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When Does an Insurance Policy Become Effective? Supreme Court Clarifies Policy Commencement Date.

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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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“Faster Health Insurance Claims: IRDAI’s Recent Directives”

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Introduction

With healthcare prices on the rise, it is now widely believed that having health insurance is essential. Nevertheless, selecting an insurance can be difficult, and policyholders frequently have to deal with a lot of difficulties when their claims are resolved. A new master circular from the Insurance Regulatory and Development Authority of India (IRDAI) attempts to streamline the entire process and benefit the policy holder. “The master circular emphasizes measures towards providing seamless, faster and hassle-free claims experience to a policy holder procuring health insurance policy and ensuring enhanced service standards across the health insurance sector,” the insurance regulator stated. Insurance companies, according to IRDAI, should work toward facilitating 100% cashless claim settlement in a timely way.

The regulator requires the businesses to respond to requests for cashless authorization within an hour. Additionally, the hospital should obtain a final authorization for discharge, and that decision should be made within three hours. In the event that a claim is settled, the policyholder will not be required to provide any documentation, according to IRDAI. Rather, it stated that the necessary paperwork should be obtained from the hospitals by the insurance companies and TPAs (third-party administrators). “No policy and claim of health insurance shall be contestable on any grounds of non-disclosure and/ or misrepresentation except for established fraud, after the completion of the moratorium period, i.e. 60 months of continuous coverage,” stated IRDAI. “The claims review committee’s approval is necessary before any claim can be renounced. a choice to reject each and every allegation,” it continued. In the event that a patient passes away while receiving treatment, the hospital must release their mortal remains right away.

Insurance Regulatory and Development Authority of India (IRDAI)

 In most cases, the insurer rewards a policyholder who maintains no claims over the policy period with a no-claims bonus, which takes the shape of a larger sum assured. According to IRDAI, the insurer may provide the policyholder the choice of receiving a no claims bonus by either raising the sum insured or lowering the premium price. Clients must have the freedom to select products, add-ons, and riders based on their needs and medical conditions. Crucially, as per IRDAI, “A health insurance coverage is renewed and cannot be refused based just on the fact that unless there was proof of proven fraud, non-disclosure, or misrepresentation by the insured, no claim was filed in the years prior to the policy.” If a policyholder neglects to renew the coverage, the insurer is required to offer a grace period of thirty days during which the premium can be paid in full each year, in half-yearly increments, or in quarterly installments, with all accumulated credits under the policy.

 There will be a grace period of 15 days for policies when premiums are paid on a monthly basis. “In addition, unless there is a rise in the amount insured, an insurer may not pursue new underwriting,” the statement stated. Notably, if the policyholder decides to terminate at any point throughout the policy term, they will also be eligible for a refund of the premium or a prorated cost for the unexpired insurance period term in accordance with IRDAI. In the event that a client wishes to transfer the insurance to a different insurer, the regulator has now established stringent deadlines. If the policyholder does not receive the ombudsman’s award within 30 days, the insurer would be responsible for paying the policyholder Rs 5,000 each day. TPA performance will also need to be observed, according to IRDAI. Payments to the TPAs must only be given when they have completed their work satisfactorily.

Claim back of compensation/fees based on customer feedback paid to TPA, which will be distributed to policyholders,” it emphasized. The policy holder must be offered the choice to switch to other acceptable products or a one-time chance to renew the product if an insurance provider withdraws a specific product. According to IRDAI, the renewal occurs within 90 days of the withdrawal date. In the event that a client wishes to transfer the insurance to a different insurer, the regulator has now established stringent deadlines. If the policyholder does not receive the ombudsman’s award within 30 days, the insurer would be responsible for paying the policyholder Rs 5,000 each day. TPA performance will also need to be observed, according to IRDAI. Payments to the TPAs must only be given when they have completed their work satisfactorily. Claim back of compensation/fees based on customer feedback paid to TPA, which will be distributed to policyholders,” it emphasized. In the event that an insurance provider discontinues a specific product, the policyholder must be offered the opportunity to switch to another appropriate products or a one-time opportunity to renew the product provided it is done within ninety days of the withdrawal date.

