EFFECTIVE DATE OF INSURANCE POLICY

[Mr. M. GOVINDARAJAN]

In RELIANCE LIFE INSURANCE COMPANY LTD. & ANR. VERSUS JAYA WADHWANI AND THE BRANCH MANAGER, RELIANCE LIFE INSURANCE CO. LTD. VERSUS USHA SONI - 2024 (1) TMI 667 - SUPREME COURT, the   Supreme Court considered two appeals filed by Reliance Life Insurance Company against one Jaya Wadhwani and the other filed against Usha Soni.  Since the facts of these two appeals are same the Supreme Court passed a common order. 

In the case of Jaya Wadhwani the following incidents occurred-

• 14.07.2012 - quotation of policy was issued; proposal form was also submitted on the same day.
• Receipt of cheque dated 13.07.2012 was also issued on 14.07.2012;
• 16.07.2012 - policy was issued.

In the policy it was mentioned that the date of commencement of the policy is 16.07.2012.  The life assured Jaya Wadhwani committed suicide on 15.07.2013.

In the case of Usha Soni, the following incidents occurred-

• 26.09.2012 - date of submission of the proposal by the life assured;
• 28.09.2012 - Date of issue of policy in which it is mentioned that the commencement of the policy is 28.09.2012.

The next premium in this case fell on 28.09.2013.  Since the said premium was not paid the policy lapsed.  However the Usha Soni paid the premium on 25.02.2014.  The lapsed policy was reinstated from 25.02.2014.  However the life assured committed suicide on 03.06.2014.

The District Consumer Forum, State Consumer Commission and National Consumer Commission held that the date of issuance of the initial deposit receipt of premium is the date of commencement of the policy.  All these three passed in favor of the complainant, respondent in this case.  The District Forum held that the appellant is liable to pay the amount of sum assured on the death of the assured.  On appeal the State Commission confirmed the order of the District Forum.  The Insurance Company filed a revision petition before the National Commission.  The National Commission dismissed the revision petitioner filed by the insurance company.

Against the order of National Commission the Insurance Company filed the present Civil Appeal before the Supreme Court.  The Supreme Court considered the following questions for its consideration for the disposal of these two appeals-

• What would be the date from which the policy becomes effective?
• Whether it would be the date of issuance of policy or the date of commencement mentioned in the policy or it would be the date of issuance of the deposit receipt or cover note.

The Supreme Court observed that all the three Consumer Forum proceeded on the basis that the date of issue of the initial deposit receipt of premium is the date of commencement of the policy.

The Supreme Court analyzed the clause 9 of the policy conditions which provide that the insurance Company will not pay any claim on death if 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.  In the case of Usha Soni, the date of commencement of the policy was mentioned 28.09.2012.  The next premium falls on 28.09.2013.  Grace period is 30 days.  Clause 5 provides that if the premium is not paid within the due date of extended grace period the policy will be lapsed.  Since Usha Soni did not pay the premium on the due date the policy was lapsed.

However Usha Soni paid the premium on 25.02.2014.  As per Clause 6 of the agreement the policy was reinstated with effect from 25.02.2014.  Usha Soni committed suicide on 03.06.2014 which was well within the period of 12 months.  The Supreme Court observed that the orders of the District Forum, State Commission and National Commission referred clause 9 of the agreement but never considered the clause 6 of the agreement which provides the reinstatement of the policy.  These Forums wrongly took the date of issue of the policy is only as the relevant date to count 12 months i.e., from 28.09.2012.  The date of reinstatement of the policy was mentioned as 25.02.2014 which is also the commencement of the policy.  Therefore the incidence of suicide is 03.06.2014 is well within 12 months.

The Supreme Court then considered the case of Jaya Wadhwani.  In this policy it is clearly mentioned that the commencement of policy is 16.07.2012.  14.07.2012 is not to be taken as the issuance of policy.  It is only the date of receipt of initial premium.  The date of issue of policy in this case is 16.07.2012.  This date is the actual commencement of the policy and becomes effective.  In this case the next premium due is 16.07.2013.  The life assured committed suicide on the last day of 12 months. 

The Supreme Court observed that in these two cases the date of issue of policy would be the relevant date for all the purposes and not the date of proposal or the issuance of the receipt.  The Supreme Court set aside the orders passed by the District Forum, State Commission and National Commission and allowed the appeal filed by the insurance company.  The Insurance Company is not liable to pay the amount.