Page 49 - Insurance Times December 2021

LEGAL

'Pay and recover' can't be applied in A bench of Justices Sanjiv Khanna and Bela M Trivedi said it
is a well-settled legal position that in a contract of insur-
cases of lapsed insurance policies: HC ance there is a requirement of Uberrima fides i.e. good faith

The "pay and recover" principle requiring insurance firms on the part of the insured.
to pay accident claims and then recovering them from ve-
"It is clear that the terms of insurance policy have to be
hicle owners cannot be applied in cases where the policies
strictly construed, and it is not permissible to rewrite the
have lapsed, the Bombay high court has said.
contract while interpreting the terms of the policy," the
The court said the principle can be resorted to when the bench said.
contract of insurance and the insurer is exonerated from
The top court was hearing an appeal filed by the Life Insur-
the liability on account of some breach of conditions of in-
ance Corporation (LIC) against the judgment of the NCDRC
surance or causes like nature. It added it cannot be in cases
that had set aside the order passed by the State Commis-
where no such contract exists.
sion.
The court made the observations while hearing an appeal
In the case, the woman's husband had taken a life insur-
filed by Oriental Insurance Company against a 2014 order
ance policy under the Jeevan Suraksha Yojana from the Life
of Nashik's Motor Accident Claims Tribunal holding the in-
Insurance Corporation under which a sum of Rs. 3.75 lakh
surer jointly liable to pay compensation of ?6.68 lakh to
was assured by LIC.
family members of Milind Gaikwad, 27, who had died in a
road accident in 2009. Gaikwad was riding a motorcycle Besides this amount, in case of death by accident an addi-
when another motorcyclist Uday Pathak collided with him. tional sum of Rs. 3.75 lakh was also assured.The insurance
premium of the said policy was to be paid six-monthly, how-
Gaikwad's family staked an accident claim before the tri-
ever, there was a default in payment.
bunal, which held the accident occurred due to Pathak's
rash and negligent driving. The tribunal added Pathak and On March 6, 2012, the husband of the complainant met
his insurer Oriental Insurance Company were jointly liable with an accident and succumbed to the injuries on March
to pay the compensation. 21, 2012.
The complainant after the death of her husband filed a
Insurance claim to be rejected if pre- claim before LIC and was paid a sum of Rs. 3.75 lakh to her.
However, the additional sum of Rs. 3.75 lakh towards the
mium not paid: Supreme Court
Accident claim benefit was denied.
An insurance claim can be rejected if the policy has lapsed
The complainant, therefore, approached the District Forum
on account of non-payment of premium, said the Supreme
by filing a complaint seeking the said amount towards the
Court which stressed that the terms of an insurance policy
Accident claim benefit. The District Forum allowed the
have to be strictly interpreted.
appeal of the woman and directed the payment of an ad-
The apex court observation came while setting aside an ditional sum of Rs. 3.75 lakh towards the Accident claim
order of the National Consumer Disputes Redressal Com- benefit.
mission (NCDRC) that ordered additional compensation in
The State Consumer Disputes Redressal Commission set
a road accident case.

The Insurance Times, December 2021 49