Premium non-payment can get claim rejected: Supreme Court
In a recent incident where the apex court was dealing with an appeal related to an insurance claim the Supreme Court said that an insurance claim will be rejected when the non-payment of the premium.
The Supreme Court set aside an order issued by the National Consumer Disputes Redressal Commission (NCDRC) which had granted additional compensation for the road accident case which was put before the court. The bench of two judges Hon’ble Justice Sanjiv Khanna and Hon’ble Justice Bela M Trivedi that the legal provisions regarding the contract of insurance are clear and they require Uberrima fides i.e. good faith must prevail on the part of the insured.
The judges of the case were convinced that this provision had been violated as there was non-payment of the premium in due time. The bench said, “That the terms of the insurance policy must be strictly interpreted and complied with. The court does not give the permission to rewrite the terms and conditions of the contract while interpreting those terms.”
The Supreme Court was hearing an appeal filed by the Life Insurance Corporation against the decision given by the National Consumer Disputes Redressal Commission. The case was about a man who had taken life insurance namely the Jeewan Suraksha Yojana which is one of the policies provided by the Life Insurance Corporation of India. Under this Yojana an amount of Rupees 3.7 lakh was assured to the people applying for the insurance.. An additional sum of 3.7 lakh rupees was also promised for incidents such as a sudden accidental death. The insurance premium of the said policy was to be paid half-yearly i.e. every six months. But, therefore was a default in payment i.e. non-payment of the premium of the policy. The man who was to be insured met with a tragic accident on March 6, 2012 and he died on March 21, 2012 because of the severe injuries that he sustained due to the accident.
In this instant case, the insurance policy expired on October 14, 2011 because of the non-payment of the premium by the insured. The insurance company refused to pay the compensatory money because the insurance was not in force when the accident took place. The man’s wife filed the case against the insurance company. The National Consumer Disputes Redressal Company gave the decision in the favour of the complainant and also instructed the insurance company to give additional compensation. The insurance company went to appeal in the Supreme Court for the concerned matter. The Supreme Court gave the decision in the favour of Life Insurance Company stating that, “When the accident took place on March 6, 2012 the insurance was not in force and the insurance company i.e. the Life Insurance Corporation of India was held not liable for the payment of the insurance money. The complainant sought to revive the policy on March 9, 2012 which is after the accident took place. The complainant also tried to mislead the Court by not disclosing the entire facts of the events that led to the accident.”
As per the guidelines put forth by the Insurance Regulatory and Development Authority of India, all insurance policies and the companies providing them are required to provide a grace period of about 30 days to the insured. The insurance companies understand that there can be some unavoidable circumstances due to which the insured might be unable to pay the money for the policy premium. Hence, the insurance companies are legally obligated to provide a grace period to the insured. Later on, the policy still remains in force during those 30 days of the grace period and if the insured pays the money within those 30 days the insurance will not lapse. If there is non-payment of the policy premium even within those 30 days then the policy lapses. But, there are several insurance companies that still give the benefits to the customers and allow them to renew their insurance policy with some standard charges. In the instant case, the premium lapsed on October 14, 2011 which is definitely after the completion of the grace period because the provision of grace period is binding upon the insurance companies. Almost 6 months had passed and the insured did not try to reinstate the policy and this led to the lapse of the policy of the life insurance.
In my opinion the notification issued by the Insurance Regulatory and Development Authority of India is correct in its place, that all the Life Insurance companies need to give grace time to the customers/insured of at least 30 days before terminating the insurance policy. This must be adhered by all the insurance companies and in the instant case the insurance company i.e. Life Insurance Corporation did the same. But, the insured were negligible and did not take the pain to pay the premium for the insurance policy even after 6 months of the lapse of the premium. In my view, the decision given by the Supreme Court in the favour of the insurance company is justified as the complainant did not state the correct facts in the initial phase of the trial. Also, the complainant tried to revive the insurance policy only when they realised the need for money. So, the decision given by the bench of the apex court seems to be correct.
Finally, the decision given by the Supreme Court was in the favour of the Insurance Company. The apex court in their judgement stated that the insurance policy lapsed on October 14, 2011 and after that the insured did not give any heed for the payment of the premium. The Court also mentioned about the concealment of facts of the accident from the complainant side and stated that the insured only tried to revive the policy after the accident ie.. March 9, 2012. The Supreme Court set aside the decision given by the National Consumer Disputes Redressal Commission which granted additional compensation to the complainant.
For case specific advice please contact consumer forum advocates lawyers in Chandigarh Panchkula Mohali Kharar Zirakpur Derabassi .