpreted broadly in favor of worker protection.
The Court's Analysis
The Court examined the contractual nature of the insurer’s liability, distinguishing it from statutory liability under the Motor Vehicles Act. It held that while the EC Act does not impose direct statutory liability on insurers, Section 19 permits the Commissioner to determine the liability of any person obligated to indemnify the employer - including insurers - under their policy terms.
"The absence of statutory liability cannot result in extinguishing the contractual liability, if proved."
Regarding the location dispute, the Court gave greater weight to the FIR, which recorded the accident site as Goregaon (East), matching the policy’s survey number and pin code (400063). The widow’s oral testimony, though lacking precision, was not sufficient to override the official record.
On the subcontractor issue, the Court emphasized that the burden lay squarely on the insurer to prove the deceased was employed by Dashrath Patel. The insurer failed to produce muster rolls, wage records, or employment contracts from the subcontractor. The witness for the employer admitted the deceased worked under the subcontractor’s instructions - but this did not equate to employment. The Court noted:
"The suggestion that the deceased was working under the instructions of the subcontractor is not the same as saying that the deceased was an employee of the subcontractor."
The policy defined "employee" as persons in direct employment under the insured, excluding those under contractors or subcontractors unless specifically covered. However, the policy’s coverage clause explicitly included "all employees engaged in the construction of the building" as civil construction workers. The Court relied on National Insurance Co. Ltd. v. Shaikh Hasina Sharfuddin, holding that such broad language must be interpreted to protect workers on-site, not limited to payroll employees.
The Court concluded that the insurer’s exclusion clause could not be invoked without proof of subcontractor employment - a burden it failed to discharge. The widow’s testimony, unshaken in cross-examination, combined with the absence of any contrary evidence, established a preponderance of probability in her favor.
The Verdict
The appellant insurer lost. The Court held that contractual liability under the insurance policy extends to all civil construction workers on the insured site, regardless of direct payroll status, unless the insurer proves otherwise. The insurer was held jointly liable with the employer for compensation under the Employees' Compensation Act, 1923.
What This Means For Similar Cases
Policy Language Must Be Interpreted Broadly
- Practitioners must argue that insurance policies covering "all workers at the site" or "civil construction employees" must be construed in favor of coverage, especially in worker protection statutes.
- Exclusion clauses for subcontractors are not self-executing; insurers bear the burden of proving the worker’s subcontractor status.
Burden of Proof Lies with the Insurer
- In EC Act claims, insurers cannot rely on denials by employers or vague FIR entries to avoid liability.
- To invoke exclusions, insurers must produce concrete evidence: payroll records, employment contracts, or wage disbursement proofs from the subcontractor.
Location Disputes Are Resolved by Official Records
-
Oral testimony from dependents about accident locations is subordinate to official documents like FIRs or police panchnamas.
-
Matching pin codes and survey numbers can override conflicting verbal descriptions of location.
-
Always cross-check policy wording against the nature of work, not just the employer’s internal structure.
-
When an employer denies employment to avoid liability, courts will look to the actual work context and evidence of presence at the site.
-
Insurers must proactively verify subcontractor arrangements at the time of policy issuance - not after an accident.
