Policyholders often have go to courts to receive their claims

SD Israni

In my previous article (Moneylife, 9 August 2012), I had stated that a contract of insurance is one of utmost trust and a proposer should truthfully make full disclosure. The corollary question that arises is: Do insurance companies also reciprocate the trust? Alas, the answer is that it is not always so; even if a policyholder faithfully follows all the conditions of a policy, a claim can be rejected on any ground the insurance company deems fit. After all, not for nothing is it said, “The easiest thing to get is an insurance policy and the most difficult thing to get is a claim paid.”

Consumer forums throughout the country are flooded with complaints by aggrieved customers. It is not that every consumer’s claim is upheld by the District Forum/State Consumer Disputes Redressal Commission/ National Consumer Disputes Redressal Commission (National Commission), but the very fact that several claims rejected by insurance companies are overturned by consumer forums speaks volumes for the travails of policyholders.

Champaklal Hansraj Shah, a jeweller from Mumbai, had taken a policy against burglary from United India Insurance. One day, his shop was burgled and he lodged a claim. The insurance company appointed a surveyor who submitted the final report assessing the loss. However, the insurance company disallowed part of the claim on the ground that it did not fall within the terms of the policy. After relentless pursuit of his claim, all that he got was total repudiation by the insurance company, overruling even the recommendations of its own surveyor.

Eventually, the matter came up before the National Commission. The ground on which the claim was rejected was that the goods were not kept in a burglar-proof safe. The Commission had stated that, “It is difficult to find any safe which could be said to be burglar-proof. Up-till now it is not invented.” It held that the insurance company was not justified in repudiating the claim especially when the surveyor had assessed the loss. While deciding this case, the National Commission referred to a judgement of the Supreme Court wherein it had observed that “Insurance companies in genuine and bonafide claims of insured should not adopt the attitude of avoiding payments on one pretext or the other. This attitude puts a serious question mark on their credibility and trustworthiness. By adopting honest approach and attitude the insurance companies would save enormous litigation costs.”

In another case, IFFCO-Tokio General Insurance rejected a claim of a policyholder and dragged him right up to the National Commission. In this case, Ram Gopal Soni from Raipur found that his Mahindra Scorpio was stolen. As his claim was rejected by the insurance company on the ground that he was using his vehicle for commercial purposes, he approached the Consumer Disputes Redressal Forum, Raipur. The Forum upheld the complaint. However, the insurance company escalated the matter to the State Commission and ultimately to the National Commission. In both cases, the judgement was in favour of the policyholder.

In another case, a claim by a widow from West Bengal, on the death of her husband, was rejected by LIC on the ground of non-payment of premium. Unfortunately, the late husband had missed paying the premium for only one quarter and had died on the 30th day of the ‘grace period’. The National Commission, after considering all the facts, concluded that the grace period of one month can be extended to 31 days and directed LIC to settle the claim. Technically one could argue that LIC was right, but the National Commission felt that the humanitarian side of the case should not be ignored.

While there is no doubt that a very large number of cases are settled by the insurance companies without the intervention of the court or consumer forums, still, in many cases, hapless policyholders have to knock on the doors of judicial authorities. 

SD Israni is a corporate lawyer and Fellow of ICSI. Email: [email protected]