THE NATIONAL LAW INSTITUTE

UNIVERSITY, BHOPAL

Project
On
21st century insurance litigation in the supreme court of
india: a critical analysis
submitted by:
Aniket Nighojkar
Roll Number: 2020 BALLB 12
Enrolment Number: A 2185
1st Semester
B. A. LL. B. (Hons.)

submitted to
Prof. (Dr.) Ghayur Alam Date of submission

1
Declaration
I, Aniket Nighojkar S/o Pradeep Nighojkar Roll Number 2020 BALLB 12 Enrolment
Number A-2185 do hereby declare that the Project titled “ 21st Century Insurance Litigation
in the Supreme court of India: A critical Analysis “is
an outcome of my own independent research endeavour and has been carried out under the
guidance of Prof. Ghayur Alam name of course teacher. Literature relied on by me for the
purpose of this Project has been fully and completely acknowledged in the footnotes and
bibliography. The Project is not plagiarized and all reasonable steps have been taken to avoid
plagiarism. Similarity Index as per the Turnitin Report is____%. In case, my project is found
to be plagiarized, the course teacher shall have the full liberty to ask me to revise the Project.
If I fail to comply with the instructions of the teacher, my project may be referred to the
Committee Against Use of Unfair Means and I will comply with the decision of the said
Committee.
 acknowledgement

I  would like to express my special thanks of gratitude to my Prof. Ghyur Alam who gave me
the golden opportunity to do this wonderful project on the topic “21st Century Insurance
Litigation in the Supreme court of India: A critical Analysis” which also helped me in doing
a lot of Research and I came to know about so many new things. I am really thankful to them.

objective

I
This project aims to analyse the trends of insurance litigation in 21 st century supreme court of India, in
this I have tried to analyse the extent of insurance litigation in India and have also discussed the major
landmark cases in the Insurance law.

scope

The scope of the project has been limited to the Supreme court of India, the topic Insurance litigation
India has been narrowed down to the insurance litigation in 21 st century supreme court and through
this research I have tried to go in depth about the various nuances of Insurance Litigation, and the
thoughts and opinions of the Supreme court about it.

Table of cases

1. MUKUND DEWANGAN V. ORIENTAL INSURANCE COMPANY LIMITED

AND OTHERS 2016 ACJ 1008 pg 7
2. Ramla v. National Insurance Company Limited 2019) 2 SCC 192 pg 8
3. Nagappa v. Gurudayal Singh 2003) 2 SCC 274 pg 8
4. Magma General Insurance v. Nanu Ram 2018 SCC OnLine SC 1546 pg 8

II
 5. Ibrahim v. Raju (2011) 10 SCC 634 (8) pg 8
6. Oriental Insurance Company v. Mahendra Construction AIR 2019 SC 2182 pg. 9

Table of Statutes

1. Motor vehicle act 1989

table of contents

Introduction…………………………………………………………………………………... 2
Literature Review……………………………………………………………………………....4
Statement of Problem………………………………………………………………….........…6

III
Hypothesis...................................................................................................................................6
Research Questions…………………….......……………………………………………….…6
Objectives of study…….……………………………………………………………………….7
A general overview of the state of insurance litigation...............………………………………7
Analysis of recent judgements.………………………………………………………………….8
Conclusion & suggestions………………………………………………………………………10
Bibliography…………………………………………………………………………………….10

IV
 ST
21 CENTURY
INSURANCE LITIGATION
IN THE SUPREME COURT
OF INDIA: A CRITICAL
ANALYSIS

INTRODUCTION
When we talk about Insurance litigation it is very essential for us to understand the in depth meaning
of the word Insurance, that is:

