Court’s Decision
The Kerala High Court allowed the writ petition filed by the widow of a deceased loan borrower, setting aside an award of the Permanent Lok Adalat that denied her insurance claim. Justice Harisankar V. Menon held:
“The insurance policy in the case at hand is to be considered with reference to the date of receipt of premium—30.06.2015—in which event the death of the insured on 10.10.2015 is after the period of 90 days.”
Accordingly, the Court declared the petitioner entitled to the policy benefits and directed the Insurance Company to disburse the same within six weeks from receipt of the certified copy of the judgment.
Facts
The petitioner’s husband had taken two housing loans from a housing finance company. As a condition of the loans, insurance coverage was availed through respondents 2 to 4, and the premium was paid directly by the financier on 29.06.2015. However, the insurance certificates (Exhibits R2A and R2B) showed the coverage commencing from 14.07.2015. The husband was hospitalised on 21.09.2015 and died of cardiac arrest on 10.10.2015. The claim was rejected on two grounds: (i) the deceased suffered from a pre-existing disease, and (ii) the death occurred within the 90-day waiting period. The Permanent Lok Adalat rejected the claim based on the second ground, prompting the petitioner to challenge the award before the High Court.
Issues
- Whether the insurance coverage is to be considered from the date of premium payment (30.06.2015) or the date shown on the certificate (14.07.2015)?
- Whether the repudiation of the insurance claim based on the 90-day waiting period was legally sustainable?
Petitioner’s Arguments
The petitioner contended that the insurance premium was paid on 29.06.2015, and the Insurance Company had encashed the premium cheque by 30.06.2015. Hence, the policy must be deemed effective from that date. She argued that the delay in formal issuance of the policy was caused solely by the insurer and could not prejudice her rights. The finding by the Lok Adalat that the death occurred within the 90-day period was erroneous.
Respondent’s Arguments
The Insurance Company argued that the policy commenced only from 14.07.2015, and since the insured died on 10.10.2015, the 90-day waiting period had not lapsed. It relied on Life Insurance Corporation of India v. Raja Vasireddy Komalavalli Kamba [(1984) 2 SCC 719], where the Supreme Court held that mere payment of premium does not constitute a concluded contract of insurance. It further asserted that the insured never raised objection to the policy start date and that the claim was also barred due to pre-existing illness.
Analysis of the Law
The Court held that there was no justification for the delay in issuing the policy after the insurer admitted receipt of premium on 30.06.2015. It found the insurer’s explanation of “telephonic clarifications” vague and unsubstantiated. The delay was held to be an internal administrative matter that could not be used to deny valid claims. The insured’s inaction in questioning the policy date did not amount to waiver of rights.
Precedent Analysis
- Life Insurance Corporation v. Raja Vasireddy Komalavalli Kamba, [(1984) 2 SCC 719]: Held that mere payment of premium and filing of proposal form does not conclude an insurance contract. However, the High Court distinguished this case as not applicable under the Legal Services Authorities Act context.
- LIC Trivandrum v. Kamalamma, [1986 SCC OnLine Ker 22]: Recognised that an insurance contract can come into existence even without issuance of a policy if premium is received and conduct of parties indicates acceptance.
- LIC v. Krishna Devi, [AIR 2017 Pat. 75]: Followed similar reasoning, holding that binding contract could arise from receipt of premium.
The Court concluded that these precedents supported the petitioner’s claim that the contract became binding from the date of premium payment.
Court’s Reasoning
The Court found that the insurer had accepted the premium and failed to provide any compelling explanation for the delayed issuance of the policy. It emphasized that administrative inefficiencies cannot defeat legitimate expectations arising from an accepted premium. Since the death occurred after 90 days from 30.06.2015, the insurer’s defence was legally untenable.
Conclusion
The writ petition was allowed. The Court:
- Set aside the Lok Adalat’s award dated 20.02.2018 (Ext.P4),
- Declared the petitioner entitled to the insurance claim,
- Directed the Insurance Company to disburse the amount within six weeks.
Implications
This judgment clarifies that once an insurance premium is received, the coverage cannot be unreasonably delayed through administrative justifications. It underscores that insurers cannot rely on technicalities to evade liability when premiums have been accepted. The decision strengthens policyholders’ rights, especially in cases involving third-party payment of premiums as part of financial agreements.
Linked Judgments and Their Relevance
- Raja Vasireddy Komalavalli Kamba (1984) 2 SCC 719: Distinguished; contract not deemed concluded before policy issuance in that case.
- LIC v. Kamalamma [1986 SCC OnLine Ker 22]: Relied on; held that receipt of premium may indicate contract formation.
- LIC v. Krishna Devi [AIR 2017 Pat 75]: Affirmed the above view and supported the petitioner’s position.