A new master circular has been released by the Insurance Regulatory and Development Authority of India (IRDAI) to expedite the processing of health insurance claims. The salient points are as follows:

Cashless Claim Settlement: Insurers must strive for 100% cashless claim settlement within a certain timeframe. Requests for cashless permission should be decided upon right away, ideally within an hour. Within three hours of the request, a final authorization should be determined for hospital discharge. In order to settle claims, policyholders are no longer required to provide documentation; instead, third-party administrators (TPAs) and insurers will obtain the required paperwork straight from hospitals.

 Non-Contestability Period: After a continuous 60-month coverage period, health insurance policies and claims cannot be disputed on the basis of non-disclosure or misrepresentation. A claim cannot be rejected without the claim’s consent committee for review. Health insurance plans are renewable and cannot be refused based on claims made in previous policy years (unless proven fraud or non-disclosure occurs). This is known as the No-Claims Bonus. Insurance companies are required to give policy renewals a grace period of 30 days. Policyholders have the option to obtain premium savings or an enhanced sum assured as a no-claims bonus. The goal of these changes is to improve service quality and make the claims process easier for policyholders.

Simplifying Health Insurance Claim Settlement

Certain exclusions are included in health insurance policies to make it clear what is and is not covered. These are a few typical exclusions:

 Pre-existing medical conditions: These are ailments that a policyholder had at the time of purchasing the policy. However, following a waiting time (often four years), many pre-existing conditions may be covered. Cosmetic surgery: Generally speaking, operations performed to improve the appearance of the face or body are not included. Alternative therapies and treatments: Some non-traditional therapies could not be reimbursed. Self-inflicted injuries: The insured person is not covered for injuries they purposefully cause.

Maternity and childbirth: Unless otherwise noted, maternity-related costs are frequently waived.

Diagnostic costs: You may be able to deduct costs for diagnostic testing. Permanent exclusions: These are particular treatment categories (such chronic illnesses) that are not covered by health insurance.

Common Exclusions in Health Insurance Policies

Pre-existing condition exclusions from health insurance policies usually include a four-year waiting period. Any treatment for pre-existing conditions might not be covered during this time. But coverage for certain conditions normally starts after the waiting period. Remember that waiting times can change based on the insurer and the particular policy.

Waiting Period for Pre-existing Conditions

If you require quick coverage for a pre-existing condition, explore the following options: If you are employed, find out if your place of employment has group health insurance. Pre-existing conditions are frequently covered by group policies without waiting periods.

 Super Top-Up or Top-Up Plans: These plans offer extra coverage in addition to what your current health insurance covers. There may be no waiting periods for pre-existing diseases they cover.

Plans for Particular Diseases: Certain insurance companies provide plans for particular diseases (such diabetes or hypertension) that cover pre-existing disorders right away.

Portability: Consider moving your current policy to a different insurer if you already have one. You can keep the benefits of your previous policy’s waiting period if you have portability.

References

1.https://www.renewbuy.com/articles/health-insurance/common-health-insurance-exclusions

2. https://www.onsurity.com/blog/exclusions-in-health-insurance/

3. https://www.myinsuranceclub.com/articles/inclusions-and-exclusions-in-your-health-insurance-policy

4. https://www.canstar.com.au/health-insurance/inclusions-exclusions-restrictions/

5. https://health.howstuffworks.com/health-insurance/exclusion.htm

6. https://www.theweek.in/news/india/2024/05/30/irdai-issues-new-master-circular-to-make-health-insurance-claims-process-more-seamless.html

7. https://timesofindia.indiatimes.com/business/india-business/irdai-sets-3-hour-limit-to-settle-health-claims/articleshow/110544039.cms

8. https://www.msn.com/en-in/health/health-news/health-insurance-claim-new-rules-irdai-issues-circular-for-insurers-to-decide-on-cashless-authorisation-in-1-hour/ar-BB1nitJ3

9.https://www.newsbytesapp.com/news/business/irdai-introduces-new-directive-for-swift-health-insurance-claims/story

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Mere smell of the alcohol in the breath Would not lead to a conclusive presumption of contributory negligence, Delhi High court