“coverage by contract whereby one party undertakes to indemnify or guarantee another

against loss by a specified contingency or peril”1
When we try to analyse this definition, we get that insurance is a way by which a person or
an organization tries to bear the loss or liability of another person.
Now this sounds like a simple enough process, so where does the problem arise? Insurance
Law is basically a contractual law in which the insured is made to sign a policy which as all
the conditions under which the insured is covered by the insurer. The problem arises when
there is an ambiguity in the conditions, because of which it is debateable as to whether the
insured’s liability/loss is covered under the specified conditions mentioned in the policy
agreement, this is where the majority of Insurance litigation in 21st century supreme court
deals with.
The trend that we are seeing now a days is that the insurance company try every way possible
to reduce the liability that they are obligated to bear, they are right in their ways as every
reasonable person would try to minimize his loss as much as he can. In order to do so the
Insurance company uses the loopholes in the policy and the existing relevant acts such as the
Motor Vehicle act, the Indian penal code and many others to their advantage.
The plaintiff, that is the insured uses the legal method of courts to try to claim his
compensation for which he is entitled to, for this he files a suit in the court or the consumer
forum whichever has the jurisdiction over his case, in his claim he tries to describe the
incident which led to the loss and also the amount which he thinks he is entitled to, in
response the insurance company replies via a written statement, denying / accepting the
claims made under the plaint. After this preliminary procedure both the sides present their
evidence and witnesses which are crossed by either sides and the court/tribunal finally gives
the decision as to whether the insured is entitled to the claim, if so, what is the amount of
compensation to be awarded.
This project will try to analyse the way the supreme court interprets the insurance laws, by
analysing various cases. The project will also cover the issue of disclosure of material facts to
transfer the risk and liability to the insurer. The works of various authors and judges has been
re-read and analysed while making this project. I have already introduced the basic
definition of Insurance and how the process of Insurance litigation works at its very roots, the
project would further explain the key challenges in insurance litigation and would try to
analyse and prove that the disclosure of material facts forms the basis on an insurance
contract which is a contract Uberrimae Fidei, i.e. a contract made in utmost good faith. The
judgements of the hon’ble supreme court have been analysed to show the evolution of the
insurance laws and how disclosure of material facts have become the basis of forming an
insurance contract in the 21st century.
The project will proceed by defining insurance litigation to its very core meaning and then
will move on to how the supreme court has interpreted it and then it will go on to discuss the
1
Definition by Merriam-webster( https://www.merriam-webster.com/dictionary/insurance )
meaning of key terms such as material facts, disclosure, liability, transfer of risk, etc. After
this the project will analyse the major judgments of supreme court in order to prove that non-
disclosure/manipulation of material facts will absolve the insurer from any liability. Then
after this the project will cover the recent updates introduced by the supreme court in
insurance law by briefly citing those judgements. This will be followed by a Conclusion
which would be drawn from an in-depth analysis of the discussion and analysis made in the
previous sections and would try to summarize the entire project. This will be followed by
suggestions made by me to simplify the process of insurance litigation and to solve various
nuances that occur in the process of insurance litigation.

