Mr. Justice M.B. Shah, President—This case illustrates how the purpose of insurance coverage for indemnifying contemplated peril is frustrated by one or other method adopted by the Insurance Company and/or the casual manner in which insurance coverage is granted without proper verification and thereafter it is sought to be avoided on one or the other pretext.

2. It also highlights below mentioned facts and the requirements for change or reform of the age-old proposal and insurance form containing terms and conditions prescribed and followed by the Insurance Companies in India—

(i) mostly, no body can dispute that the insurance agents take the signature of the assured on a dotted line;

(ii) most of the terms and conditions of insurance policy contain various provisos and exclusion clauses which could not be understood easily even by the experts in the field, on occasions ambiguous;

(iii) the terms and conditions which are meant for understanding by the insured are mostly in a small print which would require strenuous reading by the insured, if at all he is vigilant;

(iv) insurance companies have not simplified their proposal form or the form of insurance policies for reasons best known to them;

(v) insurance companies are not keen to publish the insurance proposal forms or the policies in the regional languages which could be understood by the insured or a layman; and

(vi) exclusion clauses are never highlighted or explained by the agent or Development Officer to the insured.

I. The insured had taken insurance policies — one from M/s. United India Insurance Co. Ltd. and the other from M/s. National Insurance Co. Ltd.

A. Original Petition No. 164 of 2001

Personal Accident Insurance Policy

Sl. No.

Name of the Insurance No.

Value of Policy Company

Period covering the risk

Remarks

From

To

1.A

M/s. United India Insurance Co. Ltd. Policy No. 1

Policy No. 2

Rs. 9,97,00,000

Rs. 3,00,000

11.2.1997

10.2.1998

Note : Proposal was sub-mitted in September, 1996. Date of policy is 19.2.1997

Total

Rs. 10,00,00,000

3. In this case, the insurance coverage was given on 11.2.1997 by the United India Insurance Company Ltd. for a sum of Rs. 9.97 crores and Rs. 3 lakh by charging a premium of Rs. 68,045 and Rs. 473 respectively which was paid by cheque dated 10.2.1997. The same was acknowledged by receipt dated 11.2.1997. Thereafter, a policy dated 19.2.1997 was issued in favour of the insured for the period between 11.2.1997 and 10.2.1998, for a sum of Rs.10 crores.

4. Undisputedly, the deceased, Kishori Sharan Garg, applied for an insurance policy for a sum of Rs. 5 crores by submitting a proposal form dated 19th March, 1996 to the United India Insurance Co. For one reason or the other, the proposal form was kept pending despite production of relevant income tax returns and the other records sought for by the Insurance Company. Thereafter, again, he applied in September 1996 for an insurance policy for a sum of Rs. 10 crores. It is also undisputed that on 19.2.1997 the policy for a sum of Rs. 9.97 crores for the period from 11.2.1997 till 10.2.1998 was issued in favour of the deceased. On 4th March, 1997 an additional premium of Rs. 31,463 was demanded which was also paid by the deceased. Thereafter, on 7.3.1997 the policy for Rs. 9.97 crores was amended after including the receipt of further premium and an indorsement to that effect was made. Similarly, the policy for the sum of Rs. 3 lakh was also given on the said date.

5. It is also established on record that the deceased, before the United India Insurance Co. Ltd. could accept the proposal and issue the policy, had submitted a proposal form to M/s. National Insurance Co. Ltd. on 21.1.1997 and policy was issued w.e.f. 7.2.1997, effective from 31.1.1997 to 30.1.1998.

6. Unfortunately, on 27th March, 1997, when the insured was travelling in his car by road from Jaipur to Delhi met with a fatal accident. His car was smashed and the insured died on the spot. He was taken to the hospital and was declared