Supreme Court clarifies insurance policy terms in election duty death: National Insurance Company Ltd. vs. Chief Electoral Officer (2023)

Date of the Judgment: 08 February 2023
Citation: 2023 INSC 93
Judges: Sanjay Kishan Kaul, J. and Abhay S. Oka, J.
Can an insurance company be held liable for a death that occurred during election duty, even if the death was due to a heatstroke and not a violent external cause? The Supreme Court of India recently addressed this question, clarifying the strict interpretation of insurance policy terms. The court examined whether a heatstroke death during election duty falls under the ambit of an insurance policy covering deaths resulting from accidents caused by external violent and visible means. The bench comprised Justices Sanjay Kishan Kaul and Abhay S. Oka, with the judgment authored by Justice Sanjay Kishan Kaul.

Case Background

In 2000, the National Insurance Company Ltd. (Appellant) and the Chief Electoral Officer, Bihar (Respondent No. 1) entered into a Memorandum of Understanding (MoU) to provide insurance coverage for individuals involved in election-related work for the Bihar Legislative Assembly elections. The insurance policy was intended to cover death resulting from accidents caused by external violent and any other visible means. A supplementary policy extended the coverage period from 24 May 2000 to 23 June 2000. During this extended period, Deval Ravidas, a constable, died due to a sunstroke/heat stroke while on election duty. His wife, Respondent No. 2, sought compensation under the insurance policy. Initially, the claim was rejected by the Assistant Election Officer, Bihar, on the grounds that the death was not caused by any external violent activity. The matter was then taken up by the High Court.

Timeline:

Course of Proceedings

The High Court of Judicature at Patna initially heard the case in a writ petition (CWJC No.1781/2011) filed by Respondent No. 2. The learned Single Judge did not address whether the death was accidental as per the policy. Instead, the court relied on Lilawanti Devi v. The State of Bihar & Ors., opining that the claim should have been lodged within the policy period. Since the claim was not made within the policy duration, the Single Judge held the Chief Electoral Officer and the District Magistrate, Vaishali, liable to pay the compensation. The Chief Electoral Officer appealed this decision. The Division Bench, in its judgment dated 03.10.2017, reversed the Single Judge’s order, holding the insurance company liable. The Division Bench distinguished the case from Lilawanti Devi, noting that the death occurred during the policy period. The Division Bench applied the principle from Delhi Electric Supply Undertaking v. Basanti Devi & Anr., stating that the employer acted as an agent of the insurance company, and thus, the insurance company was liable. The insurance company then appealed to the Supreme Court.

Legal Framework

The primary legal framework in this case revolves around the interpretation of the insurance policy, specifically Clause 3 of the Memorandum of Understanding (MoU) which states:

“The insurance is intended to provide for the payment of compensation in the event of death only resulting solely and directly from accident caused by external violent and any other visible means.”

The Supreme Court also considered the principles of insurance law, including the strict interpretation of insurance contracts, the concepts of utmost good faith, insurable interest, indemnity, subrogation, contribution, and proximate cause. The Court also referred to the agency principle under Section 182 of the Indian Contract Act, as discussed in Delhi Electric Supply Undertaking v. Basanti Devi & Anr.

Arguments

Appellant (National Insurance Company Ltd.) Arguments:

• The Appellant contended that the claim was rejected by the Assistant Election Officer on 20.11.2009, and the subsequent admission of liability by the Chief Electoral Officer was an attempt to shift the burden to the Appellant.
• The policy had expired on 23.06.2000, and the claim was made only on 24.04.2011, after an inordinate delay of eleven years.
• The cause of death, a sunstroke/heat stroke, was not covered under the policy’s scope, which required the death to result from “external violent and any other visible means.”
• Insurance policies must be strictly construed, and the terms of the policy must be adhered to.
• The claim should have been made immediately upon the occurrence of the event, as per the terms of the MoU.

Respondent No. 1 (Chief Electoral Officer) Arguments:

• The Respondent argued that the Supplementary Counter Affidavit only recommended the case for payment based on the judgment in Kamlawati Devi v. The State of Bihar & Ors.
• The primary responsibility to file the claim was with the wife of the deceased.
• There was an inordinate delay in the representation made by Respondent No. 2, which was made almost seven and a half years after the death.
• The death was caused by a heat stroke and was not covered under the MoU.
• The Chief Electoral Officer’s role was limited to forwarding the recommendation.
• The husband of Respondent No.2 died during the currency of the insurance policy, and the insurance company was obligated to honor the claim.

