Insurance Certificates Cannot Send Claimants On A "Voyage" Into "Labyrinth" Of Company Websites: Sikkim High Court To Insurers Appearing Before MACT
The Court noting “unclear” terms of the Tata AIG General Insurance Company said that the insurers must verify policy, disclose full terms, and inform tribunal of applicable IRDA directions.
The Sikkim High Court has laid down a mandatory three-fold obligation for insurers appearing before the Motor Accident Claims Tribunal (MACT), that they must verify the policy, disclose its complete terms, and inform the Tribunal of any applicable IRDA directions to prevent claimants and Tribunals from undertaking a "painstaking exercise" or a "voyage" into the "labyrinth of pages and pages" of company websites just to ascertain the scope of coverage.
The Court held that insurance companies cannot take advantage of the fact that accident victims or their dependents, who typically have no personal knowledge of the insurance policy taken by the vehicle owner, are unable to furnish full particulars of that policy before MACT. The Court held that allowing an insurer to exploit this informational gap to deprive claimants of compensation under welfare legislation would be contrary to the very character of proceedings before the Tribunal, which the Court described as not being "strictly adversarial as in other jurisdiction".
A Single Judge Bench of Justice Bhaskar Raj Pradhan observed, “…it is always a painstaking exercise to understand the terms and conditions of the insurance policy. The language in the insurance certificate does not give a clear picture to the extent of the indemnity of the insurance company. All that is clear is the quantum of payments made under various heads. Every insurance policy requires the insured to visit their web pages and comprehend for themselves if it is comprehensible. Every certificate of insurance issued should necessarily provide and clearly state the extent of insurance, the extent of indemnity they have undertaken and what they are liable for under any circulars or notices issued by the IRDA. This will ensure that the insured clearly knows all that is necessary for the insured to know is in the insurance certificate itself without voyaging into the labyrinth of pages and pages of their official website”.
Advocate Sishir Mothay appeared for the appellant and Advocate Rahul Rathi appeared for the respondent.
“I am also of the view that when a claim is made before the learned Tribunal by a claimant under an insurance certificate/policy and the insurance company appears after notice is issued, it is incumbent upon the insurance company to: (i) first verify whether the insurance certificate/policy policy through which the claim is made is a valid insurance certificate/policy issued by them; (ii) once it is clear to the insurance company that in fact it is a valid insurance certificate/policy issued by them then it is incumbent upon them to file the insurance policy with all its terms and conditions and inform the learned Tribunal what exactly the insurance policy covers and the extent of their indemnification; (iii) the insurance company should also inform the learned Tribunal whether they are bound to follow certain directions issued by the IRDA from time to time relevant to the insurance certificate issued by them”, the Bench noted.
The claimants, heirs of the deceased who died in a motor accident on November 12, 2019, filed the underlying certificate of insurance before the Tribunal despite having no personal knowledge of its terms; it had been filed by the vehicle owner, who merely stated he possessed the relevant documents.
The insurer, Tata AIG General Insurance Company, did not appear before the Tribunal despite publication of summons and was proceeded against ex parte, leaving the Tribunal without any clarification on the policy's actual terms.
The Tribunal dismissed the claim under Section 166 of the Motor Vehicles Act, 1988 on the ground that the accident was caused by brake failure rather than rash or negligent driving. The claimants appealed, and the insurer, having remained absent before the Tribunal, chose to appear for the first time in the appeal.
Examining the certificate of insurance, the Court explained the rationale for imposing this burden on insurers rather than the claimants.
“I say so because it is noticed that in every claim for compensation made by the victims or their dependents the claimants are the ones who are usually placing the insurance certificate issued by the insurance company to the owner of the vehicle although they may not have any personal information about it. In some cases, the claimants may not have the necessary particulars of the insurance policy taken by the insured. In such situations, it may not behove of the insurance company to hide behind the lack of information of the claimants and deprive them of the benefit of the benevolent legislation…”, the Bench said.
“…In that sense the adjudication before the learned Tribunal may not be strictly adversarial as in other jurisdiction. Therefore, the insurance company who has issued the insurance certificate/policy providing the requisite information as above to the learned Tribunal would definitely clear doubts in the mind of the learned Tribunal to pass necessary effective orders as required without delay”, the Bench noted.
Having found, on a "deeper probe" into the insurer's website, that Respondent No. 1 had in fact undertaken to indemnify the vehicle owner for third-party liability, the Court went on to hold that the Tribunal could have granted no-fault compensation under Section 140 of the MV Act notwithstanding its rejection of the negligence-based claim, and directed the insurer to pay Rs. 5,00,000 with 7% interest from the date of the claim petition.
Cause Title: Rekha Chettri & Ors. v. Tata AIG General Insurance Company & Ors., MAC App. No. 20 of 2024.
Appearances:
Appellants: Sishir Mothay, Advocate.
Respondents: Rahul Rathi, Khushboo Rathi, Bhim Shankar Pradhan, Advocates.