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Ashwin Liladhar Shah Vs. Life Insurance Corporation of India and Ors. - (High Court of Bombay) (04 Apr 2019)

Insurer is liable to pay interest in case of delay beyond the timeline prescribed in Regulation

MANU/MH/0578/2019

Insurance

Present Petition under Article 226 of the Constitution of India, seeks a writ of mandamus to Respondent No. 1- Life Insurance Corporation of India (LIC), directing it to honour the LIC Policy issued to late Ms. Bharati Bheda. The late Ms. Bheda, the assured had during her life time nominated the Petitioner as the beneficiary of the said policy. Therefore, in terms of the record of the LIC, it be directed to make over the amounts due including interest thereon under the said policy to the Petitioner as the nominee of the assured.

The Petitioner states that, the interest has not been paid fully on the amount due under the said policy. The Respondent submitted that, delay was attributable to the Petitioner and, therefore, interest as paid is sufficient recompense for the delay.

In terms of the Insurance Regulatory Development Authority of India (Protection of Policyholders' Interest) Regulations, 2017 (Regulations), the claim has to be settled at the highest within a period of 135 days from the date of making the claim even in case where investigation is to be done. Therefore, in case, there is any delay beyond the timeline prescribed in Regulation 14(2) (i) of the Regulation, then in terms of Regulation 14 (2) (ii) of the Regulation, the insurer i.e. Respondent No. 1-LIC is liable to pay interest at the rate which is 2% above bank rate from the date of the receipt of the last necessary documents to enable the LIC to honor its commitment in terms of the policy.

In present case, admittedly, the last document which was required by LIC was furnished on 5th February, 2018. Thus, the Respondent No. 1-LIC as a Life Insurer has to grant interest suo moto to the Petitioner on account of delay without waiting for any specific demand being made by the assured or his nominee as provided in Regulation 14 (2)(vi) of the said Regulations. The principal amount due under the said policy to the assurer's nominee i.e. Petitioner herein has been paid by the Respondent No. 1-LIC. This payment has been made during the pendency of this Petition.

Under Section 39 of the Insurance Act, 1938, a nominee of a policy holder is entitled to be paid by the Insurer in the event of the death of the policy holder. The Respondent No. 1-LIC does not dispute that, the payment under the said policy is due to assured Ms. Bheda's nominee - Petitioner herein. It is also not disputed that, the claim made by the Petitioner was completed on 5th February, 2018. The timeline provided in Regulation 14 of the said Regulation would commence from 6th February, 2018. The delay, thereafter, on account of the Respondent No. 1.-LIC seeking an Indemnity Bond from the Petitioner was completely unwarranted as there is no such requirement under the said policy.

In fact, in terms of Regulation 14 of the said Regulation, the obligation of the insurer on receipt of the claim is to the process the same without delay. Questions/clarification, if any by the LIC should be asked within 15 days of the receipt of the claim. Therefore, the amounts due under the policy should be paid within 30 days of the receipt of all relevant and supporting papers from the claimant. In case, any investigation is warranted, same has to be initiated at the earliest and completed within 90 days from the date of the receipt of the claim and thereafter, the claim shall be settled within 30 days thereafter.

In this case, nothing has been shown which could warrant any investigation of the part of the insurer-LIC before it could honour the claim made by the nominee of the assured. Thus, there is no justification warranting the LIC delaying the payment under the said policy. Thus, it is liable to pay interest in terms of the Regulation 14 of the said Regulations.

Non-payment of interest after 30 days of making complete claim i.e. 5th February, 2018 as in present case would lead to a loss to the estate of the deceased assured. Thus, Respondent No. 1-LIC is obliged to pay interest at 2% higher then the bank rate. The Respondent No. 1-LIC would compute the interest payable to the Petitioner in terms of Regulation 14 of the Regulations and pay interest to the Petitioner till 1st December, 2018. Accordingly, Petition allowed.

Tags : LIC POLICY   PAYMENT   DELAY   INTEREST  

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