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Supreme Court Slaps Insurance Giant: Report Forged Policies or Face Fraud Probe
In a scathing order that underscores the duty of insurance companies to combat fraud head-on, the
has directed
to pay enhanced compensation to a road accident victim while launching a criminal investigation into the alleged forgery of a policy—and naming the insurer's own officers as potential accused. Justices
Ahsanuddin Amanullah
and
R. Mahadevan
didn't mince words, criticizing the company's
"
"
for failing to report the fake document to police.
A Decade-Old Crash Ignites Insurance Firestorm
The saga began in when K. Saravanan , riding a bike, collided with a bus driven rashly and negligently in Tamil Nadu. Saravanan suffered severe injuries to his thighs and legs, requiring surgeries and leaving him 70% disabled . Police handed claimants a purported insurance policy for the bus, prompting a claim before the .
MACT awarded over
Rs. 8 lakhs
. National Insurance appealed, claiming the policy wasn't renewed for the accident period and was forged. The
rejected this, enhancing compensation threefold to around
Rs. 24 lakhs
, noting:
"Without any criminal complaint against the unknown culprits, the contentions... cannot at all be accepted."
No FIR had been filed, dooming the insurer's defense. National Insurance then approached the Supreme Court via SLP (C) No. 1003/2022.
Insurer's Silence Speaks Volumes: Arguments Unraveled
Petitioner National Insurance argued the policy was fabricated, shielding them from liability under motor accident laws. They urged the Court to overturn the High Court's award, emphasizing .
Respondents, including claimant K. Saravanan and vehicle operator Respondent No. 2 , countered that police-provided documents validated the claim. They highlighted the insurer's failure to lodge a complaint despite verifying the forgery, as affirmed in the DGP's affidavit. The High Court had already deemed this omission "unjustified and unreasonable," refusing to let the insurer evade payout without pursuing culprits.
During hearings, the Court summoned Tamil Nadu's DGP, G. Venkataraman , who clarified a new centralized portal for insurance verification and pledged officer sensitization. Crucially, the DGP confirmed no complaint from the insurer— a fact conceded by their counsel, who promised future action.
Bench Draws Line: Fraud Allegations Demand Action, Not Evasion
The Court invoked its recent ruling in
v. Maya Devi
(Civil Appeal Nos. 15016-15017/2024), stressing:
"
, but merely alleging fraud does not amount to proving it."
Citing the
Constitution Bench in
, it reiterated that fraud must be pleaded with particulars and proven via evidence (
).
But the bench went further, holding insurers to a higher standard: dealing with
"public funds contributed by policyholders,"
they must report forgeries promptly. Failure risks "
." This systemic issue, "widespread across the country," prompted directives for police reforms.
Key Observations from the Bench
"Such a stand taken by the Insurance Company reflects a lack of responsibility and a high degree of casualness on its part." (Para 5)
"Once it comes to its knowledge... that a policy is forged/fabricated... it is incumbent upon the Insurance Company to inform the appropriate authorities , namely, the police, as the creation and use of such documents constitute an offence." (Para 5)
"The failure to do so may also give rise to an between the parties." (Para 5)
"A fresh case shall be registered ... The array of accused shall include the Officers of the Insurance Company, who were aware of the fraud..." (Para 6)
Compensation Paid, Probe Launched: A Dual Blow
The Court ordered National Insurance to deposit the full High Court-awarded amount within four weeks directly to Saravanan, recoverable from Respondent No. 2 (vehicle controller at the time), despite their absence in lower forums. Tamil Nadu DGP must form a Special Investigation Team (SIT) for a "logical conclusion expeditiously."
The DGP's presence and affidavit updates—retracting prior paras for clarity—earned judicial appreciation. A status report is due, with the matter listed as part-heard on .
This ruling sets a precedent: insurers can't allege fraud to dodge claims without backing it with police action. It promises stricter scrutiny, better verification systems, and accountability, potentially reshaping how motor accident claims handle suspected forgeries nationwide.
