Insurance claim liable to be rejected if lapsed on premium not paid: SC

Insurance claim liable to be rejected if lapsed on premium not paid: SC

The Supreme Court stated that an insurance claim might be denied if the policy has lapsed due to non-payment of premiums, and that the conditions of an insurance policy must be properly read.

The Supreme Court made the remark while overturning a decision by the National Consumer Disputes Redress Commission (NCDRC) ordering further compensation in a traffic accident case.

It is a well-established legal view that under an insurance contract, there is a requirement of Uberrima fides, or good faith on the part of the insured, according to a bench of Justices Sanjiv Khanna and Bela M Trivedi.

The bench stated, “It is apparent that the terms of an insurance policy must be carefully construed, and it is not permitted to rewrite the contract while reading the policy’s terms.”

The Supreme Court was hearing an appeal filed by the Life Insurance Corporation (LIC) against the NCDRC’s decision to overturn the State Commission’s order.

In this case, the woman’s husband had purchased a Jeevan Suraksha Yojana life insurance policy from the Life Insurance Corporation, which guaranteed a payout of Rs. 3.75 lakh.

A further sum of Rs. 3.75 lakh was guaranteed in the event of death due to an accident.

The insurance premium for the said coverage was supposed to be paid six times a year, but there was a missed payment.

The complainant’s husband was involved in an accident on March 6, 2012, and died from his injuries on March 21, 2012.

Following her husband’s death, the complainant filed a claim with LIC and was awarded Rs. 3.75 lakh. The additional payment of Rs. 3.75 lakh for the Accident claim benefit, on the other hand, was disallowed.

As a result, the complainant filed a complaint with the District Forum, requesting that the aforementioned amount be applied to the Accident Claim Benefit. The District Forum upheld the woman’s appeal and ordered that an extra sum of Rs. 3.75 lakh be paid toward her accident claim benefit.

The order was overturned by the State Consumer Disputes Redressal Commission, which was then challenged in the National Consumer Disputes Redressal Commission.

The NCDRC overturned the State Commission‘s decision.

The apex court stated that in the instant case, condition no. 11 of the policy required the policy to be in force at the time of the accident.

“The insurance in this case had expired on October 14, 2011 and was no longer in effect on the day of the accident, March 6, 2012. It was attempted to be resurrected on March 9, 2012, following the accident in question, and without disclosing the fact that the accident had occurred on March 6, 2012 “In an order issued on October 29, the Supreme Court stated.

Apart from the fact that the complainant did not come with clean hands to claim the policy’s add-on/extra Accident benefit, and the policy in question was not in force on the date of the accident as per condition no. 11 of the policy, the claim for extra Accident benefit was properly rejected by the Corporation, according to the top court.

“Because clause 3 of the policy’s terms and conditions allowed for the renewal of a discontinued policy, the appellant-Corporation resurrected the complainant’s policy by accepting late premium payments and paying Rs 3,75,000 as assured under the policy; however, for the Accident Benefit, the policy had to be in force for the full sum assured on the date of the accident as stipulated in the policy.” the bench said.

The accident benefit could only have been claimed and used if the accident occurred after the policy was renewed, according to the apex court.

“The Court, then, is of the opinion that the NCDRC’s challenged order setting aside the Commission’s order and reviving the District Forum’s order was severely erroneous and liable to be set aside,” the bench said.

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