When settling claims, the insurance company should not ask the insured to provide documents that are beyond the control of the insured: Supreme Court

The Supreme Court observed that when settling claims, the insurance company should not be too technical and ask for the documents, which the insured is unable to produce due to circumstances beyond his control.

The bench of Judges MR Shah and BV Nagarathna noted that in many cases insurance companies turn out to deny the claim on flimsy and/or technical grounds.

Background

In this case, the insurance company having failed to settle an insurance claim against theft, the insured went to the District Consumer Dispute Redress Board which adjudicated the complaint in ordering him to provide a certified copy of the truck’s registration certificate to the insurance company. within one month and that the insurance company within one month after receiving the same would settle the claim according to the terms and conditions of the insurance policy. He then filed a request with the RTO to obtain a certified true copy of the registration certificate for the Truck in question. However, RTO refused to issue a certified copy of the registration certificate on the grounds that due to the theft report of the truck, the registration certificate details on the computer were locked. Subsequently, he submitted a claim to the insurance company along with a photocopy of the registration certificate and registration details, as provided by the RTO. Despite the above, the claim was not settled and therefore he filed a new consumer complaint. The district commission dismissed the said complaint observing that since he had not filed the relevant documents for the settlement of the claim, the non-settlement of the claim cannot be considered as a defect of service. This order issued by the District Commission was confirmed by the State Commission and subsequently by the National Commission for the Redress of Consumer Disputes.

On appeal, the Apex Court panel noted that the insurance claim was not settled primarily on the grounds that the appellant failed to produce either the original registration certificate or even the duplicate copy certificate of registration issued by the RTO. However, the appellant produced photocopy 5 of the registration certificate and other registration details provided by the RTO, the bench noted.

Even, at the time of taking out the insurance policy and getting the insurance, the insurance company must have received the copy of the registration certificate. Consequently, the Appellant had done his best to obtain a duplicate of the certified true copy of the Truck’s registration certificate. However, due to the theft report of the Truck, the registration details on the computer were locked and the RTO refused to issue the duplicate certified copy of the registration. Thus, in the facts and circumstances of the case, while the appellant had produced the photocopy of the registration certificate and the registration details as provided for by the RTO, on the sole ground that the original of the certificate of registration (which was stolen) is not produced, failure to settle the claim may be considered a service defect.

The insurance companies refuse the claim on weak and/or technical grounds.

The court also observed that in this case the insurance company became too technical when settling the claim and acted arbitrarily.

“The appellant was asked to provide the documents which were beyond the control of the appellant to procure and provide. Once there was valid insurance on the payment of a huge sum as premium and the truck was been stolen, the insurance company should not have become too technical and should not have refused to settle the claim on the failure to present the duplicate of the certified copy of the registration certificate, which the appellant did not could not produce due to circumstances beyond its control.Insurance companies refuse the claim on weak and/or technical grounds.When settling claims, the insurance company should not be too technical and ask for the documents which the insured is unable to produce due to circumstances beyond his control.”

Allowing the appeal, the court held that the appellant was entitled to the insurance amount of Rs. 12 lakhs with interest at 7% from the date of submission of the claim. The court also ordered the insurance company to pay the legal costs of Rs. 25,000 to the appellant.

Case details

Gurmel Singh vs Branch Manager, National Insurance Co. Ltd. | 2022 LiveLaw (SC) 506 | CA 4071 FROM 2022 | May 20, 2022

Coram: Judges MR Shah and BV Nagarathna

Summaries

Assurance – Insurance companies refuse the claim for weak and/or technical reasons – When settling claims, the insurance company should not be too technical and ask for documents that the insured is not able to to produce due to circumstances beyond his control. (Paragraph 4.1)

Consumer Protection Act, 1986; Section 2(g) – InsuranceService deficiency – When the insured has produced the photocopy of the registration certificate and the registration details provided for by the RTO, for the sole reason that the original of the registration certificate (which was stolen) is not produced, the no -settlement of the claim can be considered as a lack of service. (Paragraph 4)

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