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Insurance firms can’t negate claims

The companies have to look at the larger picture before refusing compensation.

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Insurance companies must look at the larger picture while repudiating a claim. When a vehicle skids off the road and the insurance company is facing a claim, can the fact that the driver’s licence had expired a few days ago be enough reason to negate the claim? This proposition was answered by the Himachal Pradesh Consumer Disputes Redressal Commission in Salig Ram Sharma vs. The New India Assurance Co Ltd.

Sharma’s vehicle was used to carry apples in boxes for delivery to a customer when it met with an accident. The repairs came to about Rs80,000 which he claimed from the insurance company.

However, the company noticed that the driver of the vehicle had a licence which had expired a few days prior to the accident. On the basis of the policy terms that the vehicle being driven must be handled by a licenced driver, the company rejected the claim.
Sharma filed a complaint in the Consumer Disputes Redressal Forum at Shimla but was dismissed.

Sharma took the matter in appeal to the State Commission. The Commission noted that the complainant had said that the road conditions on the day of the accident were wet and there was some sand which had fallen on the road, which led to skidding of the vehicle. The Insurance company did not dispute this fact.

The commission then used the precedent laid down by the Supreme Court in another case where it had stated that the company must look at the facts and circumstances leading to the accident rather than the validity of the licence by itself. If the facts suggested that the driver’s skill or licence was relevant to the accident, the company could reject the claim, but if it was immaterial, the rejection was unacceptable.

Applying this rule, the commission stated that the accident had occurred due to a skid. Since the company had not rebutted the cause of the accident itself, and the driving skills of the driver and the driving licence’s validity was not relevant to the case, the rejection was unsustainable in law.

The order of the district forum was set aside and the insurance company was asked to pay the consumer Rs40,443.65 as the costs of repairing the damaged vehicle with interest at 9% per annum till date of payment. Costs of litigation quantified at Rs5,000 were also allowed.

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