LITERATURE REVIEW

Insurance Disputes Law Review2 By Joanna Page; chapter 10: India

This is an international review of insurance laws in various countries, the India chapter was
written by Neeraj Tuli and Rajat Taimni3. They analysed the existing state of insurance
litigation in India and gave a brief analysis of various cases of the supreme court which made
significant changes in the way the insurance laws are perceived. They first began with an
2
a Joanna Page| The Insurance Disputes Law Review| (http://www.tuli.biz/articles/2019/India.pdf| chapter
10: ‘India” |2018) Joanna page reviewed the insurance laws in various countries including India; Joanna Page is
a partner in Allen & Ovary’s litigation and investigations group, and developed Allen & Ovary’s insurance
disputes group, which is rated Tier 1 by both Chambers and The Legal 500 for policyholder claims
3
Neeraj Tuli is a senior partner and Rajat Taimni is a partner and head of dispute resolution at Tuli & Co
overview of insurance litigation in India and then went on to analyse the existing legal
framework with respect to insurance in India, then the authors go on to analyse the recent
cases and try to give us a brief description about the way the supreme court thinks about the
recent insurance cases.
The author has analysed recent insurance cases and have concluded that the majority of cases
in insurance litigation arises when the insured is of the opinion that he is covered under the
policy conditions, but this is rejected partly or fully by the insurer. Moreover, to add to the
author I would say that this is where the insurance litigation in India begins, this point of
ambiguity creates a need for litigation with the policy conditions as an enigma to be
unravelled.
The author also mentions that the insured can only approach the commercial court or
consumer court if there is no arbitration clause in the policy. In the courts the remedies
available to the insured are either a claim for damages or a specific performance of the
contract. The courts also award and interest on the amount which generally varies between 9-
12 % from the date the cause of action arose, the final quantum is at the court’s discretion.
So, to sum this up we can say that, the insured is completely bound by the policy conditions
and he can only approach the courts in case of an absence of arbitration clause. Also, What I
could get from the author is that, insurance can be treated under the consumer law and
therefore the legal machinery established under the consumer protection act is also available
to the insured in case of disputes. He can approach the courts too if they have the appropriate
jurisdiction in the matter.

General Principles of Insurance Law by A. K. Bhattacharjee4

In his research paper A.K Bhattacharjee has tried to show some light on the early history and
evolution of insurance laws in India. He tells us that the very first legislation on insurance
was enacted through the Insurance Act 1938, followed by the Life Insurance act of 1956 and
then Marine Insurance act of 1963, these three laws formed the very basis of insurance
legislation in India.
In chapter one, the author has talked about the principals required for the formation of a
contract of insurance and has differentiated various kinds of insurance. The author has also
provided an exhaustive analysis of what constitutes as an insurable interest, i.e., “Insurable
interest is defined as the reasonable concern of a person to obtain insurance for any individual
or property against unforeseen events such as death, losses, etc.”

What I could also conclude from the author is that an insurance contract is a contract
Uberrimae Fidei5 .This means that the Insurance contract must be signed in utmost good faith
4
Saxena, I. C. Journal of the Indian Law Institute, vol. 11, no. 1, 1969, pp. 112–117. JSTOR,
www.jstor.org/stable/43950014. Accessed 16 Dec. 2020.
5
The doctrine Uberrimae Fidei is originated from English law to the formation of insurance contract. Principle
of Uberrimae fidei (a Latin phrase), or in simple English words, the Principle of Utmost Good Faith, is a very
and the insured must disclose his complete true information to the insurer. In case of falsified,
concealed or wrong information the liability of the insurer gets void.6

STATEMENT OF PROBLEM

The Policy conditions forms the basis of the arguments in Insurance litigation, it is the
ambiguous interpretation of such policy condition which makes the insured believe that he is
covered under a certain condition even when he is not and such ambiguity also allows the
insurer to exploit loopholes to its own benefits and minimize the due claim.

HYPOTHESIS

The disclosure of material facts forms the very basis of an insurance contract which is a
contract Uberrimae Fidei7, without the non-disclosure of material facts the insurer can never
be held liable for the risk he bore.

RESEARCH QUESTIONS

basic and first primary principle of insurance;

6
The principles underlying this rule were stated by Lord Mansfield in the leading and often quoted case
of Carter v Boehm (1766) 97 ER 1162, 1164,

7
A contract made in Utmost good faith, which means that the insured is required to reveal all the material facts
honestly and in good faith so that the insurer can asses the risk and then provide the insurance accordingly
  What are material facts?
 What is it meant by disclosure?
 What is the interpretation of the term liability as under the insurance law?
 What is bearing of risk?
 What is the transfer of risk?
 What does the court say about disclosure of material facts?
 What happens if the material facts are manipulated?
 How can the insurer evade/reduce his liability?
 What is insurance litigation?
 What type of insurance cases does the supreme court deals with?
 What are the views of supreme court on insurance law
 How has insurance litigation in 21st century different from 20th century
 Why is Insurance litigation necessary?