Respondent No. 2 (Wife of the deceased Constable) Arguments:

• Respondent No. 2 sought compensation under the insurance policy, as her husband had died while performing election duty.

Innovativeness of the argument: The Appellant’s argument was innovative in highlighting the strict interpretation of the insurance policy and emphasizing that the cause of death did not fall under the specified conditions of the policy. The Respondent’s argument was innovative in emphasizing that the death occurred during the policy period and that the employer acted as an agent of the insurance company.

Issues Framed by the Supreme Court

The Supreme Court framed the following issues:

1. What are the consequences of the delay in claiming the amount from the Appellant insurance company?
2. Whether the insurance policy covered the scenario of the death of the constable due to sunstroke/heat stroke?

Treatment of the Issue by the Court:

The following table demonstrates as to how the Court decided the issues:

Authorities

Cases Relied Upon by the Court:

• Lilawanti Devi v. The State of Bihar & Ors., High Court of Judicature at Patna: The court distinguished this case, stating that in the present case, the death occurred during the policy period, unlike in Lilawanti Devi.
• Delhi Electric Supply Undertaking v. Basanti Devi & Anr., Supreme Court of India: The Division Bench of the High Court had applied the agency principle from this case, stating that the employer acted as an agent of the insurance company. However, the Supreme Court found this principle not relevant to the factual and legal controversy in the present case.
• Kamlawati Devi v. The State of Bihar & Ors., High Court of Judicature at Patna: The Respondent No. 1 relied on this case in their supplementary counter affidavit.
• Suraj Mal Ram Niwas Oil Mills (P) Ltd. vs. United India Insurance Co. Ltd., Supreme Court of India: The court reiterated that the words used in a contract of insurance must be given paramount importance, and the court cannot add, delete, or substitute any words.
• Export Credit Guarantee Corporation of India Limited vs. Garg Sons International, Supreme Court of India: The court stated that exceptions cannot be made on the grounds of equity, and the courts should not interfere with the terms of an insurance agreement.
• Vikram Greentech India Ltd. v. New India Assurance Co. Ltd., Supreme Court of India: The court reiterated that the insured cannot claim anything more than what is covered by the insurance policy, and the terms of the contract have to be construed strictly.
• Oriental Insurance Co. Ltd. v. Sony Cheriyan, Supreme Court of India: The court stated that the insurance contract must be read as a whole, and every attempt should be made to harmonize the terms.
• Polymat India (P) Lid. v. National Insurance Co. Ltd., Supreme Court of India: The court stated that the insurance contract must be read as a whole, and every attempt should be made to harmonize the terms.
• Sumitomo Heavy Industries Ltd. v. ONGC Ltd., Supreme Court of India: The court stated that the insurance contract must be read as a whole, and every attempt should be made to harmonize the terms.
• Rashtriya Ispat Nigam Lid. v. Dewan Chand Ram Saran, Supreme Court of India: The court stated that the insurance contract must be read as a whole, and every attempt should be made to harmonize the terms.
• Alka Shukla v. Life Insurance Corporation of India, Supreme Court of India: The court discussed the distinction between “accidental means” and “accidental result” while deciding insurance claims.

Legal Provisions Considered by the Court:

• Clause 3 of the Memorandum of Understanding (MoU): The court analyzed the scope of cover under this clause, which stated that the insurance was for death resulting solely and directly from an accident caused by external violent and any other visible means.
• Section 182 of the Indian Contract Act: The High Court had invoked this section to state that the employer acted as an agent of the insurance company.

Judgment

How each submission made by the Parties was treated by the Court?

How each authority was viewed by the Court?

The Supreme Court distinguished the case from Lilawanti Devi v. The State of Bihar & Ors.* and found the principle in Delhi Electric Supply Undertaking v. Basanti Devi & Anr.* not relevant to the factual and legal controversy. The court followed the principles laid down in Suraj Mal Ram Niwas Oil Mills (P) Ltd. vs. United India Insurance Co. Ltd.*, Export Credit Guarantee Corporation of India Limited vs. Garg Sons International*, Vikram Greentech India Ltd. v. New India Assurance Co. Ltd.*, Oriental Insurance Co. Ltd. v. Sony Cheriyan*, Polymat India (P) Lid. v. National Insurance Co. Ltd.*, Sumitomo Heavy Industries Ltd. v. ONGC Ltd.*, Rashtriya Ispat Nigam Lid. v. Dewan Chand Ram Saran*, and Alka Shukla v. Life Insurance Corporation of India*.

