Delay in informing of vehicle theft not reason for rejection of insurance claim: SC

New Delhi: The Supreme Court ruled on Friday that an insurance company cannot reject a claim on the grounds that there was a delay in reporting the theft of a vehicle.

A bench of Judges Sanjiv Khanna and Bela M Trivedi said: “When the plaintiff filed the FIR immediately after the theft of the vehicle, and when the police after the investigation arrested the accused and also filed an appeal in court concerned, and where the insured’s claim was not found to be unfounded, the insurance company could not have rejected the claim on the sole ground that there was a delay in informing the insurance company of the occurrence of the theft.”

The bench said the defendants were also arrested and charged, but the vehicle could not be found. “Of course, it is true that there was a delay of approximately five months on the part of the complainant in notifying and filing his claim with the insurance company, nevertheless, it is pertinent to note that the insurance company insurance did not disavow the claim on the grounds that it was not genuine,” he noted.

The higher court quashed an order of the National Consumer Dispute Resolution Commission (NCDRC), which was passed on a petition by Oriental Insurance Company Ltd challenging the order to pay sum insured to Jaina Construction Company Ltd in relation with the flight of Tata Aiwa Truck.

The bench said: “In this light, the court is of the view that the NCDRC should not have set aside the orders of the District Forum and the State Commission in holding that the repudiation of the insurance claim by the insurance company was justified. The impugned order being erroneous and contrary to established rule of law, deserves to be set aside, and is set aside accordingly.”

The insurance company denied liability for the claim, saying there was a breach of policy condition number one, which required immediate notice to the insurer of accidental loss or damage. The company said the theft was brought to its attention after a lapse of more than five months.

Rejecting this allegation by the insurance company, the high court said that in this case too, the FIR was filed immediately the day after the theft of the vehicle by the plaintiff occurred.

The district consumer awarded compensation of Rs 10,000 and Rs 5,000 court costs to the plaintiff. This order was challenged by the insurance company before the state commission, which denied its appeal. Later, the insurance company moved the NCDRC, which ruled in his favor. Jaina Construction Company asked the higher court to challenge the NCDRC’s order.

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