OBJECTIVES OF STUDY

 To prove that insurer can never be held liable if there is a non-disclosure/manipulation of

material facts.
 To analyse the decisions of supreme court on the matter of Insurance Litigation
 To answer the Key Research question to prove the hypothesis
 To understand the process of insurance litigation

A general overview of the state of Insurance law in india

Insurance litigation arises only when there is error in interpreting policy conditions and related
statutory sections. In a number of cases hon’ble supreme court and national commission emphasise
the importance of law and up to what extent nit should be applicable in settlement of claims. The
officers of insurance company are bound to adhere to the policy conditions strictly as mentioned in
policy whereas the supreme court and national commission in their time and again citations interpret
the wordings in its true sense and only after pronouncement of judgement the insurance companies
deal with the matter as per guidelines of the Supreme court and national commission. Eg: In case non
registration of vehicle the insurance company generally deny the claims though they insured the
vehicle only on the bases of engine no. and chassis no. In one of its citations the national commission
held that by non-registration of vehicle the penalties imposed by MV act are up to certain limit
whereas the claim of insured in case of a non-registered vehicle (when the vehicle is stolen) is rejected
for more than the amount prescribed in MV act.
Similarly, in case of driving license MV act categorized light motor vehicles and commercial vehicles
but the insurance company repudiated the claims where the vehicle is under the category of Light
motor vehicle having weight below 7500 and is registered under the heading of commercial vehicle
where the driver was holding license for LMV non transport (Devangan v UOI) 8
Similarly, in case of theft of vehicle the policy conditions say that the intimation to the insurance
company should be immediate whereas the supreme court held that where the insured reported matter
to the police within 2-3 days of the theft and where the investigator of the insurance company found
no foul play, the delay in intimation to the insurance company will not be a ground for repudiation. In
Mediclaim’s also pre-existing conditions imposed by insurance company are waived by supreme
court where the deceased is having no proximity with the pre-existing conditions.
In 21st century there are a lot of changes made in consumer protection act and the extent of consumer
protection act has been widened, particularly in cases of jurisdictional limitations.
Further the limitation of amount is also enhanced in State commission and National Commissioning
21 century the e marketplace has been on a boom, all the alternate types of litigation and insurance are
entertained under the ambit of consumer protection act 1920.Limit was imposed in consumer
protection act for filing reply by insurance companies and provides for the directions issued for
speedy disposal of cases.

ANALYSIS OF RECENT JUDGEMENTS

Case Law Analysis: Ramla v. National

Insurance Company Limited9
The Supreme Court , consisting of Justice N.V. Ramana and Justice M.M. Shantanagoudar,
held that there was no restriction on the award of compensation over and above the amount
claimed under Section 168 of the Motor Vehicles Act, 1988.

Facts of the case

In the present case, the applicants before the Hon'ble Supreme Court sought further
improvement in compensation under Rs. 21,53,000/-awarded by the High Court of Kerala at
Ernakulam.

The plaintiffs were the dependents, i.e., the wife, two children, and the elderly father of the
deceased who died in an accident in 2008 due to serious injuries. Initially, the plaintiffs filed
a claim petition before the Motor Accidents Claim Tribunal seeking total compensation for
Rs. 25000000/- (Rupees Twenty-five Lakhs). After hearing the arguments, the Tribunal
granted compensation for Rs 11,83,000/-which was enhanced by an additional award of Rs
9,70,000/-by the High Court of Kerala. The plaintiffs, having been aggrieved by the decision

8
MUKUND DEWANGAN V. ORIENTAL INSURANCE COMPANY LIMITED AND OTHERS 2016 ACJ
1008

9
(2019) 2 SCC 192
of the High Court of Kerala, preferred an appeal before the Hon'ble Supreme Court to further
increase the amount of compensation.

