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2025 Supreme(AP) 456
IN THE HIGH COURT OF ANDHRA PRADESH AT AMARAVATI
T. MALLIKARJUNA RAO, J.
Life Insurance Corporation Of India and Others - Apellants
Versus
Smt Surapaneni Eswari – Respondent
Second Appeal No. 913 of 2005
Decided On : 31-01-2025
For the Appellants : Y. Malathi
An insurance policy is valid if the premium is paid before the proposer’s death, and the insurer cannot deny liability due to processing delays.
Headnote:
(A) Insurance Act, 1938 - Section 64VB - Life Insurance Policy - Dispute over the validity of an insurance policy following the death of the proposer before acceptance - The trial court dismissed the suit, but the appellate court reversed this decision, leading to a second appeal. The court found that the policy commenced at midnight on the date of the premium payment, despite the proposer’s death. (Paras 10, 30, 41)
(B) Contract Law - Acceptance of an insurance proposal - The court emphasized that a binding contract requires acceptance communicated to the proposer during their lifetime. The insurer's failure to act promptly does not absolve them of liability. (Paras 12, 37)
(C) Good Faith - The court reiterated that insurance contracts are based on utmost good faith, and the insurer cannot exploit technicalities to deny claims. (Paras 38, 39)
Facts of the case:
The plaintiff's husband died on 15.12.1997, having taken an insurance policy on 03.12.1997. The insurer denied the claim, asserting no contract existed as the proposer died before acceptance.
Findings of Court:
The court ruled that the policy was valid and effective from midnight on the date of premium payment, directing the insurer to pay 75% of the claim amount as ex gratia.
Issues: The main issues included whether a concluded contract existed and the implications of the proposer’s death on the insurance policy.
Ratio Decidendi: The court held that the insurance policy was valid as the premium was paid before the proposer’s death, and the insurer's delay in processing the policy did not negate the contract.
Result: Second appeal partly allowed, directing payment of 75% of the claim amount.
JUDGMENT :
(T. MALLIKARJUNA RAO, J.)
1. This Second Appeal has been filed by the Appellants/Defendants against the Decree and Judgment dated 14.02.2005, in A.S.No.183 of 2000 on the file of IV Additional Senior Civil Judge (Fast Track Court) at Vijayawada (for short, ‘the 1st Appellate Court’) reversing the decree and Judgment dated 06.11.2001, in O.S. No.2001 of 1999 on the file of IV Additional Junior Civil Judge’s Court, Vijayawada (for short, ‘the trial Court’).
2. The Respondent is the Plaintiff, who filed the Suit in O.S.No.2001 of 1999, seeking a declaration that she is entitled to receive the claim from the defendants covered by Policy 673515851 dated 15.12.1997 as the said Policy is valid and binding on the Defendant. Appellants are the Defendants in the said Suit.
3. Referring to the parties as they are initially arrayed in the Suit is expedient to mitigate potential confusion and better comprehend the case.
4. The factual matrix, necessary and germane for adjudicating the contentious issues between the parties inter se, may be delineated as follows:
The Plaintiff's husband passed away suddenly on 15.12.1997. He had an insurance policy (No. 673515851) with the Life Insurance Corporation of India (hereinafter referred to as ‘Insurance Corporation’), for which the Plaintiff was the nominee. The Policy was taken for 15 years, and the husband had paid Rs.356/- towards the first premium on 03.12.1997, as confirmed by a receipt from the agent of the 2nd Defendant. After the husband's sudden death, Plaintiff informed Defendant but received no response for two months. Later, despite correspondence, the Insurance Corporation denied her claim, stating that there was no concluded contract.
5. The 1st Defendant filed a written statement, and the 2nd Defendant adopted the same. In their written statement, the Defendants denied the Plaintiff's claims, asserting that the proposer was deceased when the Corporation accepted the Policy or when the acceptance was communicated. There was no concluded contract between the deceased and the Insurance Corporation, and therefore, the Plaintiff is not entitled to any claim. The Policy was accepted during working hours on 15.12.1997 but was issued on 16.12.1997, with the date backdated, without knowledge of the proposer's death. The Defendants further asserted that no acceptance communication was made to the proposer before his death, as the proposal forms were submitted on 15.12.1997 at 10 AM, and he died before the Policy was processed. Hence, the Defendants claimed no liability.
6. Based on the above pleadings, the trial Court has framed the following issues:
1) Whether the Plaintiff is entitled to seek a declaration as prayed for?
2) Whether there is concluded contract in between the deceased and Defendants?
3) To what relief?
7. During the trial, P.W.1 was examined and marked Exs.A1 to A20 on behalf of the Plaintiff. Conversely, on behalf of the Defendants, DW.1 was examined and marked Exs.B1 to B5.
8. After completing the trial and hearing both sides' arguments, the trial Court dismissed the Suit without costs.
9. Aggrieved by the same, the Plaintiff filed an Appeal in A.S.No.183 of 2000 on file of the First Appellate Court. The First Appellate Court, being the final fact-finding Court, framed the following points for consideration:
1) Whether there is a concluded contract in between the deceased and the Respondents?
2) Whether the Appellant is entitled for the policy amount of her husband as prayed for?
3) To what relief?
10. The First Appellate Court, after scrutinising oral and documentary evidence adduced on behalf of both sides, allowed the Appeal by its Judgment and Decree dated 14.02.2005. Assailing the same, the Defendants preferred the present Second Appeal.
11. Heard Smt. Y. Malathi learned Counsel representing the Appellants/Defendants, and none represented the Respondent/Plaintiff.
12. The learned Counsel for the Appellants/Defendants asserts that the First Appellate Court erred in reversing the
