Can Insurer Use Exclusion Clause To Scrap Claim? Supreme Court To Examine

The Supreme Court has agreed to examine an appeal filed by an insurance firm challenging an order of the National Consumer Disputes Redressal Commission (NCDRC) that directed it to pay Rs 13.48 lakh to a woman whose husband died by suicide.

Reliance Life Insurance Company Limited had refused the claim, relying on the exclusion clause of the policy.

Staying the NCDRC order, a bench of Justices D Y Chandrachud and B V Nagarathna issued a notice to the woman on the appeal filed by a branch manager of the insurance firm.

"Issue notice, returnable in eight weeks. Pending further orders, there shall be a stay of the operation of the impugned judgment and order of the National Consumer Disputes Redressal Commission," the bench said in its October 20 order.

The counsel for the insurance company submitted before the bench that in view of the specific exclusion in Clause 9 and Clause 12 -- general conditions -- of the insurance policy, suicide by an insured having taken place within 12 months from the date of the reinstatement of the policy has no amount as payable.

He said the policy was issued on September 28, 2012, and lapsed on 28 September 2013, due to the failure to pay the renewal premium.

The insurance policy was reinstated on February 25, 2014, and the death due to suicide took place on June 30, 2014, that is within 12 months of reinstatement of the policy, the lawyer said.

The woman's husband was the holder of the insurance policy and had paid a premium of Rs 1 lakh, which was issued to him on September 28, 2012, according to the case.

In June 2014, the man jumped into the Indravati River in Chitrakoot and died. When the insurance company refused to pay the insurance amount, she approached the district forum, which directed the company to pay Rs 13.48 lakh to her.

The insurance firm approached the NCDRC, which dismissed its plea and imposed a cost of Rs 1.5 lakh on it.

The NCDRC said that in its appeal, the insurance firm was unable to prove from evidence on record that the case of the insured was covered under the exclusion clause, yet challenged the findings in this revision petition without having any valid ground of challenge.

"Every conduct of the petitioner reflects on their callous attitude towards their customers. The facts on record show that the petitioner had collected all the relevant documents from the complainant and got the relevant forms for the claim, filled in proceedings before ombudsman court. Before that court the Petitioner gave assurance that they would soon decide the claim of the claimant...," the NCDRC had said.

"Such conduct of the service providers needs to be dealt with in such a manner that it serves as a deterrent to other service providers and they deter doing it," it had said.

The facts and circumstances of this case call for imposing exemplary cost on the petitioners, the NCDRC had said.

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