SUPREME COURT HOLDS THAT INSURANCE CLAIM CAN BE REJECTED IF PREMIUM IS NOT PAID ON THE DUE DATE

A Two Judge Bench of the Hon’ble #SupremeCourt of India comprising of Justices Sanjiv Khanna and Bela M. Trivedi passed a #Judgment dated 29-10-2021 in the case of Life Insurance Corporation Of India And Another v. Sunita {Special Leave Petition (Civil) No. 13868 Of 2019} held that the #Insurance Claim is liable to be rejected if #premium was not paid on the due date.

In the present case, one Mr. Pradeep Kumar (Insured), the husband of the (Respondent) (original Complainant) had taken an Insurance Policy on 14-04-2021 under the Jeevan Suraksha Yojana from the Life Insurance Corporation (Appellant-Corporation). Under the said Policy a sum of Rs. 3,75,000/-was assured by the Appellant-Corporation and an additional sum of Rs. 3,75,000/- was assured in the event of death by accident. The insurance premium of the said Policy was to be paid in six months. The next premium was due to be paid on 14-10-2011 by the Insured. However, there was a default in paying the premium. On 06-03-2012 the Insured met with an accident and succumbed to the injuries on 21-03-2012. In the meantime, the due insurance premium of October, 2011, was deposited by the Insured on 09-03-2012 for reviving the Policy.

The Complainant after the death of the Insured-Husband filed a claim before the Appellant-Corporation. The Appellant paid a sum of Rs. 3,75,000/- however, did not pay the additional amount of Rs. 3,75,000/- towards the Accident claim benefit to the Complainant.

Aggrieved, the Complainant approached the District Forum and vide Judgment and Order dated 14-10-2013, the District Forum while placing reliance upon the Ready Reckoner issued by the Appellant-Corporation, allowed the said claim of the Respondent. Aggrieved by the said Order dated 14-10-2013, the Appellant-Corporation preferred an Appeal before the State Consumer Disputes Redressal Commission. The State Commission while setting aside the said Order dated 14-10-2013 passed by the District Forum, allowed the said Appeal. Thereafter, the aggrieved Complainant preferred a Revision Petition being No. 897 of 2008 under Section 21(B) of the Consumer Protection Act, 1986 (Act), before the National Consumer Dispute Redressal Commission (NCDRC) thereby challenging the Order passed by the State Commission. Vide Judgment dated 24-04-2019, the NCDRC allowed the said Revision Petition and set aside the Order passed by the State Commission.

Aggrieved and dissatisfied, the Appellant-Corporation approached the Hon’ble Supreme Court of India by way of an Appeal. After taking into consideration the facts of the case and the arguments advanced by the Parties to the dispute, the Bench observed that the it is not disputed that the Insured had taken the Life Insurance Policy on 14-04-2011, and that the next premium had to be paid on 14-10-2011 but the same was not paid by him. That the Insured met with an accident on 06-03-2012, and thereafter the premium was paid on 09-03-2012 and that he expired on 21-03-2012. Also, while making payment of premium on 09-03-2012, it was not disclosed by the Complainant or the Insured to the Appellant-Corporation about the accident which had taken placed on 06-03-2012. The Court held that the facts reveal that the Insured did not follow the principle of Uberrimae Fidei (utmost good faith) which states that the Insurer and the Insured must disclose all material facts before the policy inception. In case of non-disclosure or misrepresentation of material facts, the Policy can be considered null and void.

The Court noted that by not disclosing the accident to the Appellant-Corporation, the Complainant and the Insured not only suppressed the material facts but it also shows the mala fide intention on their part. In such a scenario the Accident benefit claim of the Complainant was liable to be rejected on the said ground alone. “It is well settled legal position that in a contract of insurance there is a requirement of Uberrima Fides i.e. good faith on the part of the assured.”

The Apex Court while placing reliance upon the case of Vikram Greentech (I) Ltd. V/s New India Assurance Co. Ltd. (2009) 5 SCC 599, observed that “9. From the afore-stated legal position, it is clear that the terms of insurance policy have to be strictly construed, and it is not permissible to rewrite the contract while interpreting the terms of the Policy. In the instant case, condition no. 11 of the Policy clearly stipulated that the policy has to be in force when the accident takes place.”

Therefore, the Bench while setting aside the Impugned Order dated 24-04-2019 passed by the NCDRC, allowed the Appeal filed by the Appellant-Corporation and held that the claim of the Respondent towards Accident benefit is liable to be rejected.

Suchitra Upadhyay

Associate

The Indian Lawyer & Allied Services

Edited by

Sushila Ram Varma

Chief Consultant and Editor

The Indian Lawyer & Allied Services