'Insurer Did Not Exercise Ordinary Care': MP High Court Upholds Compensation To LRs Of Deceased Despite Policy Being Bought After Her Death

Deciding the appeal preferred by the Insurance Company against the impugned award, Justice Vishal Dhagat held that the Company did not exercise ordinary care and diligence in the case-

Since, owner-Urmila Uikey has died, therefore, she could not have appeared for signing application and proposal for purchase of policy. Insurance Company made no efforts to find out why Insured has not appeared and signed the application. Insurer could have discovered the truth by ordinary diligence following proper procedure for issuing of policy.

The facts of the case were that the policy owner/deceased had met with a fatal accident while travelling in a car registered under her name. The said car was insured by the Appellant Company in the favour of the deceased. The Insurance company was challenging the award passed by the Claims Tribunal in favour of the legal representatives of the policy owner/deceased.

The Appellant company submitted that the policy owner had died more than two and a half years before the policy was bought. It was argued that since there cannot be any contract between a dead and living person, the said insurance policy was null and void and Claims Tribunal had committed an error in fixing liability on them to indemnify the owner and pay the legal representatives of deceased.

Examining the submissions of the parties and documents on record, the Court noted that despite the misrepresentation on the part of the legal representatives in contracting with the Appellant, the contract was not voidable-

In this case as owner has died before purchasing insurance policy, therefore, there was a misrepresentation on the part of legal representatives/driver/owner of vehicle in contracting with the appellant for purchase of policy in name of deceased owner Urmila Uikey. Contract entered between the parties is not voidable as consent given by appellant for covering the risk on purchase of policy was given by misrepresentation or silence hiding the fact that Urmila Uikey has died as appellant had means to discover the truth with ordinary diligence.

The Court further observed that the Appellant Company received the money and issued the policy without carrying out due diligence. The Court also pointed out that even during the pendency of the case, no effort was made for declaring policy to be void or to cancel the same. Therefore, the Court concluded, the policy could not be held to be voidable at option of the Appellant Company. Finding no in the impugned award, the Court dismissed the appeal.

Case Title : NATIONAL INSURANCE CO. LTD v SMT. GUDDI BAI AND ANRS.

Citation: 2022 LiveLaw (MP) 165

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