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CASE TITTLE:RELIANCE GENERAL INSURANCE CO LTD V.HAWA SINGH & ANR

CASE NO:MAC.APP. 107/2016

ORDER ON:08 May 2024

QUORUM: J. DHARMESH SHARMA

FACTS OF THE CASE:

The present appeal is prefered  by the appellant/insurance company , Under Section 173 of the Motor Vehicles Act, 1988, challenging the judgment-cum-award dated 23.11.2015

The brief facts of the case is that the claimant/ respondent 1 sustained injuries on 07.11.2011, wherein his motorcycle was hit by a Santro car(‘offending vehicle’) driven by respondent No.2/Anil Kumar, who is the driver-cum-owner Of the offending vehicle.While the case came before the  Presiding Officer, Motor Accident Claims Tribunal, on 23.11.2015 passed a judgment-cum-award directing, A sum of Rs.7,64,654/- as compensation to The claimant with interest @ 9% per annum from the Date of filing of the petition till realisation.

LEGAL PROVISIONS:

Section 173 of the Motor Vehicles Act, 1988:talks about appeals which states that no appeal by the person who is required to pay any amount in terms of such award shall be entertained by the High Court unless he has deposited with it twenty-five thousand rupees or fifty per cent.

CONTENTIONS OF APPELLEANT:

Learned counsel for the appellant/insurance company Vehemently urged that while the factum of the accident is not in Dispute as also the fact that the two vehicles were indeed involved in The accident, however, it was vehemently submitted that the Respondent No.1/claimant-injured was guilty of negligence since when He was examined in Sanjay Gandhi Memorial Hospital and MLC, was recorded by the doctor Attending to him that he smelled of alcohol in his breath. Having consideration to the submissions advanced by The learned counsel for the rival parties and on perusal of the Trial Court Record (TCR), plea raised by the Appellant/insurance company cannot be sustained in law.

COURTS ANALYSIS AND JUDGEMENT:

The court considered that observation made by  motor accident claims tribunal wherein the respondents claims that the accident was claimed by the fault of the petitioner under influence of liquor  but respondents failed to lead the evidence of the same, herefore court also observed that the procecution witness in cross-examination, denied that he had consumed liquor before the accident. However,  it is borne out from the medical records MLC of respondent No.1/claimant injured that the smell of alcohol was present and it was also recorded that The patient was conscious and well-oriented.therefore the court considered that the  blood sample of the Respondent No.1/claimant-injured was taken so as to test how much Alcohol was present in his blood. Further, there was no challenge in The cross-examination to his testimony that it was the driver of the Offending vehicle who was responsible for causing the accident. Hence the court opined that Mere smell of the alcohol in the breath Would not lead to a conclusive presumption that the respondent No.1/claimant was guilty of contributory negligence.

Therefore, the  court opines that, issue that requires modification is the award of compensation towards the interest rate. The claim Petition was decided within three years of its filing and the Court,in Umpteen number of cases, has taken a consistent view that the interest Rate should ordinarily be 7.5% unless and until exceptional Circumstances are shown.therefore the court refered,

The Oriental Insurance Co. Ltd. V. Sohan Lal

National Insurance Co. Ltd. v. Mannat Johal

Accordingly, the court reduced the intrest rate  from 9% to 7.5%, which shall be payable to the claimant from the date of filing of the petition till realization. In view of the foregoing discussion, the court  hereby dismissed the present appeal. It is pertinent to mention here that the Court vide order dated 02.02.2016, had directed the appellant/insurance company to deposit the entire amount of compensation with accrued interest with the learned Tribunal within four weeks from the day upon which 60% of the amount of compensation was directed to be released to the respondent No.1/claimant. Hence, the balance amount of Compensation be released to the respondent No.1/claimant forthwith With interest. Further, the court held that since the present appeal is failing on merits, the Statutory amount of Rs.25,000/- deposited by the appellant/insurance Company shall stand forfeited to the State. The court disposed of the  present appeal accordingly.

