Verdict

In the Supreme Court of India, Civil Appellate Jurisdiction
Civil Appeal arising out of SLP (Civil) No.10954 of 2019 & SLP (Civil) No.15588 of 2021

Reliance life insurance Company Ltd. & Anr. ………..Appellant(s)
Vs
Jaya Wadhwani …………..respondent(s)

With

The Branch Manager
Reliance life insurance Co. Ltd. ……..appellant(s)
Vs
Usha Soni …………respondent(s)

In January 2024, the Hon’ble Supreme Court passed judgment on an important issue of the effective date of an insurance policy. Two cases had similar issues and a common question of law. Hence the Apex Court passed a common Judgment for both cases. A look at the highlights of the facts, issues and Judgment in these cases.

Facts of the case(s)

Reliance Insurance Company Ltd Vs. Jaya Wadhwani

Jaya Wadhwani took an insurance policy with Reliance Life Insurance Company (‘Reliance Life’). 

1. The quotation of the Policy was issued on 14.07.2012 and the proposal form was submitted on the same day.
2. The cheque dated 13.07.2012 was issued on 14.07.2012.
3. Subsequent to realization of cheque in the bank, the Policy was issued on 16.07.2012.
4. The date of commencement was mentioned as 16.07.2012 in all relevant places of the Policy.
5. Jaya Wadhwani committed suicide on 15.07.2013.

Reliance Insurance Company Ltd Vs. Usha Soni

Usha Soni took an insurance policy with Reliance Life.

1. The date of submission of proposal form is 26.09.2012.
2. The date of issue of Policy as well as date of commencement of Policy is 28.09.2012.
3. The date of next premium was due on 28.09.2013. Since Usha Soni had not paid the premium, the Policy lapsed.
4. Usha Soni paid the premium (delayed) on 25.02.2014. The Policy was reinstated from that date onwards.
5. Usha Soni committed suicide on 03.06.2014.

Clauses common to Policy(s) in both cases:

Both Policies had the following identical clause (Clause 9) which contained provisions relating insurance in the event of the insured committing suicide.

“9. Suicide: The Company will not pay any claim on death of the Life Assured, whether sane or insane, commits suicide within 12 months from the date of issue of this Policy or the date of any reinstatement of this Policy.”

Reliance Life did not provide insurance amount to Jaya Wadhwani and Usha Soni. Aggrieved, their family filed a case in the District Consumer Forum which upheld their right to receive insurance amount. 

On appeal by Reliance Life, the State Consumer Forum, and the National Consumer Dispute Redressal Commission (NCDRC) upheld the order passed by the District Consumer Forum. Aggrieved, Reliance Life filed a Special Leave Petition (SLP) in the Hon’ble Supreme Court. 

Issue / Question of Law

The sole question of Law – what would be the date from which the policy becomes effective? Would it be the date on which the policy is issued OR the date of the commencement mentioned in the Policy OR would it be the date of the issuance of the deposit receipt or cover note?

Analysis

The Apex Court considered the following: 

Jaya Wadhwani case

1. The cheque dated 13.07.2012 with the premium amount was submitted along with the proposal form on 14.07.2012 wherein it was clearly mentioned that receipt shall be issued only subject to clearance of the cheque and that insurance protection shall be provided only from the date of acceptance of the risk. Now in this case, Policy was issued and date of commencement of risk became effective from 16.07.2012. 
2. 14.07.2012 could not be considered as date of issuance of Policy. It was only date of submission of proposal form along with cheque. The Apex court observed that the date of proposal cannot be treated as the date of effectiveness of the Policy unless the deposit of cheque and clearance, issuance of Policy happens on the same day. Further, merely tendering a cheque would not be considered until the encashment / clearance of the cheque. There could be various reasons ranging from the drawer issuing a ‘stop payment’ to insufficient funds’ that could lead to cheque not being encashed or cleared.     
3. Hence, 16.07.2012 is the date when the Policy becomes effective. 
4. A plain reading of Clause 9 of the Policy states that insurance premium would not be provided if the insured person committed suicide within 12 months from date of issue of Policy / reinstatement of Policy.
5. In this case, the 12- month period ended on 15.07.2013. Unfortunately, Jaya Wadhwani committed suicide on 15.07.2013 which was the last day of the 12-month period. Therefore, she was not entitled to insurance cover.

Usha Soni case

1. The first cheque for premium was paid by Usha on 26.09.2012. The Policy issuance and commencement date was mentioned in the Policy itself as 28.09.2012.
2. Clause 1 (iv) of Usha’s Policy stated that a grace period of 30 days would be given for payment of premium with delay. Clause 5 further mentions about lapse of Policy due to non-payment of premium. Clause 6 contains provisions for reinstatement of Policy it stated that upon payment of premium, the Policy would be reinstated from the date of payment.
3. In this case, the second premium amount became due and payable on 28.09.2013. However, Usha Soni failed to make payment of the premium within the said date or grace period. Consequently, her Policy lapsed. 
4. However, Usha Soni made the payment on 25.02.2014. The Policy stood reinstated from the date of payment of premium which was 25.02.2014.
5. Unfortunately, Usha Soni committed suicide on 03.06.2014 which was well within the 12- month period of the (reinstated) Policy. 
6. On perusal of the Order passed by the District Forum, State Commission and NCDRC, the Hon’ble Supreme Court was of the view that although Clause 9 relating to insurance in the event of suicide was referred to, the provision relating to reinstatement of Policy was not considered. Due to this the date of Policy was erroneously considered as 28.09.2012. The reinstatement date ought to have been considered. In fact, the 12-month period commenced from 25.02.2014 from when the Policy was reinstated. Since the suicide occurred on 03.06.2014, it was within the 12-month period and hence the insured would not be entitled to insurance cover.

Further, the Apex Court considered Judgments in decided cases of  LIC & Anr Vs Dharam Vir Anand (1998) 7 SCC 348 and LIC & Anr Vs Mani Ram (2005) 6 SCC 274 in deciding on the above issues.

In both cases the issue was pertaining to the  effective date of Policy. The Apex Court held that the date of issuance of Policy would be the relevant date for all purposes and not the date of proposal or date of issue of receipt for premium. In both cases, the Apex Court held that the stand taken by Reliance Life is correct and set aside the orders passed by the District, State and National Consumer Commissions.

For full text of the Judgment:
https://main.sci.gov.in/supremecourt/2019/12162/12162_2019_8_1503_49160_Judgement_03-Jan-2024.pdf