1. Two appeals challenging NCDRC orders holding appellant liable to pay sum assured on death of assured under life insurance policy. (Para 2 , 4 )
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2024 Supreme(SC) 3
SUPREME COURT OF INDIA
VIKRAM NATH, RAJESH BINDAL, JJ.
Reliance Life Insurance Company Ltd. & Anr. – Appellants
Versus
Jaya Wadhwani - Respondent
Civil Appeal No. 35 of 2024, Arising out of SLP(Civil) No.10954 of 2019
With
The Branch Manager, Reliance Life Insurance Co. Ltd. - Appellant
Versus
Usha Soni – Respondent
Civil Appeal No. 36 of 2024, Arising out of SLP(Civil) No.15588 of 2021
Decided on : 03-01-2024
Advocates:
Advocate Appeared:
For the Petitioner(s): Mr. Vikas Upadhyay, AOR
For the Respondent(s): Mr. Nitin S. Tambwekar, Adv. Mr. Seshatalpa Sai Bandaru, AOR
Advocate Appeared:
For the Petitioner(s): Mr. Vikas Upadhyay, AOR
For the Respondent(s): Mr. Nitin S. Tambwekar, Adv. Mr. Seshatalpa Sai Bandaru, AOR
IMPORTANT POINT
Effective date of Insurance Policy – Date of issuance of policy would be relevant date for all purposes and not date of proposal or date of issuance of receipt.
Headnote:
Insurance Act, 1938—Section 64VB - Consumer Protection Act, 1986 – Section 23 – [Consumer Protection Act, 2019 – Section 67] – Insurance Policy – Effective date – Date of issue of policy would be relevant date even if there was backdating – Date of issuance of policy would be relevant date for all purposes and not date of proposal or date of issuance of receipt – Date of proposal cannot be treated to be date of policy until and unless on date of proposal, initial deposit as also issuance of policy happens on same date – Merely, tendering a cheque may not be enough as till such time cheque is encashed, contract would not become effective. (Paras 11, 14 and 15)
Facts of the case:
Sole question involved in these appeals is as to what would be date from which policy becomes effective; whether it would be date on which the policy is issued or the date of commencement mentioned in the policy or it would be the date of issuance of deposit receipt or cover note.
Findings of Court:
Orders passed by District Forum, State Commission and National Commission are set aside and claims of respondent are rejected.
Result : Appeals allowed.
Judgement Key Points
Key Points: - The date of issuance of the policy is not the effective date; the date of commencement, including reinstatement, is relevant for effectiveness. (!) (!) - The 12-month suicide exclusion period is measured from the date the risk commences (policy issue or reinstatement), not from the proposal or cheque issuance date. (!) (!) (!) - If reinstatement occurs, the reinstatement date is treated as the commencement date for the purposes of the suicide clause. (!) (!) - The policy is deemed effective from the date of issue of the policy or the date of reinstatement, whichever is relevant, rather than the proposal or receipt date. (!) (!) - The court reversed lower authorities and held that the insurer’s liability is determined by the policy’s commencement date, not merely the policy issue date. (!)
What is the date from which an insurance policy becomes effective for backdated policies under the Insurance Act and Consumer Protection Act?
What is the correct relevant date to determine the 12-month suicide clause period in life insurance policies when reinstatement of a lapsed policy occurs?
What is the proper interpretation of the terms "date of the policy" vs "date the risk under the policy has commenced" for determining liability and payout?
