When the insurance company must consider Sub Standard Claim to the insured if cannot allow total claim, is a question time and again coming before the consumer courts .Consumers are often confused when in some cases it is total denial of the claim  for the reason deviating from the terms and conditions of the policy whereas in similar default in other case, sub-standard claim is approved. For clarity on the subject ,we need to look into the criterion set by the apex court and apex commission through their various judgements pronounced from time to time.   

In a case of violation of condition of the policy as to the nature of use of the vehicle, the claim ought to be settled on non-standard basis HELD BY Hon’ble Supreme Court in National Insurance Company Ltd. v. Nitin Khandelwal reported in (2008) 11 SCC 256 and contended that in the case of theft of vehicle, breach of condition here  is not germane. The brief facts in the case were that Nitin Khandelwal had purchased the vehicle Mahindra Scorpio bearing No.HR-18-8743 on 28.5.2003. On 27.9.2003, he had sent his vehicle to bring his children from Jaipur. On the way, some unknown people stopped the vehicle, tied the driver and dumped him on the way and snatched away the vehicle. The report was lodged by the driver at the police station and the appellant Insurance Company was informed. However, the claim of the insured under the policy was repudiated by the Insurance Company solely on the ground that the vehicle though registered and insured as a private vehicle, at the time of theft, was being used as a taxi for carrying passengers on payment. So, the said vehicle was  being used contrary to the terms and conditions of the insurance policy.Here court observed that using vehicle for commercial purpose has no role to play in theft incident.

Similar view was taken by the National Commission in the matter of United India Insurance Co. Ltd. v. Gian Singh [2006 CTJ 221 (CP) (NCDRC)] 

In yet another case of Amlendu Sahu v Oriental Insurance Company   SLP(C) No.11227/2009, complainant had taken a comprehensive insurance policy in respect of his private car being No. WB-34C/1919 vide policy No.311701/3/99/7172 of 1999 and the complainant duly  paid the insurance premium too. As per the complainant, United Bank of India's regional office is his tenant and many of its employees are known to him. One of its employees had approached the complainant to hand over the aforesaid vehicle for a few hours for urgent use by the employees of the Bank. The complainant handed the aforesaid vehicle by way of a good gesture and did not take any rent from the Bank in this regard. The vehicle met with an accident during the subsistence of the policy.In this case what is disputed by the insurance company is that the vehicle was not used for personal use but was given on hire, though no payment for hiring charges was proved. However, according to the insurance company, by using the vehicle on hire, the appellant had violated the terms of the insurance policy and on that basis the insurance company was within its right to repudiate the claim.

In this case also court allowed sub-standard claim and directed to pay Rs 2,50,000/- where as claim was for 5,00000/-

In the landmark judgement by the apex, in  National Insurance Co. Ltd. v. Swaran Singh & Others (2004) 3 SCC 297 , Supreme Court court has held as under:

"If on facts, it is found that the accident was caused solely because of some other unforeseen or intervening causes like mechanical failures and similar other causes having no nexus with the driver not possessing requisite type of licence, the insurer will not be allowed to avoid its liability merely for technical breach of conditions concerning driving licence."

But yet there are different orders in number of cases where claim has been rejected   for the reason of  violatation of  the terms and condition of the policy .It is done so keeping in view the facts and circumstances of the case where deviating from condition is fatal to the situation and deprives the insurance company to know the real facts of damage.We may refer to a very relevant judgement pronounced by National Commission which has been further followed by number of courts. In Appeal No. 321/2005 New India Assurance Company Ltd. vs. Trilochan Jane, decided on 09-12-2009,  the facts in that case were that the complainant’s vehicle was stolen on 08-04-2000 and he reported the theft to the police on 10-04-2000, i.e., two days later and informed the insurance company on 17-04-2000, i.e., nine days later. Counsel for opposite party argued by referring Nitin Khandelwal case and pleaded for sub standard claim which was rejected by the commission  In the said judgment, this Commission observed as under:-

‘ The said judgment in National Insurance Company Ltd. v. Nitin Khandelwal reported in (2008) 11 SCC 256 was in a totally different context.  In the said case, the plea taken by the Insurance Company was that the vehicle though insured for personal use was being used as a taxi in violation of the terms of the Policy. .  In the present case, the respondent did not care to inform the Insurance Company about the theft for a period of 9 days, which could be fatal to the investigation.  The delay in lodging the FIR after 2 days of the coming to know of the theft and 9 days to the Insurance Company, can be fatal as, in the meantime, the car could have traveled a long distance or may have been dismantled by that time and sold to kabadi (scrap dealer).

The above order has set the criterion as to when non-observance of condition can be considered for sub-standard claimand where situation does not permit to take lenient stand

                    Now again in the recent case decided by the national commission in the matter of Proprietor of Zuber Transport Sohaibbhai Unusbhai  Versus Reliance General Insurance Co.decided on 22.07.2013,  sub standard claim has also been rejected. Complainant having truck no. GJ 9Y6891, insured with the opposite party, was parked outside the office of Zuber Transport in common plot, when it was stolen early morning and FIR No. 2/09 dated 01.01.2009 was filed with the police, and the insurance company was also informed.  The aforesaid truck was later recovered As per the Panchnama prepared by the police, 11 tyres and plates, nuts were stolen which valued at Rs. 1,75,000/-.  The complainant sent the requisite documents and original bills of Rs. 2,53,908/- to the Insurance Company, but the company sent a cheque of Rs. 45,441.50/- as full and final settlement.  The complainant filed Consumer Complaint in the District Consumer Forum.  The stand taken by Insurance Company was that under the terms and conditions of the policy, the tyres of the truck were not covered.  Had the truck not been recovered, the Insurance Company was liable to pay compensation as per the total loss, but in this case, the position was different, as the truck had been recovered.  There was no deficiency on the part of the Insurance Company, because they had sent a cheque of Rs. 45,441.50/- to the complainant in accordance with the reports submitted by the surveyor.

 Complainant contended that the claim should have been allowed, at least on non-standard basis by the Insurance

Insurance company argued the case in the light of judgements by Hon’ble Supreme Court of India in ‘Export Credit Guarantee Corporation of India Ltd. Vs. Garg Sons International’, as reported in 2013 (1) SCALE 410, Suraj Mal Ram Niwas Oil Mills (P.) Ltd. Vs. United India Insurance Co. Ltd. and Anr. as reported in (2010) 10 SCC 567 and Oriental Insurance Company Ltd. Vs. Sony Cheriyan as reported in AIR 1999 SC 3252  that the insured can not claim anything more than what is covered by the insurance policy

 After thoughtful consideration to the arguments advanced and on  perusal of the record it was held that

“The company shall not be liable to make any payment in respect of:

          (A) Damages to tyres and tubes unless the vehicle insured is damaged at the same time in which case the liability of the company shall be limited to 50% of the cost of replacement          

(B)Except in the case of total loss of the vehicle insured the insured shall not be liable under section of the policy for loss or the damages to lumps, tyres, tubes, mudguards, bonnet side parts, bumpers and paint work ….”

In view of the above facts and circumstances of the case sub-standard claim could not be allowed .


Dr Prem lata Member CDRF



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