Decision of the Hon'ble Supreme Court

The Supreme Court held that the High Court did not have the right to deduct 2/3 of the total
income of the deceased in respect of his personal expenses and was of the opinion that a
deduction of 40% would be appropriate for the quantification of the compensation. In the
opinion of the Supreme Court, the applicants were entitled to a total compensation of Rs
28.000.000/-which was higher than the amount claimed by the claimant(s) of the deceased.
The Hon'ble Supreme Court relied on the judgments of Nagappa v. Gurudayal Singh10,
Magma General Insurance v. Nanu Ram11 and Ibrahim v. Raju12; the Court noted, "There is
no restriction that the Court cannot award compensation exceeding the claimed amount, since
the function of the Tribunal or Court under Section 168 of the Motor Vehicles Act, 1988 is to
award 'just compensation'"

The Court noted that the Motor Vehicles Act is a beneficial and welfare legislation. A just
compensation' is one in which the compensation granted is reasonable on the basis of
evidence on record. It cannot be said that it has become time-barred. The Court also noted
that there was no need for a new cause of action to claim an increased amount. It is the duty
of the courts to grant just compensation

Oriental Insurance Company v. Mahendra

Construction13

By its judgement of 1 April 2019, the Supreme Court relieved insurance companies of the burden of not
providing sufficient disclosure of the material facts by the insured. The Court held that it was not the
obligation of the insurer to consult previous insurers on the nature and settlement of the previous claims, if
any.

The Apex Court heard an appeal by the Oriental Insurance Company ('Insurer') against a decision of the
National Consumer Dispute Redressal Commission ('NCDRC').

In 2004, the insured purchased a hydraulic excavator machine, which was insured with New India
Assurance Company Limited ('previous insurer') from 15 November 2004 to 14 November 2005. On 12
April 2005, the excavator caught fire, for which a claim was lodged and settled by the previous insurer.
The excavator was under repair until 10 October 2006 and was insured with the insurer from 11 October
2006 to 10 October 2007. The excavator caught fire again on 15 October 2006 and a claim was lodged
with the insurer. On 25 November 2008, the insurer repudiated the claim on the ground that it had not
disclosed all the material facts which the insured had to disclose to the insurer in order to assess the risk
profile of the good insured. More specifically, the position of the insurer was that the form of the proposal
10
(2003) 2 SCC 274
11
2018 SCC OnLine SC 1546
12
(2011) 10 SCC 634
13
AIR 2019 SC 2182
contained a specific question concerning the details of the claims lodged in the preceding three years. The
same had not been answered, instead the insured had enclosed the insurance policy that he had with the
previous insurer, with the form of the proposal.

conclusion and suggestions

The insurance law is based on the principal of utmost good faith and Indian insurance laws have mostly
developed from the English laws.
Although some finer points of insurance law are missing, this case is central to insurance jurisprudence in
India. The Court's heavy dependence on English cases and treaties led it to establish precisely the law on
pressing issues under insurance law. In line with the settled law in England, the law on good faith and
materiality was further refined. As most insurance disputes first find their way to consumer forums, which
tend to lean towards protecting the insured as a priority, this case clarified that safeguard

The Court, however, missed the opportunity to apply the warranty law by remaining silent on the argument
that there was an infringement of the contractual clause and by illustrating the consequences that it would
have. Then again, it is plausible that the Court deliberately avoided doing so, assessing the jurisprudence of
Indian insurance as still too nascent to allow the punishment of automatic discharge of liability in favour of
an insurer.

Bibliography

1. Indian corp law https://indiacorplaw.in/2020/03/supreme-courts-enunciation-of-insurance-law-in-

india.html
2. Lexology https://www.lexology.com/library/detail.aspx?g=188d7059-fa83-412d-9cb4-
75f6d0104f50
3. Mondaq https://www.mondaq.com/india/insurance-laws-and-products/818804/oriental-insurance-
company-v-mahendra-construction
4. www.Casemine.com
5. https://indiankanoon.org/