Full Disclosure Necessary In Insurance Contracts: NCDRC

Brief Facts of the Case

The complainant purchased a shipment insurance policy for Rs. 60,00,000 from Export Credit Guarantee Corporation Of India/ insurer which was valid for two years. The complainant received an order from an Italian buyer and applied for a limit of Rs. 57,00,000 with the insurer, following all necessary procedures. Later, the buyer failed to pay the bill, leading the complainant to report the default to the insurer, but the claim was rejected by the insurer. The complainant claimed that the rejection of her claim was wrongful and illegal. Consequently, the complainant filed a complaint before the State Commission of Punjab seeking directions for the insurer to pay Rs. 57,00,000 on account ofthe insured value, along with 18% interest per annum and Rs. 10,00,000 as damages due to deficiency in service. The State Commission rejected the complaint, following which the complainant appealed before the National Commission.

Contentions of the Insurer

The insurer affirmed to the Shipment Policy and the credit limit but claimed that the complaint was business related and thus the complainant could not be regarded a consumer according to Section 2(1)(d) of the Consumer Protection Act, 1986. They argued that the complainant had concealed material facts and given information that was false which vitiated the policy under the terms of the policy. Additionally, it was proven that the complainant did not pay the required premium before shipment and was also very slow in protesting the bill to recover from the buyer. Consequently, the claim was rejected. The insurer further pointed out that the representation against the claim rejection was made by the complainant after the allowed timeframe, therefore it was non actionable.

Observations by the National Commission

Additionally, the insurer pointed out that the complainant delayed the process of getting the bill notarized, impairing the recovery of dues from the Italian buyer and justifying the claim's rejection.The Commission cited judgments reinforce that non-disclosure and misrepresentation are valid grounds for voiding an insurance contract, particularly the case of United India Insurance Co. Ltd. v. M.K. J. Corporation, which underscores the necessity of full disclosure in such contracts. The commission observed that the insurers rejection of the claim was based on the complainant's non-compliance with policy terms, insufficient premium payment, and the concealment of material facts. It was highlighted that the complainant's arguments regarding the acceptance of the premium and credit limit extension do not negate the fact that the shipment occurred before the policy modification, and the full premium was not paid before the risk began.

Consequently, the National Commission found no reason to interfere with the well-reasoned order of the learned State Commission and dismissed the appeal.

Case Title: M/S. Nancy Overseas, Importers & Exporters Vs. Export Credit Guarantee Corporation Of India Ltd. & Anr

Case Number: F.A. No. 821/2013