Insurers must settle claim for stolen vehicles

They cannot delay the payment under the pretext that the outcome of the police investigation is not known

Insurance companies prefer to avoid settling claims. If one cannot be rejected outright, the next best alternative is to delay it under various pretexts. This usually happens in the case of claims for stolen motor vehicle, where the insurance company avoids payment of the claim on the ground that it is awaiting the outcome of a police investigation or a criminal case regarding the theft.

Rajendra Kumar Gupta had purchased a truck on credit from Shriram Transport Finance Company. The truck was insured with ICICI Lombard General Insurance, since June 7, 2007, when it was purchased, till it was stolen on February 12, 2009. A police complaint was lodged and an insurance claim preferred.

The police could not trace the truck. Yet, the insurance company refused to pay on the ground that a criminal case was pending and the outcome was awaited.

Gupta filed a consumer complaint before the Lakhimpur Kheri District Forum against the insurer as well as against the financier. ICICI Lombard contested the complaint but the financier did not. Gupta alleged deficiency in the service of the insurance company by failing to settle his claim within 90 days. Consequently, he could not discharge the loan and had to continue to pay interest to the finance company.

The Forum elaborately considered the evidence on record. It observed the only mandatory requirement for the insurance company to settle the claim was the evidence that theft had taken place. Though the theft of the vehicle and its coverage under the policy were not in dispute, the insurance company had not even bothered to appoint a surveyor. The only excuse put forth was that the claim had been kept pending on the off chance that the vehicle might be recovered. Holding this delay a deficiency in service, the Forum directed the insurer to settle the claim.

ICICI Lombard challenged this order in an appeal before the Uttar Pradesh State Commission. As the appeal was not filed within the limitation period of 30 days and no satisfactory reason was given for the delay in filing the appeal, the State Commission dismissed.

The insurer filed a revision petition before the National Commission, claiming the delay of three months ought to have been condoned and the appeal decided on merits. Keeping in mind the observations of the Supreme Court in the case of Anshul Agarwal v/s New Okhla Industrial Development Authority, the National Commission held that if belated appeals are entertained, it would defeat the objective of the Consumer Protection Act to provide expeditious adjudication of consumer disputes. Accordingly, it held the dismissal of the appeal as being time-barred was justified.

Nevertheless, the National Commission also examined the merits of the dispute. It observed that the insurance company's contention that the truck might be traced and recovered in the future was merely a theoretical possibility. Simply because the police investigation showed the vehicle had been sold and some money had been recovered from those involved in the theft, for which a criminal case was pending, would not absolve the insurance company of its liability to settle the claim within 90 days. The National Commission concurred with the reasoning of the District Forum, holding the insurance company liable to settle the claim regardless of the pendency of the criminal proceedings. It, therefore, dismissed the insurance company's revision petition.

Consumers whose claims are being wrongly delayed by the insurance company for reasons not according to the terms governing the policy can now insist these be settled without delay.

The write is a consumer activist