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Synopsis

The Supreme Court on January 3, 2024 held the date of issuance of insurance policy to be the relevant date for all the purposes and not the date of proposal or the date of issuance of the receipt. 

A bench of Justices Vikram Nath and Rajesh Bindal approved the stand taken by Reliance Life Insurance Company Ltd in repudiating the claims made on the parts of the assured in two separate cases.

The question involved in the appeals was 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. 

In both the cases, the District, the State and the National Consumer Disputes Redressal Commission, all the three fora had 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 complaints.

In the appeal of Jaya Wadhwani, the quotation of policy was issued on July 14, 2012. The proposal form was submitted by the life assured on July 14, 2012. Receipt of the Cheque of July 13, 2012 was also issued on July 14, 2012. On July 16, 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 July 16, 2012. On July 15, 2013, the life assured committed suicide.

In the case of Usha Soni, the date of submission of proposal form by the life assured is September 26, 2012. The date of issue of policy as also the date of commencement of policy was September 28, 2012. The date of next premium was on September 28, 2013. As the next premium was not paid, the policy lapsed. The assured paid the next premium on February 25, 2014 and the lapsed policy was reinstated from that date. On June 03, 2014, the life assured committed suicide.

According to clause 9 of the policy conditions, 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.

The bench noted in the case of Usha Soni, 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. The fora have wrongly taken the date of issue of policy only as the relevant date to count 12 months, i.e., from September 28, 2012.

"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 February 25, 2014 and that is also the date of commencement of policy, both the dates being the same. Thus, the date of incidence of suicide being June 03, 2014, it was well within 12 months," the bench said.

In the case of Jaya Wadhwani, the proposal form, no doubt, was submitted on July 14, 2012 with respect to the cheque of July 13, 2012 of the premium amount wherein also it was mentioned that the receipt is issued subject to the clearance of the cheque and further that the insurance protection would only be provided effective from the date of acceptance of the risk, which happened on July 16, 2012, when the policy was issued and the date of commencement was notified to be the same date.

In the present case, period of 12 months from July 16, 2012 will complete on July 15, 2013. It would be the last day of 12 months as from the next day, i.e., July 16, 2013 the next month will start. 

"The date of proposal cannot be treated to be the date of policy until and unless on the date of proposal, initial deposit as also the issuance of policy happens on the same date where, for example, the premium is paid in cash then, immediately, the policy could be issued. Merely, tendering a cheque may not be enough as till such time the cheque is encashed, the contract would not become effective. The drawer of the cheque may, at any time, after issuing, stop its payment or there may not be enough funds in the account of which the cheque is issued and there could be many other reasons for which the cheque could be returned without being encashed," the bench said.

The bench also referred to Supreme Court's judgment in case of 'Life Insurance Corporation of India and Another vs. Dharam Vir Anand (1998) relied upon by the appellants that terms and conditions of the contract as contained in the policy should be strictly adhered to, and it would be a futile exercise, if any other interpretation is given or terms and conditions are relaxed.

Relying upon the judgment in the case of Dharam Vir Anand, the Supreme Court again in the case of 'Life Insurance Corpn of India Vs Mani Ram (2005), reiterated and held that the date of issue of policy would be the relevant date even if there was backdating, the bench pointed out.

The court, thus, allowed the appeals, rejected the claims and set aside the orders passed by the District, State and National Consumer Commission.

Cause Title: Reliance Life Insurance Company Ltd & Anr vs. Jaya Wadhwani