Supreme Court Orders Insurance Payout for Stolen Truck After Unjust Claim Rejection

The Supreme Court of India has ruled in favor of Gurmel Singh in a dispute with the National Insurance Company regarding the rejection of his insurance claim for a stolen truck. The case, Gurmel Singh vs. Branch Manager, National Insurance Co. Ltd., highlights the issue of insurance companies using technicalities to deny claims and emphasizes that insurers must act fairly and not impose unreasonable conditions on policyholders.

Background of the Case

The case arose after Gurmel Singh’s truck, bearing registration number CG-04-JC-4984, was stolen on the night of March 23-24, 2013. The vehicle was insured with National Insurance Company for the period between August 22, 2012, and August 21, 2013. Upon discovering the theft, Gurmel Singh immediately filed an FIR at the Kumhari Police Station and notified both the Regional Transport Office (RTO) and the insurance company.

Despite completing all necessary formalities, including submitting all required documents, the insurance company failed to settle his claim. Gurmel Singh then approached the consumer courts for relief.

Legal Timeline

March 24, 2013: The truck was stolen, and the complainant informed the police and the insurer.
December 3, 2013: The District Consumer Disputes Redressal Commission, Durg, directed the complainant to submit a duplicate registration certificate, after which the insurance company was to settle the claim.
2014: The complainant applied for a duplicate certificate from the RTO, but it was denied due to system restrictions after registering the vehicle as stolen.
January 23, 2015: The District Commission dismissed the complaint, citing non-submission of the duplicate certificate.
2021: The National Consumer Disputes Redressal Commission (NCDRC) upheld the rejection of the insurance claim.
May 20, 2022: The Supreme Court overturned the NCDRC’s order and directed the insurer to pay the claim.

Key Legal Issues

Whether non-submission of a duplicate registration certificate justified the rejection of an insurance claim.
Whether the insurer’s requirement for additional documents, which the complainant could not obtain, constituted a deficiency in service.
Whether an insurance company can deny a claim based on technical grounds when all substantial conditions of the policy have been met.

Arguments by the Petitioner (Gurmel Singh)

The petitioner argued that:

He had fulfilled all requirements, including filing a police complaint and notifying the insurer.
He applied for a duplicate registration certificate but was denied because the RTO locked the records after registering the theft.
The insurer had access to the original registration details, which they had verified before issuing the policy.
Rejecting the claim on a minor technicality was unfair and constituted a deficiency in service.

Counterarguments by the Respondent (National Insurance Co. Ltd.)

The insurance company contended that:

As per the policy, the insured must submit a duplicate registration certificate for claim settlement.
The complainant’s failure to provide the document justified claim rejection.
Insurance settlements must strictly adhere to policy terms, and the insurer cannot be compelled to pay without complete documentation.

Supreme Court’s Observations

1. Unreasonable Technicality Used to Deny Claim

“The appellant had tried his best to get the duplicate certified copy of the certificate of registration. However, because of the report of theft, the RTO refused to issue it. In such circumstances, solely on the ground that the original certificate is not produced, non-settlement of claim can be said to be deficiency in service.”

The Court held that the complainant’s inability to obtain the document was due to reasons beyond his control.

2. Insurer’s Conduct Was Arbitrary

“The insurance company has become too technical while settling the claim and has acted arbitrarily. The insured was asked to furnish documents beyond his control to procure.”

The Court criticized the insurer for being overly rigid in its documentation requirements.

3. Consumer Protection and Fair Business Practices

“While settling claims, the insurance company should not be too technical and ask for documents which the insured is not in a position to produce due to circumstances beyond his control.”

The ruling reaffirmed that insurers must act fairly and reasonably.

Final Judgment

The Supreme Court ruled:

The rejection of the claim was arbitrary and unjustified.
The insurance company was ordered to pay ₹12 lakhs to the complainant.
Interest at 7% per annum from the date of claim submission was awarded.
Litigation costs of ₹25,000 were imposed on the insurer.
The payment must be made within four weeks.

Impact of the Judgment

This ruling has significant implications:

Protection Against Unfair Insurance Practices: The Court reinforced that insurers cannot unfairly reject claims based on rigid technicalities.
Consumer Rights Strengthened: The judgment serves as a precedent for policyholders to challenge arbitrary claim rejections.
Insurers Must Act in Good Faith: The ruling emphasizes that companies should not impose impractical document requirements.
Stronger Enforcement of Consumer Laws: The decision reaffirms judicial oversight of unfair trade practices in the insurance sector.

By delivering this judgment, the Supreme Court has reinforced the principle that insurers must act in good faith, ensuring fair treatment of policyholders and preventing unjust claim denials.

Petitioner Name: Gurmel Singh.
Respondent Name: Branch Manager, National Insurance Co. Ltd..
Judgment By: Justice M.R. Shah, Justice B.V. Nagarathna.
Place Of Incident: Durg, Chhattisgarh.
Judgment Date: 20-05-2022.

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