Insurance Agents Liable For Errors In Insurance Applications, Must Provide Diligent Assistance To Customers: Jammu & Kashmir High Court

The Jammu and Kashmir High Court recently held that insurance agents are required to provide careful and diligent assistance to customers while helping them complete insurance applications as intermediaries between clients and insurance companies.

A division bench of Justices Tashi Rabstan and Wasim Sadiq Nargal thus granted relief to the owner of a Hydraulic Excavator whose insurance claim was denied due to the entry of the wrong chassis number in the insurance policy, clarifying that verifying such numbers is the responsibility of the insurance agent, not the insured party.

"Every insurance agent is expected to act with care and diligence and to assist customers in properly completing insurance applications in order to act as an intermediary between the customer and the insurance company. Therefore, we do not find any force in the argument of learned counsel for National Insurance Company that it was claimant-Inderjeet Singh who had wrongly written the chassis number and engine number in the proposal form, that too when the name of insurance agent has been mentioned as Shagun Vaid in the insurance policy of National Insurance Company."

The bench underscored the crucial role of insurance agents as representatives of insurance companies and ruled that these agents bear responsibility for potential errors and omissions.

" insurance agents represent insurance companies and they are liable for errors and omissions.These are the insurance agents who are responsible for complying with legal and contractual duties. An insurance agent must meet the standard expectations and must have full knowledge of the process," it added.

The Court was hearing an appeal against the judgment delivered by the J&K State Consumer Disputes Redressal Commission. The Commission had dismissed the complainant's claim due to the absence of a valid policy for claiming indemnity following an accident involving an excavator owned by the appellant.

The accident occurred on January 28, 2009, when a rock fell on the excavator. The excavator was insured by the respondent, National Insurance Company, with a policy in effect from March 30, 2008, to March 29, 2009.

Despite not contesting the damage or the active policy during the accident, the Insurance Company declined the claim, citing discrepancies in the engine and chassis numbers. The claimant, dissatisfied with this decision, filed a complaint with the Commission. The commission ruled against the claimant, prompting the appeal.

The appellant argued that ICICI Lombard and the insurance agent of National Insurance Company both entered the wrong chassis and engine numbers during the initial purchase, and this incorrect information was carried over to the subsequent policy.

On the other hand, the respondents argued that the Hydraulic Excavator damaged in the accident in January 2009, does not match the insured vehicle under the policy issued in March 2008 and as a result of this discrepancy, the company has rightly rejected the claim.

The bench noted that the respondent Insurance Company has not denied the issuance of Certificate of Insurance. It further noted that when the National Insurance Company had disputed the claim due to mismatched chassis and engine numbers, Singh had reported to the Police Station and the Crime Branch.

Subsequently, ICICI Lombard issued an endorsement in June 2009, correcting the chassis and engine numbers and the endorsement was communicated to the Crime Branch.

In this backdrop the Court held,

"Thus, once the ICICI Lombard included the correct engine number and chassis number in the insurance policy vide endorsement dated 04.06.2009, the same shall be deemed to be included in the policy certificate of National Insurance Company, because as per the own stand of National Insurance Company the policy-in-question was in continuation of the previous policy with the ICICI Lombard."

The court added that ICICI Lombard had already admitted the mistake of mentioning the wrong chassis and engine numbers in the policy due to a typographical error before the commission.

The Court scrutinised the actions of the National Insurance Company, emphasizing that an insured individual expects protection and coverage for their policy. It found that the claimant could not reasonably be expected to know the chassis and engine numbers, which are typically handled by insurance agents.

Given that the insured party, cannot be held responsible for such technical details and is expected to remember only the registration number of the vehicle, the Court questioned why he should suffer due to the mistake made by the insurance agent in this case.

Expressing displeasure on the National Insurance Company's failure to acknowledge and act reasonably on the claim when the liability had become reasonably clear, the court said it seems the respondent Company was escaping from its liability to indemnify the insured. 

The Court accordingly allowed the appeal and directed the National Insurance Company to pay Rs. 13,60,000/- to the claimant with interest.

Case Title: Inder Jeet Singh Vs ICICI Lombard and another

Citation : 2023 LiveLaw (JKL) 219

Click Here To Read/Download Judgment