Date of Judgement:
29 October 2021
Coram:
Justice Sanjiv Khanna
Justice Bela M Trivedi
Parties:
Appellant – LIC
Respondent – Sunita
Subject
Terms of an insurance policy should be observed strictly. Failure to pay the premium can be grounds for rejection of the claim.
Overview
- The facts of the case are that the husband of the respondent purchased a life insurance policy, wherein a sum of Rs. 3,75,000 was to be insured and in case of death of the insured, an additional amount of Rs. 3,75,000 was assured. The respondent’s husband failed to pay premium on the due date, 06.03,2012. Subsequently, the husband met with an accident on 09.03.2012 and on the same day he had paid the due premium with late charges to revive the policy. On 21.03.2012, he succumbed to the injuries and expired.
- The respondent filed for the claim. However, the appellant corporation only accepted the claim up to Rs. 3,75,000 and rejected the additional claim of the same amount.
- The respondent approached the District Forum seeking the additional claim amount. The District Forum allowed the claim by relying upon the ready reckoner issued by the appellant corporation. Feeling aggrieved by the same, the appellant preferred an appeal before the State Consumer Dispute Redressal Commission (SCDRC). The SCDRC allowed the appeal by the appellant corporation. The respondent filed a revision application before the NCDRC which was allowed. Feeling aggrieved, the appellant preferred the present appeal before this court.
- The appellant relied heavily upon the terms of the insurance scheme which provided that the additional claim in case of death of the insured is available only when the policy is still in force when the accident happened. After the failure of the husband to pay the premium, the scheme had lapsed and hence the respondent is only eligible for the original claim amount.
- It was also submitted that the respondent had supressed the fact that her husband had suffered an accident on 09.03.2012 and the premium was paid on the same day suppressing such fact to the insurer. It was argued that the there was no good faith on part of the insured.
- The respondent contended that they had paid the premium with late charges. Hence, the policy is revived.
Issue
- Whether the insurance policy is said to have been revived when the premium was paid after the due date?
Judgement Analysis
- This court after perusing the facts and circumstance of the cases held that the action of the respondent in suppressing the fact that her husband had met with an accident while paying the premium after the due date was with a mala fide intention. Hence, the claim is liable to be rejected.
- It also held that the terms of an insurance policy should be strictly followed and observed without altering the contract. The court pointed to the condition stipulated in the policy that the additional claim on expiry of the insured will be claimable only when the policy was still in force. In this case, the husband of the respondent had failed to pay the insurance premium and after that, the policy is said to have lapsed.
- Hence the claim is to be rejected not only on the ground that the respondent had acted with a mala fide intention but also for the fact that when the accident occurred, the policy was not in force.
- Making the above observation, this court allowed the appeal and set aside the order of NCDRC.
Conclusion
A contract of insurance is a contract of Uberrima Fide i.e., a contract of good faith. It is a settled principle that the insured and the insurer must provide all relevant information which might possibly prejudice a party to that contract. It was also laid down that the contract of the insurance must be followed to the letter and must not be altered.
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Questions.
1. Whether life insurance is a contract of indemnity?
2. Which act regulates a contract of insurance in India?
