Insurance Company Cannot Be Held Guilty Of Deficiency Of Service Solely For Delay In Processing/Repudiating Claims: Supreme Court

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Consumer Protection Act, 1986 - Insurance claims - The delay in processing the claim and delay in repudiation could be one of the several factors for holding an insurer guilty of deficiency in service. But it cannot be the only factor. 

The Supreme Court observed that an insurer cannot be held guilty of deficiency in service solely for the delay in processing the claim and delay in repudiation

"They could be one of the several factors for holding an insurer guilty of deficiency in service. But it cannot be the only factor", the bench comprising Justices Hemant Gupta and V. Ramasubramanian observed.

The court observed thus while allowing the appeal filed by New India Assurance Co Ltd against the National Consumer Disputes Redressal Commission directing them to make payment of the sum assured under a Marine Insurance Policy to the insurer.

In this case, the insured took a policy of insurance for a sum of Rs.1,62,70,000 covering risks to the Mechanical Sailing Vessel MSV Sea Queen. As the vessel MSV Sea queen, sank in the high sea between Oman and Pakistan, due to bad weather and rough tides, which damaged the lower portion of the vessel, the insured lodged a claim with the ­insurer. Since the claim was neither admitted nor repudiated, she filed a consumer complaint before NCDRC which allowed it. The NCDRC noticed that though the incident took place on 30.05.2011, the surveyor was appointed on 3.06.2011 and a Final Survey Report was sent on 25.03.2013, the claim was repudiated by the appellant only on 4.09.2013, which was after more than two years of the incident. Thus it held that the inordinate delay violating Regulation 9 of the Insurance Regulatory and Development Authority (Protection of Policyholders' Interests) Regulations, 2000, constituted deficiency in service.

Referring to materials placed on record, the bench noted that the complainant did not state anywhere in the complaint as to where exactly the mishap had happened. It also noticed that an email about a suspected piracy attack demonstrated at least that the vessel was plying in the prohibited location.

Therefore, we are of the view that the Consumer Forum which has limited jurisdiction to find out if there was any deficiency in service, could not have allowed the complaint on the basis of sketchy pleadings supported by doubtful evidence, the court said.

"The delay on the part of the Insurance Company in securing the Final Survey Report and the further delay in issuing the letter of repudiation, cannot per se lead to the complaint being allowed. The delay in processing the claim and delay in repudiation could be one of the several factors for holding an insurer guilty of deficiency in service. But it cannot be the only factor.", the bench observed while allowing the appeal.