What weighed in the mind of the Court?

The Supreme Court’s decision was primarily influenced by the strict interpretation of the insurance policy and the delay in making the claim. The Court emphasized that the terms of the insurance policy must be strictly construed, and the death due to a sunstroke/heat stroke did not fall under the ambit of the policy, which required the death to result from an accident caused by external violent and visible means. The Court also noted the inordinate delay in raising the claim, which was made after seven and a half years. The Court emphasized that the claim should have been made immediately as per the terms of the MoU. The conduct of Respondent No. 1 was also considered, as they had initially rejected the claim and later tried to shift liability to the Appellant.

Sentiment Analysis of Reasons Given by the Supreme Court:

Fact:Law Ratio Table:

Logical Reasoning:

The Court considered the alternative interpretation that the death occurred during the policy period, but rejected it based on the strict interpretation of the policy terms. The Court also rejected the High Court’s application of the agency principle from Delhi Electric Supply Undertaking v. Basanti Devi & Anr., stating that it was not relevant to the case.

The Court concluded that the insurance company was not liable to pay the compensation. The Court emphasized that the terms of the insurance policy must be strictly construed, and the death due to sunstroke/heat stroke did not fall under the ambit of the policy. The Court also noted the inordinate delay in raising the claim.

The Court quoted the following from the judgment:

• “The insurance is intended to provide for the payment of compensation in the event of death only resulting solely and directly from accident caused by external violent and any other visible means.”
• “It is trite to say that the terms of the insurance policy are to be strictly construed.”
• “On a plain reading itself, leave aside the question of strict interpretation of the clauses, it is quite apparent that the admissibility of the claim is in the event of death. The second part of the same sentence begins with “only”. Thus, even in the event of a death, it is only in the scenario where the consequent situation arises, i.e., it has to be solely and directly from an accident caused by external violence.”

There were no dissenting opinions. The bench comprised Justices Sanjay Kishan Kaul and Abhay S. Oka, with the judgment authored by Justice Sanjay Kishan Kaul.

The decision has implications for future cases involving insurance claims, as it emphasizes the importance of strict interpretation of insurance policies and the need for timely claims. It also clarifies that not all deaths occurring during the policy period are covered, and the cause of death must fall within the specific terms of the policy.

No new doctrines or legal principles were introduced in this case. The Court applied existing principles of insurance law and contract interpretation.

Key Takeaways

• Insurance policies must be strictly interpreted, and the terms must be adhered to.
• Claims must be made within a reasonable time frame, and delays can lead to rejection of claims.
• Not all deaths occurring during the policy period are covered; the cause of death must fall within the specific terms of the policy.
• The principle of agency may not be applicable in all insurance claim cases.

The decision highlights the importance of understanding the specific terms of an insurance policy and the need for timely action in making claims. It also serves as a reminder that insurance policies are contracts and must be interpreted as such.

Directions

The Supreme Court set aside the judgment of the Division Bench of the Patna High Court. The Court also directed that Respondent No. 1 should not recover the amount already paid to Respondent No. 2.

Development of Law

The ratio decidendi of this case is that the terms of an insurance policy must be strictly construed, and the cause of death must fall within the specific terms of the policy for a claim to be valid. The decision reinforces the existing legal position on the interpretation of insurance contracts and does not introduce any new legal principles.

Conclusion

The Supreme Court’s judgment in National Insurance Company Ltd. vs. The Chief Electoral Officer & Ors. clarifies that insurance policies must be strictly interpreted, and claims must be made within a reasonable time frame. The Court held that a death due to sunstroke/heat stroke does not fall under the ambit of an insurance policy covering deaths resulting from accidents caused by external violent and visible means. The Court also emphasized that delays in making claims can lead to rejection of claims. The judgment sets aside the decision of the Patna High Court’s Division Bench and reinforces the importance of adhering to the specific terms of an insurance policy.