Supreme Court: Mere Retention of Premium Not Sufficient to Conclude Insurance Acceptance (D. Srinivas v. SBI Life Insurance Co. Ltd. 2018)

Landmark Judgment Law Insider (1)

Published on: May 12, 2024 16:23 IST

Court: Supreme Court of India

Case: D. Srinivas v. SBI Life Insurance Co. Ltd. 2018

Honourable Supreme Court of India has held that the acceptance of an insurance contract may not be completed by mere retention of the premium or preparation of the policy document rather the acceptance must be signified by some act or acts agreed on by the parties or from which the law raises a presumption of acceptance.

It is held that the insurance contract being a contract of utmost good faith. It is held that if the Insurance Company accepts the premium then it would be presumed that Insurance Company has accepted the insurance contract.

12. Although we do not have any quarrel with the proposition laid therein, it should be noted that aforesaid judgments only laid down a flexible formula for the court to see as to whether there was clear indication of acceptance of the insurance. It is to be noted that the impugned majority order merely cites the aforesaid judgment, without appreciating the circumstances which give rise to a very clear presumption of acceptance of the policy by the insurer in this case at hand. The insurance contract being a contract of utmost good faith, is a two-way door. The standards of conduct as expected under the utmost good faith obligation should be met by either party to such contract.

13. From the aforesaid clause, it may be seen that the condition precedent for acceptance of the premium was the medical examination. It would be logical for an underwriter to accept the premium based on the medical examination and not otherwise. Therefore, by the very fact that they accepted the premium waived the condition precedent of medical examination.

15. In the circumstances, there is no reason to believe that there was no complete contract. There is clear presumption of the acceptance of the proposal in favour of the proposer. Therefore, the majority view of the Commission would not sustain.

Drafted By Abhijit Mishra

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