1. Insurance policy purchased during the day after a vehicle accident occurred on the same date — dispute over the commencement of policy effectiveness. (Para 2 )
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1998 Supreme(SC) 196
SUPREME COURT OF INDIA
M. M. Punchhi, CJI., K. T. Thomas, M. Srinivasan, JJ.
NEW INDIA INSURANCE CO., APPELLANT
Versus
BHAGWATI DEVI AND OTHERS, RESPONDENTS.
Civil Appeal No. 1550 of 1994,
decided on February 10, 1998.
An insurance policy is generally effective from the previous midnight of the date of purchase. However, if the policy specifies a particular time of purchase, it becomes operative only from that specific time.
Headnote:(A) Insurance Law - Effectiveness of insurance policy - Time of commencement - Where a policy is purchased during the day, the general rule is that it becomes operative from the previous midnight - However, if the policy mentions a specific time of purchase, it constitutes a special contract and becomes operative from that mentioned time, not fictionally from the previous midnight. (Para 2)
Facts of the case:
An insurance policy was purchased at 4 p.m. on a specific date. A fatal accident involving the insured vehicle had occurred earlier that same day at approximately 9 a.m. A claim for damages was filed before the Motor Accident Claims Tribunal and was initially allowed based on the legal fiction that policies are effective from the previous midnight.
Findings of Court:
The claim for compensation is rejected against the insurance company but remains allowed against the driver and the owner of the offending vehicle.
Issues: Whether an insurance policy bought during the day is effective from the previous midnight or from the specific time of purchase mentioned in the policy.
Ratio Decidendi: The court held that in the absence of a contract to the contrary, an insurance policy becomes operative from the previous midnight. However, if a specific time for its purchase is mentioned, a special contract to the contrary is created, and the policy is effective only from that mentioned time.
Result: Appeal allowed.
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Table of Contents
2. Whether an insurance policy is effective from the previous midnight or from the specific time of purchase mentioned in the contract. (Para 2 )
3. The court observed that a specific time mentioned in the policy creates a special contract overriding the general fiction of midnight effectiveness. (Para 2 )
4. Insurance policies are effective from the previous midnight unless a specific time of purchase is mentioned, making it operative from that specific time. (Para 2 )
5. Appeal allowed — compensation claim rejected against the insurance company but allowed against the driver and owner of the vehicle. (Para 3 )
6. When does an insurance policy generally become operative if purchased during the day?
Unless there is a contract to the contrary, an insurance policy purchased during the day becomes operative from the previous midnight. (Para 2 )
7. What is the effect of mentioning a specific time of purchase in an insurance policy?
When a specific time of purchase is mentioned in the policy, it creates a special contract to the contrary, and the policy becomes effective from that mentioned time. (Para 2 )
JUDGMENT
1. In this appeal, the correctness of the decision of a two-member Bench a of this Court reported in New India Assurance Co. Ltd. v. Ram Dayal ((1990) 2 SCC 680 : 1990 SCC (Cri) 432) requires to be tested.
2. The facts giving rise to the appeal are minimal. The appellant-insurance company sold a policy at about 4 p.m. on 17-2-1989. Undeniably, it had been bought at a time when an accident pertaining to the vehicle insured had already taken place at about 9 a.m. the same day. The fatal accident occurring thereby gave rise to a claim for damages before the Motor Accident Claims Tribunal. The same was allowed on the strength of the decision of this Court aforementioned, correctness of which has been challenged. The said decision proceeded on the legal fiction that when a policy is taken on a particular date, its effectiveness would start from the commencement of that date which is from the previous midnight. The accident taking place at any time during the day would be covered by the policy. Later a three-member Bench of this Court in National Insurance Co. Ltd. v. Jikubhai Nathuji Dabhi ((1997) 1 SCC 66) has taken the view that when there is a special contract mentioning in the policy the time when it was bought, it would be operative from that time and not fictionally from the previous midnight. In the said case, the policy had been bought at about 4 p.m. on the day of the accident and, thus, was not allowed to be operative from midnight; the accident having occurred around 11 a.m. on that date. The principle deduced is thus clear that should there be no contract to the contrary, an insurance policy becomes operative from the previous midnight, when bought during the day following. However, in case there is mention of a specific time for its purchase then a special contract to the contrary comes into being and the policy would be effective from the mentioned time. The law on this aspect has been put to rest by this Court. There is, thus, nothing further for us to deliberate upon.
3. As a result, this appeal is allowed on the basis of the decision of this Court in the Jikubhai case ((1997) 1 SCC 66) in such manner that the claim of the complainant for compensation would stand rejected against the appellant-insurance company but would otherwise remain allowed against the driver and the owner of the offending vehicle. No costs.
