Vehicle Insurance Claim Dispute Case Study

NCDRC Rules that Non-Standard Basis of Insurance Claim is Justified in Cases of Mutual Breach

July 13, 2024

The National Consumer Disputes Redressal Commission, under the presidency of AVM J. Rajendra, ruled that justifying an insurance claim on non-standard terms is deemed appropriate when breaches have occurred from both parties.

Case Background

The complainant’s husband had insured his vehicle, financed by Indusind Bank with Cholamandlam Insurance, before his demise. Following his death, the loan was settled, but delays in obtaining a No Objection Certificate (NOC) from the bank obstructed the transfer of the insurance policy to legal heirs. Despite a court order directing the bank to issue the NOC, delays persisted, and upon issuance, it bore an incorrect date. As a result, the policy could not be transferred due to RC transfer issues. The complainant renewed the policy in the deceased’s name as advised. However, following an accident resulting in a total loss, the insurer rejected the claim, citing failure to transfer the policy within the specified timeframe after the husband’s death. Subsequently, the complainant filed a Consumer Complaint with the District Forum, alleging wrongful denial of the claim. The District Forum ruled in favor of the complainant, directing the insurer to pay Rs. 13,75,000 as compensation for the vehicle’s cost. Dissatisfied with this decision, the insurer appealed to the State Commission of Punjab, which modified the order and directed the insurer to pay 75% of the insured declared value of Rs. 13,75,000 on a non-standard basis, amounting to Rs. 10,31,250, along with Rs. 25,000 as litigation costs. The complainant, dissatisfied with the State Commission’s modification, filed a revision petition before the National Commission.

Arguments Presented by the Insurer

The insurer contended that they rejected the claim due to the absence of a legal heir certificate and the non-transfer of the policy to the complainant’s name. They argued that the complainants had not initiated the policy transfer process, thereby disputing the occurrence of the claimed incident. The insurer refuted the allegations and requested the dismissal of the complaint, along with reimbursement of costs.

Findings of the National Commission

The National Commission examined whether the State Commission’s decision to modify the District Forum’s order, directing the insurer to pay 75% of the insured declared value of Rs. 13,75,000 on a non-standard basis, along with interest, was justified. It was observed that the insurance policy had been renewed after the death of the complainant’s husband, and the insurer was aware of this during the renewal process. Despite the complainant’s payment of all dues to the bank, they did not possess the No Objection Certificate, resulting in the policy being renewed in the deceased person’s name. The Commission acknowledged minor breaches of contractual obligations on both sides. Therefore, considering these circumstances, the Commission upheld that the State Commission’s reasoned decision, which applied the non-standard basis, was fair and legally sound.

Posted and reproduced in Public Interest by

Adv. Sulaiman Bhimani Legal Consultant

Expert in RERA & Consumer Matters, Co-operative Scty Matters,

Deem Conveyance, Family Matters, and Property Disputes.

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President Citizens Justice Forum https://citizensjusticeforum.in