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2025 Supreme(Online)(NCDRC) 3382
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
Mr. Justice A.P. Sahi, PRESIDENT, Mr. Bharatkumar Pandya, MEMBER
State Insurance and PF Department (SIPF) – Appellant
Versus
New India Assurance Co. – Respondent
NC/CC/84/2009 | NC/IA/6052/2016 | NC/IA/5348/2020 | NC/IA/3048/2023
For the Appellants/Petitioners: Mr. Bharat Sood
For the Respondents: Ms. Awantika Manohar, Mr. Aman Kumar Pandey
Reinsurance agreements require clear and accurate documentation, and failure to establish proper communication between parties may lead to claim repudiation.
Headnote:(A) Insurance Act, 1938 - Section 101A - Reinsurance coverage dispute - Complainant alleged unfair repudiation of claim on aircraft reinsurance policy. Policy issued referred to as primary insurance; lack of documentation evidencing reinsurance. Court emphasized distinction between insurance and reinsurance; identified deficiencies in communication and noted brokers' roles. Consideration given to public interest and service deficiencies. (Paras 4, 60, 100, 104)
(B) Parties involved: Complainant - State Insurance and PF Department, Opposite Party - New India Assurance Co.
Result: Refund of Rs.14,19,589/- directed.
| Table of Content |
|---|
| 1. overview of the insurance policy and reinsurance context (Para 1 , 2 , 3 , 4 , 5) |
| 2. discussion on the reinsurance negotiations and broker's role (Para 6 , 7 , 8 , 9 , 10) |
| 3. details and disputes regarding payment and policy endorsements (Para 12 , 13 , 14 , 16 , 24) |
| 4. developments leading to the claim after the accident (Para 21 , 22 , 23 , 25 , 26) |
| 5. sequence of communications and legal filings (Para 27 , 28 , 29 , 30 , 31) |
| 6. arguments presented by both parties (Para 32 , 33 , 34 , 35) |
| 7. affidavit evidences and contests on proposal forms (Para 38 , 39 , 40 , 41) |
| 8. issues and disputes over liability and brokerage (Para 47 , 48 , 49 , 50 , 51) |
| 9. concerns over the conduct of brokers (Para 52 , 53 , 54) |
| 10. broader implications and observations on industry practices (Para 55 , 56 , 57) |
| 11. settlement of claims and the court's directive (Para 58 , 59 , 60 , 61) |
| 12. final determinations and directions (Para 62 , 63 , 64) |
ORDER
JUSTICE A.P. SAHI, PRESIDENT
1. A State owned Aircraft of the Govt. of Rajasthan that was insured by the Complainant, met with an accident on 24.05.2007, the reinsurance claim whereof has been repudiated by the Opposite Party on 03.02.2009 giving rise to this Complaint alleging deficiency and unfairness against the Insurance Co.
2. This is a unique case where the State Insurance and Provident Fund Department (SIPF) of the Government of Rajasthan, functioning as an IRDA licensee, insured a King Air B-200 (VT-RJA) Aircraft that was acquired by the State of Rajasthan for facilitating the transport of VIPs, State Guests and their security of the State of Rajasthan. The policy acquired on 02.03.2007 assured a sum of Rs. 36.90 Crores and the period of coverage for the risks relating to the said aircraft was from 02.03.2007 to 01.03.2008. The risk coverage included the Hull risk of Rs. 24 Crores, Third party liability to the extent of Rs. 12 Crores and Passenger liability for Rs. 90 lakhs. The policy records the name of the insured as Chief Pilot Officer with its address endorsed as State VIP Aircraft, Sanganer Airport, Jaipur. The premium paid for the said insured sum was Rs. 25,50,000/-.
3. The Complainant insurer states that it was desirous of protecting itself from any liability arising out of the risk coverage and therefore proposed a reinsurance whereby through this method, it sought the coverage of its liability arising out of any peril covered under the original insurance policy.
4. It may be pointed out that a reinsurance differs from a double insurance in the sense that in a double insurance the insured acquires two insurances on the same risk and with the same interest, whereas in a reinsurance, the coverage is to the liability under the first insurance. On a reinsurance, the new reinsurer is answerable to the Insurance Company, and not to the original insured. This arrangement is therefore exclusively for the insurer, like the Complainant in the present case, to cover and indemnify itself against any liability which the Insurance Company may incur under the original insurance cover. The original coverage is thus shared by another insurer via this method. We may refer to the meaning of the word reinsurance as defined in Ivamy’s Dictionary of Insurance which defines reinsurance as follows:
Reinsurance. A type of insurance the purpose of which is to indemnify the insurers taking the place of the original insured against the loss which they may themselves sustain in their capacity as insurers under the original policy. Reinsurance is of two kinds: (a) facultative reinsurance i.e. reinsurance against the liability on a particular policy; and (ii) treaty reinsurance i.e. reinsurance against liabilities on policies generally.
5. It may be further pointed out that insurance contracts can be negotiated through insurance brokers, who procure insurance covers negotiating between the insurer and the insured as an auxiliary service. The soliciting of such services through procurement ensures remuneration or re
