SC: Defense that did Not Serve as Basis for Repudiation of Claim Cannot be Raised by Insurance Company

Supreme Court Law Insider

Savvy Thakur

Published on: October 30, 2022 at 20:08 IST

The Supreme Court made the observation that an insurance company cannot take a defense that did not serve as the basis for repudiating a claim made by the insured in front of a consumer commission.

In this instance, the insurance company rejected the claim because there was not enough money to cover the declaration and/or loss.

The appeal against the State Consumer Disputes Redressal Commission‘s order dismissing the complaint was denied by the National Consumer Disputes Redressal Commission on the grounds that they had changed their “from anywhere in India to anywhere in India” policy into a sales turnover policy that only covered transportation of goods between two locations.

The appellants argued in front of the Supreme Court that the insurance company could not have resisted a claim petition for reasons other than those cited by them when they rejected a claim.

In Saurashtra Chemicals Ltd. vs. National Insurance Co. Ltd., they cited a Supreme Court decision.

The court made the observation that the National Commission should not have gone beyond the grounds of repudiation and into the nature of coverage in light of the facts of the case.

The bench added that all of these terms of art apply to the insurance industry.

The bench granted the appeal and remanded the case to the State Commission to reconsider the insured’s claim based on the grounds for repudiation and to determine whether sufficient funds existed at the relevant time to cover the insured’s claim due to the declaration of the insured’s loss.

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