New Delhi: In a setback to insurance companies, the Supreme Court on Friday upheld a Jammu & Kashmir High Court order asking them to pay 95% of insured amount for policies above Rs 25 lakh and 50% for those below Rs 25 lakh as interim relief to the flood-affected shopkeepers, house and vehicle owners in the state.
The firms claimed that they will have to shell out Rs 9,000 crore against Rs 5,000 crore sum insured.
A bench headed by Chief Justice HL Dattu rejected the appeals filed by four PSU firms - National Insurance Company, New India Assurance Company, United India Insurance Company and Oriental Insurance Company - and few private insurance companies, including the ICICI Lambard General Insurance Company and Bajaj Allianz. “We are not going to interfere (with the HC order), keeping in view the tragedy they have suffered. Let insurance companies pay... sometimes, we have to ignore rules and regulations... in the interests of those people,” the CJI said.
The firms told the bench that the HC had failed to appreciate that, in many cases, they had received preliminary survey reports wherein the loss had been assessed much below the sum insured, thus paying them higher amounts would lead to “unjust enrichment and making profit out of loss in large number of claims and the same will result in defeating the basic principle of indemnity”.
“...a contract of insurance is a contract of indemnity and that the insurance company is liable to indemnify the insured against the actual loss suffered subject to the extent of liability as mentioned in the insurance policy,” the insurers stated.
Attorney general Mukul Rohtagi told the court that, in the absence of any loss assessment, the HC cannot direct any such payment and, if the amount paid is higher than the loss assessed, it would be later difficult to recover the excess amount paid and lead to multiplicity of litigation. “It cannot be without assessments. These are public funds,” he added.
They said rewriting insurance contracts isn’t allowed as per law. “The insurance companies are custodians of policyholders' fund and, keeping in view the accepted principle that the insurance represents a strict indemnity, unscrupulous elements cannot and must not be allowed to make a profit out of these policies,” the appeals stated.
The firms claimed that they will have to shell out Rs 9,000 crore against Rs 5,000 crore sum insured.
A bench headed by Chief Justice HL Dattu rejected the appeals filed by four PSU firms - National Insurance Company, New India Assurance Company, United India Insurance Company and Oriental Insurance Company - and few private insurance companies, including the ICICI Lambard General Insurance Company and Bajaj Allianz. “We are not going to interfere (with the HC order), keeping in view the tragedy they have suffered. Let insurance companies pay... sometimes, we have to ignore rules and regulations... in the interests of those people,” the CJI said.
The firms told the bench that the HC had failed to appreciate that, in many cases, they had received preliminary survey reports wherein the loss had been assessed much below the sum insured, thus paying them higher amounts would lead to “unjust enrichment and making profit out of loss in large number of claims and the same will result in defeating the basic principle of indemnity”.
“...a contract of insurance is a contract of indemnity and that the insurance company is liable to indemnify the insured against the actual loss suffered subject to the extent of liability as mentioned in the insurance policy,” the insurers stated.
Attorney general Mukul Rohtagi told the court that, in the absence of any loss assessment, the HC cannot direct any such payment and, if the amount paid is higher than the loss assessed, it would be later difficult to recover the excess amount paid and lead to multiplicity of litigation. “It cannot be without assessments. These are public funds,” he added.
They said rewriting insurance contracts isn’t allowed as per law. “The insurance companies are custodians of policyholders' fund and, keeping in view the accepted principle that the insurance represents a strict indemnity, unscrupulous elements cannot and must not be allowed to make a profit out of these policies,” the appeals stated.
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