Legal Category Hierarchy
- insurance law
- consumer protection
- contract law
Table of Contents
2. Dispute whether policy effective date is date of issuance, date of commencement in policy, or date of deposit receipt issuance. (Para 3 , 7 , 9 , 10 , 11 )
3. Impugned orders set aside; respondent claims rejected; appeals allowed. (Para 1 , 15 , 16 , 17 )
4. What is the relevant date from which the 12-month suicide exclusion period commences under a life insurance policy?
The date of issuance of the policy is the relevant date, not the date of proposal or the date of issuance of the initial deposit receipt. (Para 3 , 9 , 10 , 11 )
5. Does reinstatement of a lapsed policy restart the 12-month suicide exclusion period?
Yes, the 12-month period runs from the date of reinstatement, which is also the date of commencement of the reinstated policy. (Para 6 , 7 , 8 )
6. What does 'date of the policy' mean in the suicide exclusion clause?
The date of the policy means the date on which the policy was issued, not the date on which the risk commenced or the date of the deposit receipt. (Para 5 , 9 , 10 , 11 , 12 , 13 , 14 )
JUDGMENT :
VIKRAM NATH, J.
Leave granted.
2. These two appeals raise a common question of law. As such they are being analogously dealt with by this common order. The challenge in both these appeals is to the orders passed by the National Consumer Disputes Redressal Commission1[NCDRC], New Delhi, whereby the revision filed by the appellant has since been dismissed and the orders passed by the District Forum as also the State Commission have been affirmed holding that the appellant is liable to pay the amount of the sum assured on the death of the assured.
3. The sole question involved in these appeals is as to what would be the date from which the policy becomes effective; whether it would be the date on which the policy is issued or the date of the commencement mentioned in the policy or it would be the date of the issuance of the deposit receipt or cover note. The District Consumer Disputes Redressal Forum2[District Forum], the State Consumer Disputes Redressal Commission3[State Commission] and the National Commission have proceeded on the basis that the date of issuance of the initial deposit receipt of premium is the date of commencement of the Policy and have accordingly allowed the complaint filed by the respondent.
4. The relevant dates in both the cases are summarised hereunder:
4.1. In the appeal of Jaya Wadhwani, the quotation of Policy was issued on 14.07.2012. The proposal form was submitted by the life assured on 14.07.2012. Receipt of the Cheque dated 13.07.2012 was also issued on 14.07.2012. On 16.07.2012, the Policy was issued and at all relevant places, it was mentioned in the policy that the date of commencement of the policy would be 16.07.2012. On 15.07.2013, the life assured committed suicide.
4.2. In the appeal of Usha Soni, the date of submission of proposal form by the life assured is 26.09.2012. The date of issue of policy as also the date of commencement of policy was 28.09.2012. The date of next premium due was 28.09.2013. As the next premium was not paid, the policy lapsed. The assured paid the next premium on 25.02.2014 and the lapsed policy was reinstated from that date. On 03.06.2014, the life assured committed suicide.
5. The Clause relevant for consideration is clause 9 of the Policy conditions and privileges and the terms and conditions mentioned therein. Clause 9 reads as follows:
“9. Suicide: The Company will not pay any claim on death if the Life Assured, whether sane or insane, commits suicide within 12 months from the date of issue of this Policy or the date of any reinstatement of this Policy.”
6. From the documents on record in the case of Usha Soni, we find that the first cheque was issued on 26.09.2012. The policy issuance and commencement date in the Policy is mentioned as 28.09.2012. Further, the next premium due was on 28.09.2013. Grace period is 30 days under Clause 1(iv) of the terms and conditions. Clause 5 mentions that the policy would lapse. Clause 6 provides for reinstatement. However, since the renewal amount was not paid within the time allowed, the policy stood lapsed and subsequently, upon payment of the premium against the lapsed policy on 25.02.2014, the policy was reinstated from the said date. The life assured committed suicide on 03.06.2014, which was well within the period of 12 months.
7. On a perusal of the orders passed by the District Forum, the State Commission, and the National Commission, we find that although clause 9 of the terms and conditions has been referred to but the aspect of reinstatement of a lapsed Policy has not been considered. They have wrongly taken the date of issue of policy only as the relevant date to count 12 months, i.e., from 28.09.2012.
8. Once it is mentioned in the Policy that the 12 months period is to commence from the date of the issuance of the policy or the date of any reinstatement of the policy, the reinstatement aspect ought to have been considered. The date of reinstatement of the policy is clearly stated to be 25.02.2014 and that is
