When Does an Insurance Policy Become Effective? Supreme Court Clarifies Policy Commencement Date.
CASE TITLE – Reliance Life Insurance Company Ltd. & Anr. v. Jaya Wadhwani
The Branch Manager, Reliance Life Insurance Company Co. Ltd. v. Usha Soni
CASE NUMBER – 2024 INSC 10 (Neutral Citation)
DATED ON – 03.01.2024
QUORUM – Justice Vikram Nath & Justice Rajesh Bindal
FACTS OF THE CASE
The sole question involved in these appeals is as to what would be the date from which the policy becomes effective. The District Consumer Disputes Redressal Forum2, the State Consumer Disputes Redressal Commission3 and the National Commission have proceeded on the basis that the date of issuance of the initial deposit receipt of premium is the date of commencement of the Policy and have accordingly allowed the complaint filed by the respondent.
In the appeal of Jaya Wadhwani, the quotation of Policy was issued on 14.07.2012. The proposal form was submitted by the life assured on 14.07.2012. Receipt of the Cheque dated 13.07.2012 was also issued on 14.07.2012. On 16.07.2012, the Policy was issued and at all relevant places, it was mentioned in the policy that the date of commencement of the policy would be 16.07.2012. On 15.07.2013, the life assured committed suicide. In the appeal of Usha Soni, the date of submission of proposal form by the life assured is 26.09.2012. The date of issue of policy as also the date of commencement of policy was 28.09.2012. The date of next premium due was 28.09.2013. As the next premium was not paid, the policy lapsed. The assured paid the next premium on 25.02.2014 and the lapsed policy was reinstated from that date. On 03.06.2014, the life assured committed suicide.
ISSUE
Whether the Policy would take effect from the date on which the policy is issued or the date of the commencement mentioned in the policy or it would be the date of the issuance of the deposit receipt or cover note.
COURT ANALYSIS AND JUDGEMENT
The Hon’ble Supreme Court analyzed that the Clause relevant for consideration, was Clause 9 of the Policy conditions and privileges and the terms and conditions mentioned therein, which reads as follows:
“Suicide: The Company will not pay any claim on death if the Life Assured, whether sane or insane, commits suicide within 12 months from the date of issue of this Policy or the date of any reinstatement of this Policy.”
The Court observed that the Grace period is 30 days under Clause 1(iv) of the terms and conditions. Clause 5 mentions that the policy would lapse. Clause 6 provides for reinstatement. In the case of Usha Soni However, since the renewal amount was not paid within the time allowed, the policy stood lapsed and subsequently, upon payment of the premium against the lapsed policy on 25.02.2014, the policy was reinstated from the said date. The life assured committed suicide on 03.06.2014, which the Hon’ble Supreme Court stated was well within the period of 12 months. In the case of Jaya Wadhwani, the proposal form, no doubt, was submitted on 14.07.2012 with respect to the cheque dated 13.07.2012 of the premium amount wherein also it was mentioned that the receipt is issued subject to the clearance of the cheque and further that the insurance protection shall only be provided effective from the date of acceptance of the risk, which happened on 16.07.2012, when the policy was issued and the date of commencement was notified to be the same date. The Court stated that 14th July 2012, therefore, cannot be taken to be the date of issuance of policy. It is only the date of issue of receipt of the initial premium. The date of issue of policy being 16.07.2012 is actually the date from which the policy commences and becomes effective. period of 12 months from 16.07.2012 will complete on 15.07.2013. It would be the last day of 12 months as from the next day, i.e., 16.07.2013 the next month will start. Unfortunately, the incidence of suicide is on 15.07.2013, the last day of 12 months. The Hon’ble Supreme Court held that in view of the above, the stand taken by the appellant should be approved, and Accordingly, the orders passed by the District Forum, the State Commission, and the National Commission are to be set aside and the claims of the respondent were rejected.
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Judgement Reviewed by – Gnaneswarran Beemarao
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