2024 (1) TMI 667 - SC - Indian Laws

Life insurance policy effective date is issuance date, not proposal date - suicide within 12-month exclusion period bars claim

RELIANCE LIFE INSURANCE COMPANY LTD. & ANR. Versus JAYA WADHWANI And THE BRANCH MANAGER, RELIANCE LIFE INSURANCE CO. LTD. Versus USHA SONI

The SC held that the effective date of a life insurance policy is the date of policy issuance, not the proposal date or receipt date. In this case, the ... Liability to pay the amount of the sum assured on the death of the assured - date from which the policy becomes effective - whether it would be the date on which the policy is issued or the date of the commencement mentioned in the policy or it would be the date of the issuance of the deposit receipt or cover note? - HELD THAT:- In the present case, period of 12 months from 16.07.2012 will complete on 15.07.2013. It would be the last day of 12 months as from the next day, i.e., 16.07.2013 the next month will start. Unfortunately, the incidence of suicide is on 15.07.2013, the last day of 12 months. The date of proposal cannot be treated to be the date of policy until and unless on the date of proposal, initial deposit as also the issuance of policy happens on the same date where, for example, the premium is paid in cash then, immediately, the policy could be issued. Merely, tendering a cheque may not be enough as till such time the cheque is encashed, the contract would not become effective. The drawer of the cheque may, at any time, after issuing, stop its payment or there may not be enough funds in the account of which the cheque is issued and there could be many other reasons for which the cheque could be returned without being encashed. Relying upon the above judgment in the case of Dharam Vir Anand [1998 (10) TMI 534 - SUPREME COURT], this Court again in the case of Life Insurance Corpn. of India vs. Mani Ram [2005 (8) TMI 747 - SUPREME COURT], reiterated the same view and held that the date of issue of policy would be the relevant date even if there was backdating as has been done in the case of Dharam Vir Anand - In the present appeals, there are no issue of back dating but the date of issuance of the policy would be the relevant date for all the purposes and not the date of proposal or the date of issuance of the receipt. In view of the above, the stand taken by the appellant is approved. The impugned orders are thus liable to be set aside. The orders passed by the District Forum, the State Commission, and the National Commission are set aside and the claims of the respondent are rejected - Appeal allowed. Issues:The judgment deals with the question of the effective date of a policy and its implications on the liability of the insurer in cases of suicide by the life assured within a certain period.Effective Date of Policy:The appeals raised the issue of determining the date from which the policy becomes effective, whether it is the date of issuance, the date of commencement mentioned in the policy, or the date of the deposit receipt. The lower forums considered the date of issuance of the initial deposit receipt as the commencement date, leading to the liability of the appellant to pay the sum assured upon the death of the assured.Case of Usha Soni:In the case of Usha Soni, the policy was issued on 28.09.2012, with the next premium due on 28.09.2013. The policy lapsed due to non-payment, but it was reinstated on 25.02.2014. The life assured committed suicide on 03.06.2014, within 12 months of the reinstatement. The lower forums erred in not considering the reinstatement date for calculating the 12-month period from which suicide occurred.Case of Jaya Wadhwani:For Jaya Wadhwani, the policy was issued on 16.07.2012, not on the date of the initial premium receipt. The suicide occurred on 15.07.2013, within 12 months of the policy issuance. The date of proposal cannot be equated with the policy issuance date unless both events occur simultaneously, as mere cheque submission does not ensure policy effectiveness.Legal Precedents:The judgment referred to previous cases emphasizing strict adherence to policy terms and conditions. It highlighted that the date of policy issuance is crucial, as seen in the cases of Life Insurance Corporation of India vs. Dharam Vir Anand and Life Insurance Corpn. of India vs. Mani Ram. Backdating was not an issue in the present case, making the date of policy issuance the relevant date for all purposes.Conclusion:The Supreme Court set aside the lower forum's orders, rejecting the claims of the respondents. It affirmed that the date of policy issuance is paramount, not the date of proposal or receipt issuance, in determining the policy's effective date and liability in cases of suicide within a specified period. The appeals were allowed, with no costs imposed.