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Proximate Cause Is Required for Insurance Coverage Under Accidental Death, according to the Supreme Court

By - King Stubb & Kasiva on February 22, 2023

The division bench comprising Justice Sanjay Kishan Kaul and Justice Abhay S. Oka, of the Supreme Court, made the following observation: according to the insurance policy, death resulting “only and directly from an accident caused by external violent and any other visible means” during election duty will not be covered under the scope of payment of compensation.

In order to offer insurance coverage for individuals deployed for election work in the 2000 assembly elections, the National Insurance Company and the Chief Electoral Officer of Bihar had signed a Memorandum of Understanding in the year 2000. One officer passed away from sunstroke while carrying out his responsibilities. The brief overview of this case is that the Supreme Court had to decide whether the deceased man's wife had a right to insurance coverage under the MoU by referencing the aforementioned clause. Following the widow's relief from the Patna High Court, the insurance firm appealed to the Supreme Court.

Two issues were brought up before the Apex Court and they were: first, the repercussions of waiting too long to file a claim with the appellant insurance company, and second, whether the insurance policy even covered the event of the constable's demise. The bench upheld the insurer's appeal and determined that death from sunstroke was not covered by the policy agreement.

The claim was beyond any reasonable time period- regarding the first issue, it was admitted before the court that Respondent No. 2 never made a claim or even inquired about the claim's eligibility until the letter dated November 21, 2008, which was sent after seven and a half years. As a result, by any standard, this claim was made too late.

The bench also clarified in the 2019 precedent of Alka Shukla vs Life Insurance Corporation Ltd, the criteria used to evaluate claims under any insurance policy and ruled that the conditions of the insurance policy must be read strictly. A "proximate causal relationship between the accident and the body injury is a need," the Court said, citing the prior cases. The significance of reading the insurance policy clearly was also emphasised as a guiding principle.

Law on Interpretation of Insurance Terms- the court reiterated the law on the interpretation of insurance clauses. Regarding the specific MoU clause controlling the insurance policy, which calls for payment of compensation in the event of a death resulting “solely and directly” from an accident brought on by an outside force or any other clear cause leaving aside the question of how narrowly the articles should be interpreted, the Court thought it was obvious that the claim was only allowed in cases of death.

The second part of the same statement begins with the word “only.” Therefore, even if a fatality occurs, it must be the sole and direct outcome of an accident caused by external hostility and only in the scenario where the resulting condition occurs.

Additionally, a number of court rulings were cited, according to which the insurance contract should be read in its entirety and every effort should be made to harmonise its terms. It should be noted, however, that the rule of contra proferentem does not apply in cases involving commercial contracts because a clause in a commercial contract is bilateral and has been mutually agreed upon, so it is not applicable in these situations.

Finally, the bench decided that “the appellant insurance firm was not responsible and set aside the challenged decision of the Division Bench of the Patna High Court while granting the appeal.”

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