Making a Claim, and What to Do When It Is Repudiated
Chapter Twenty-Three
Syllabus topic 2, "General Principles of Law of Insurance."
Pages 114 to 117 of 745
In one line
A claim is made by giving notice, proving the loss and letting it be assessed; if it is refused, the policyholder has four forums and should choose by the size of the claim and the kind of dispute.
In the wording a student can write in an exam: the claim procedure comprises intimation within the period the policy prescribes, submission of the claim form with proof of loss, survey and assessment where the class requires it, and settlement or repudiation with reasons in writing; repudiation may be challenged before the insurer's own grievance machinery, the Insurance Ombudsman, a consumer commission, a civil court, or by writ against a statutory insurer.
Why the procedure is where claims are lost
Because a good claim can be defeated by a bad process. The policyholder who reports a theft three weeks late, who repairs the damage before the surveyor arrives, who settles with the wrongdoer, or who cannot produce a purchase invoice, has given the insurer a defence that has nothing to do with whether the loss was insured.
And because Indian courts have pushed back hard against that. The two cases in this chapter are the two a policyholder cites, and both are recent.
Step one: intimation
The policy fixes the period. Fire policies commonly require immediate notice and written particulars within fifteen days; motor policies require immediate notice; theft claims require both notice to the insurer and a police complaint.
Notice is usually drafted as a condition precedent to liability, so breach defeats that claim although the policy continues.
But an explained delay does not defeat a genuine claim.
Facts. Om Prakash v. Reliance General Insurance, (2017) 9 SCC 724. A truck was stolen and intimation to the insurer was delayed. The insurer repudiated on the policy condition requiring immediate notice.
Held. A genuine claim cannot be rejected mechanically for a delay that is explained. A hyper technical approach in repudiating claims defeats the very object of the contract.
Why it matters here. It is the leading Indian authority against a purely procedural repudiation, and the Authority's own regulations now reflect it.
Step two: the claim form and proof of loss
The insured must establish that a loss occurred, that it was caused by an insured peril, and how much it was. He does not have to disprove the exclusions: the burden of bringing a loss within an exception is on the insurer, which is the allocation in British and Foreign Marine Insurance Co. Ltd. v. Gaunt, [1921] 2 AC 41, worked in the chapter on accidental loss and damage.
The documents required vary by class: the police first information report and the final report in theft; the fire brigade report and stock records in fire; the post mortem report and death certificate in life; the hospital discharge summary and bills in health.
Making a Claim, and What to Do When It Is Repudiated
An insurer cannot demand the impossible.
Facts. Gurmel Singh v. Branch Manager, National Insurance Co. Ltd., 2022 INSC 626. The insurer repudiated a claim because the insured had not produced documents that he could not possibly have supplied.
Held. Insurers must not be too technical. They must deal with claimants in a bona fide and fair manner, and cannot reject a genuine claim on the non production of documents which it is impossible for the claimant to furnish.
Why it matters here. It is the most recent statement of the insurer's duty in handling a claim, and it is the case to cite where the repudiation is about paperwork rather than about cover.
Step three: survey and assessment
In general insurance a loss above the prescribed amount must be assessed by a licensed surveyor. Section 64UM of the Insurance Act, 1938 requires it and licenses the surveyors, and the chapter on the property claim works the section out.
The surveyor's report is not binding on either party, but it is not to be brushed aside. An insurer that departs from its own surveyor's assessment must have reasons, and an insured who disputes it may obtain his own assessment.
In life insurance there is no survey. The insurer verifies the death, the age and the identity, and where the death is early it investigates the health disclosures. In health insurance a third party administrator commonly handles the assessment.
Step four: settlement or repudiation
The Authority's protection of policyholders regulations fix the periods within which an insurer must call for documents, appoint a surveyor, decide and pay, and provide for interest where it is late.
A repudiation must be in writing and must give reasons. In life insurance this is statutory: section 45 of the Insurance Act, 1938 requires a policy called in question within three years to be so called only by notice in writing stating the grounds and the materials on which the decision is based, and it bars any challenge at all after three years.
A repudiation on a ground not stated cannot ordinarily be supported later. An insurer that repudiated for late intimation and then, in court, relies on non disclosure is changing its case, and Indian courts have been unwilling to let it.