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NIACL Triumphs: Supreme Court Validates Insurance Claim Rejection in Tata Steel Case

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Case Title – New India Assurance Company Ltd. Vs. M/s. Tata Steel Ltd. 2024 INSC 356

Case Number – SLP (C) No. 10001 of 2009, C.A. No. 5242-5243 of 2009

Dated on – 30th April, 2024

Quorum – Justice K. V. Viswanathan

FACTS OF THE CASE

In the case of New India Assurance Company Ltd. Vs. M/s. Tata Steel Ltd. 2024 INSC 356, the insured had an insurance policy with the New India Assurance Company Limited (NIACL) covering their complete machinery of the mill, paying a premium of Rupees 62,09,655/-. On the 12th of December,1998, the 20 Hi Cold Rolling Mill was destroyed by a fire causing them a claimed loss of Rupees 35.08 Crores. NIACL was informed instantly, and surveyors were appointed. On dated 29th January,1999, a claim of Rupees 35.08 Crores was filed, based on the replacement quotations. On dated 24th March, 1999, NIACL transferred Rupees 4,92,80,905/. Rupees 29.60 crores were spent by the insured on a new 6 Hi Cold Rolling Mill to restart the operations. The insured agreed to accept an amount of Rupees 20.9 crores as a final settlement to avoid any detains. The NIACL further did not release the remaining balance resulting in the institution of a consumer complaint Case No. 233 of 2000 on the dated 30th May, 2000. NIACL appointed surveyors instantly post the fire and made interim payments on the basis of their reports. The final Joint Surveyors’ Report assessed the losses at Rupees 19.55 Crores and Rupees 13.51 crores for replacement and depreciation respectively on dated 11th December,2001. NIACL claimed that the insured informed them about the new 6 Hi Cold Mill on dated 27th March, 2002 which was in contrast to the claim for the reestablishment of the 20 Hi Cold Rolling Mill. The Claim was duly settled by the NIACL at Rupees 7.88 Crores, citing that the replacement mill was of lesser capacity.

CONTENTIONS OF THE APPELLANT

  1. The Appellant, through their counsel, in the said case contented that the subsistence of the reestablishment value clause in the insurance policy, which stated that the method of the indemnity should be the cost of replacing or reestablishing the damaged property with a property of the same type, but not superior or more comprehensive than the insured property when new and that this clause compels the insured to reestablish the damaged property within 12 months or within an extended period, or else, the clause stands futile.
  2. The Appellant, through their counsel, in the said case contented that the insured failed to take requisite steps for the reestablishment despite abundant opportunities provided by the NIACL and that the delay on the part of the insured in providing necessary information and taking action for the purpose of reestablishment. They contended that the delay on the part of the insured in providing requisite information and taking actions related to reestablishment. Further, the damaged property’s repair was delayed.
  3. The Appellant, through their counsel, in the said case contented that the National Consumer Disputes Redressal Commission (NCDRC) faultily neglected their affidavit vindicating the calculation of depreciation at 60% and that there were no standard guidelines for depreciation calculation and that their conduct, including seeking a revised calculation from the surveyors, was apt as per the situation.

CONTENTIONS OF THE RESPONDENT

  1. The Respondent, through their counsel, in the said case contented that existence of the reestablishment value clause in the policy document issued by the NIACL, asserting it was never received by them and that the Clause 9 of the policy conditions, which pertains to reestablishment, should be read in combination with any such clause.
  2. The Respondent, through their counsel, in the said case contented that the clause 9 of the policy applies when reestablished or repair is not possible, as assessed by the surveyor and cited the judgment in the Oswal Plastic Industries.
  3. The Respondent, through their counsel, in the said case contented that the depreciation should be calculated either on the sum insured or on the cost of a new locally sourced 20 Hi Cold Rolling Machine and that the NIACL failed to provide competent reasons for directing apart from the recommendation of the surveyors for 32% depreciation and that the doctrine of contra proferentem should be applied in their favour. 

LEGAL PROVISIONS

  1. Section 64 UM (2) of the Insurance Act, 1938 prescribes that the surveyors and loss assessors must follow the code of conduct for their duties, responsibilities, and other professional requirements as specified by the regulations made under the Act.
  2. Regulation 9(3) of the Insurance Regulatory and Development Authority of India (Protection of Policyholders’ Interest) Regulations, 2002 prescribes that if an insurer receives an incomplete survey report, they must ask the surveyor to provide an additional report on specific issues. The insurer must also notify the insured about the delay that may occur in the claim assessment if the insured doesn’t provide all the required information or doesn’t cooperate with the surveyor.

