BENCH: Justice BV Nagarathna and Justice Satish Chandra Sharma
FACTS:
The appellant is the owner of a truck, a TATA-251625.0 LPKTC, bearing registration number BR-02-Q9220. The truck was insured with the respondent, National Insurance Company, for a period of one year, from September 18, 2013, to midnight of September 17, 2014. Unfortunately, during the validity of the insurance coverage, the truck caught fire due to a short-circuit on June 8, 2014.
Following the incident, the appellant lodged a complaint before the State Consumer Disputes Redressal Commission, Bihar, Patna (“State Commission”). Relying on the Supreme Court’s decision in National Insurance Company v. Nitin Khandelwal (Criminal Appeal No. 8463/2014), the State Commission directed the insurer to settle the claim on a non-standard basis, provided the appellant fulfilled other necessary requirements.
Aggrieved by this decision, the National Insurance Company appealed to the National Consumer Disputes Redressal Commission (“National Commission”). The National Commission ruled in favor of the insurer, stating that the judgment in Nitin Khandelwal pertained to a theft case, whereas the present matter involved fire damage. Relying on Amrit Paul Singh & Anr. v. TATA AIG General Insurance Co. Ltd. & Ors. [(2018) 7 SCC 558], the National Commission held that the insurance claim could not be granted due to the absence of a valid permit. Consequently, it set aside the State Commission’s order.
ISSUES:
The primary issue in this case was around the validity of the permit the appellant held which was the determining factor for the allowance of insurance.
JUDGEMENT WITH REASONING:
The Court ruled that, the appellant was not only entitled for the entire claim amount right from the date it became due but he is also entitled for interest from the date of the complaint made before State Commission till the date, the amount is actually paid to him. The appellant shall be entitled to interest @ 9% per annum and the same with the proposed amount be paid positively within 60 days from today. No cost is to be paid.
The Court found that the National Permit of the truck was valid until October 13, 2017, and the requirement to pay an authorization fee applied only when the vehicle was operated outside Bihar. Since the truck caught fire within Bihar on June 8, 2014, during the validity of the insurance policy, the insurer’s decision to repudiate the claim on the ground of non-payment of the authorization fee was deemed frivolous and unjustified. The Court emphasized that the permit was issued by a competent authority, and there was no violation of its terms that could warrant rejection of the insurance claim.
Furthermore, the Court held that the State Commission had correctly directed the insurer to settle the claim, and the National Commission erred in reversing this decision. Given that the claim was wrongfully denied in 2014, and the appellant had to wait for several years for redressal, the Court ruled that the appellant was entitled to the full claim amount along with interest at 9% per annum from the date of the complaint before the State Commission until the actual payment. Consequently, the National Commission’s order was set aside, and the insurer was directed to process the claim and make the payment within 60 days.
ANALYSIS:
The Court’s ruling in favor of the appellant highlights the fundamental principles of insurance law, particularly the duty of insurers to honour legitimate claims within the scope of policy coverage. By setting aside the National Commission’s order, the Court reinforced the need for a fair and non-arbitrary interpretation of policy terms and regulatory requirements. The decision underscores that an insurance claim cannot be denied on technicalities that do not impact the legitimacy of the insured event—in this case, the fire damage to the truck during the policy period. The Court’s interpretation of the permit requirements clarifies that the authorization fee was not applicable since the vehicle did not operate outside Bihar. The insurer’s attempt to repudiate the claim on a technical ground was therefore found to be unjustified, leading to the Court’s ruling that the claim should be honoured in full.
Moreover, the Court’s award of 9% per annum interest on the insurance claim reflects its acknowledgment of the undue delay and hardship suffered by the appellant due to the insurer’s refusal to settle the claim. This aspect of the judgment serves as a deterrent against unjustified claim denials by insurance companies and reinforces the principle that delays in rightful compensation should not be borne by the claimant. The Court’s directive for settlement within 60 days further ensures that the insurer cannot continue to withhold payment. By upholding the State Commission’s decision, the Court reaffirmed consumer rights in insurance disputes and set a precedent for ensuring fairness in insurance claim settlements, especially in cases where insurers attempt to reject claims based on misinterpretation of procedural requirements.
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