What to do when the claim is refused
| Forum | When it suits | Limits |
|---|---|---|
| The insurer's grievance redressal officer | Always, as the first step; it is quick and free | It is the insurer deciding its own case |
| The Insurance Ombudsman | Personal lines complaints within the monetary limit fixed by the Ombudsman Rules; free, quick, no lawyer needed | Personal lines only; an award binds the insurer but not the complainant |
| A consumer commission | Deficiency in service, which a wrongful repudiation is; costs little; summary procedure | Not suited to a case needing oral evidence; the pecuniary limits decide the level |
| A civil court | Large or complex claims, disputed facts, commercial policies | Slow and expensive; court fee on the amount claimed |
| A writ petition | Against a statutory insurer acting arbitrarily | Article 226 does not decide disputed questions of fact |
Making a Claim, and What to Do When It Is Repudiated
The Insurance Ombudsman is the forum most Indian policyholders should use first, because it costs nothing, needs no lawyer and decides within a few months. Its award is binding on the insurer; the complainant remains free to go elsewhere if he is dissatisfied.
A wrongful repudiation is a deficiency in service within the consumer legislation, which is why the consumer commissions decide the great majority of reported Indian insurance disputes.
A worked example
Prakash Nimbalkar's insured lorry is stolen from a highway dhaba on 2 March. He lodges a police complaint the same night, but tells the insurer only on 20 March, having spent the intervening days searching for the vehicle. The insurer repudiates for breach of the condition requiring immediate notice and, in the alternative, because he cannot produce the second set of keys.
On the delay, Om Prakash answers the point. The claim is genuine, the police complaint was immediate, and the delay is explained by the search. A hyper technical repudiation defeats the object of the contract.
On the keys, Gurmel Singh answers it. An insurer cannot reject a genuine claim on the non production of a document the claimant cannot furnish, and a set of keys taken with the vehicle is exactly that.
Where should Prakash go? A commercial vehicle claim may fall outside the Ombudsman's personal lines jurisdiction, so a consumer commission is the natural forum, the pecuniary limit deciding the level. He should plead the two cases, the police complaint and the surveyor's report, and claim interest for the delay.
Change one fact. Suppose Prakash had also had the lorry repaired by a friend for cash and produced no bills. The claim would fail not on procedure but on proof: he must show the quantum, and the burden of proving the loss is his.
What it does NOT mean
It does not mean the insurer must accept every claim. It must decide fairly and promptly and give reasons. It may still refuse a claim outside the cover, and Harchand Rai and the strict construction line remain good law.
It does not mean delay never matters. Om Prakash requires the delay to be explained and the claim genuine. An unexplained delay that has destroyed the insurer's ability to investigate is a different case.
Making a Claim, and What to Do When It Is Repudiated
It does not mean the surveyor decides. The report is evidence, not an award, though an insurer departing from it needs reasons.
And it does not mean all four forums are open in every case. The Ombudsman is confined to personal lines within its monetary limit, and a writ will not decide disputed facts.
Quick revision
Four steps: intimation within the period; the claim form with proof of loss; survey and assessment, section 64UM in general insurance; settlement or a written repudiation with reasons.
Burden: the insured proves the loss and that an insured peril caused it; the insurer proves that an exclusion applies.
The two policyholder cases: Om Prakash v. Reliance General Insurance, (2017) 9 SCC 724, an explained delay does not defeat a genuine claim; Gurmel Singh v. Branch Manager, National Insurance Co. Ltd., 2022 INSC 626, no repudiation on documents the claimant cannot furnish.
Life insurance: section 45 requires written grounds within three years and bars any challenge after three years.
Four forums: the insurer's grievance officer, the Insurance Ombudsman, a consumer commission, a civil court, with a writ against a statutory insurer.
Test yourself
1. What must the insured prove, and what must the insurer prove? The insured must prove that a loss occurred, that an insured peril caused it, and its amount. The insurer must prove that an exclusion applies.
2. A theft is reported to the insurer eighteen days late, with an explanation. Can the insurer repudiate? Not if the claim is genuine. Om Prakash v. Reliance General Insurance, (2017) 9 SCC 724: a hyper technical approach defeats the very object of the contract.
3. The insurer demands documents the claimant cannot possibly produce. What is the answer? Gurmel Singh v. Branch Manager, National Insurance Co. Ltd., 2022 INSC 626: insurers must deal with claimants in a bona fide and fair manner and cannot reject a genuine claim on impossible documents.
4. Who assesses a large general insurance claim, and is the report binding? A surveyor or loss assessor licensed under section 64UM of the Insurance Act, 1938. The report is evidence, not binding, but an insurer departing from it must give reasons.
5. Name the four forums open to a policyholder whose claim is refused, and say which is cheapest. The insurer's grievance officer, the Insurance Ombudsman, a consumer commission and a civil court, with a writ against a statutory insurer. The Ombudsman is free, needs no lawyer, and binds the insurer but not the complainant.
6. What must a life insurer do to repudiate within three years? Give notice in writing stating the grounds and the materials on which the decision is based, under section 45 of the Insurance Act, 1938. After three years the policy cannot be called in question at all.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.