ISSUES 

  1. The main issue of the case revolved around whether the claim of Tata Steel for the loss incurred due to the circumstance of the fire incident covered under the insurance policy with NIACL?
  2. Whether the NIACL rightfully rejected the claim on the basis of the exclusion and conditions of the policy?

COURT ANALYSIS AND JUDGMENT

The court in the case of New India Assurance Company Ltd. Vs. M/s. Tata Steel Ltd. 2024 INSC 356, scrutinized the terms and conditions of the insurance policy between the Appellant and the Respondent to determine the coverage for the loss incurred. The court inspected the specified provisions, exclusions, and conditions of the insurance policy to ascertain if the Respondents’ claim came under the ambit of coverage. The court took into consideration any evidence or documentations provided by both the parties concerning the terms and conditions of the insurance policy. The court discovered that the claim of the Tata Steel comes within the ambit of policy exclusion or conditions, upholding the rejection of the claim of NIACL. The judgment of the court provided a conclusive resolution to the dispute between the parties regarding the insurance coverage for the loss from the fire incident.

The court thus in this case, allowed the appeal of the NIACL and set aside the order of the NCDRC. The court observed that the claim was rightly settled by the NIACL letter dated 3rd January,2003 which determined the loss amount payable at Rupees 7.88 crores after applying 60% depreciation. The court dismissed the appeal instituted by the Insured-Respondent.

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Just Because Death Under Employment Was Not Because Of Accident It Doesn’t Exempt One From Compensating The Deceased: High Court Of Kerala

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Citation: MFA (ECC) No.136 of 2018

Decided On: 28TH DAY OF OCTOBER 2023

Coram: HONOURABLE MR.JUSTICE P.G. AJITHKUMAR

Introduction:

This appeal is an appeal under Section 30 of the Employees Compensation Act, 1923. The appellants through the appeal assail the order of Employees Compensation Commissioner. The appellants are the widow and daughter of Sri.Vasu who died on 01.02.2006 due to an accident.

Facts:

The deceased husband of the appellant was driving taxi car bearing Registration No.KEH 9783 along the Swaraj Round, Thrissur on the said date. At about 12.15 p.m he felt chest pain and collapsed resulting in the car dashing against an electric post. He was rushed to the Aswini hospital, Thissur, but he succumbed to the injuries. The doctor who examined him informed that Sri.Vasu died due to heart attack.

The appellants filed a claim petition before the Employees Compensation Commissioner under the Employees Compensation Act claiming compensation from the 1st respondent, who is the owner of the vehicle and the 2nd respondent, the insurer. The 1st respondent did not chose to contest the matter. The 2nd respondent resisted the claim on several grounds. It was contended that the 1st respondent was not the owner having transferred the vehicle in favour of Sri.Vasu as early as on 17.03.2004. The further contention of the 2nd respondent was that the death was due to heart attack and not on account of an accident arising out of and in the course of the employment.

The appellant failed to discharge their initial burden that the death of Sri.Vasu was the result of an accident and in the course of his employment. In the light of that finding, other issues were not answered and the application was dismissed.

Court’s Analysis and Judgement:

The Apex Court in Param Pal Singh v. National Insurance Co. Ltd and another [2013 ACJ 526] considered a similar question. In the above case, it has come out that the deceased was driving cars for about 40 years. He was aged 60 years at the time of death. A person involved in the avocation of driving for such a long period suffered a heart attack while he was driving the car. The heart attack he suffered while driving had resulted in the accident of his car hitting an electric post. The proximate reason for the death may be heart attack. But, had he not suffered a heart attack, such an accident would not have happened. The view taken by the Apex court is that the employer was liable to compensate even if the deceased was not actually driving the truck. When in the course of his driving, he felt discomfort and later, in the hospital, he died due to heart disease, he being a driver for long years subjected to its stress and strain, the death would amount an accident arising out of and in the course of his employment.

Accordingly, the order of the Employees Compensation Commissioner, Thrissur, dated 25.01.2018 in E.C.C No.405 of 2016 is set aside by holding that the appellants are entitled to claim compensation on account of the death of Sri.Vasu in the accident occurred on 01.02.2006

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