Limitation Period is Key to Insurance Claims
Limitation period means the time within which a person must file his case before a judicial authority for exercising his rights. This period is to be calculated from the date of the cause of action. This term does not have any definition, but it is well settled that “cause of action” is a mixed question of fact and law. It has consistently been held that for insurance disputes, the cause of action starts from the date of rejection of the claim.
Yet, a recent judgement of the Supreme Court is being misinterpreted out of context to claim that the date of rejection of the claim is irrelevant as the limitation period starts from the date of the incident or occurrence of loss in respect of which the claim is lodged. Consequently, consumers are at the receiving end as any complaint filed after two years of the date of the incident is being rejected as time barred without considering the date of rejection of the claim.
The law: The manner of computing the limitation period for insurance claims is given under Article 44 (b) of the Limitation Act 1963, which states that time is to be calculated from“the date of the occurrence causing the loss, or where the claim on the policy is denied either partly or wholly, the date of such denial”.
In Sirpur Paper Mills Ltd. V/s National Insurance Co. Ltd. [ II (1997) CPJ 36 (NC) the full five member bench of the National Commission has interpreted the law on the subject. A fire had occurred in October 1986. The claim was rejected in November 1986. The insured made representations to the insurance company which appointed a surveyor who submitted his report in April 1989. The insurance company slept over the claim and ultimately rejected it in August 1994. Aggrieved by the rejection of the claim, the insured filed a consumer complaint in 1995. The issue before the National Commission was whether the claim was time–barred or not. The commission held that since the claim was under consideration by the insurance company, it would be just and fair to consider that limitation would begin to run from the date of final rejection of the claim. In Oriental Insurance Co. Ltd. Vs Prem Printing Press [I (2009) CPJ 55 (SC), a similar issue came up. After the claim was rejected, the insured sent representations to the insurance company to review the claim. The insurance company agreed to reconsider it, and later re–affirmed the rejection. The question was whether the starting point for computing the limitation period would be the date of first rejection or the final rejection. The Supreme Court observed that by stating that the matter was under fresh consideration, the insurance company had“dangled a carrot of hope”, because of which the insured had not take legal action. Hence, the limitation period cannot be computed from the date of the original rejection of claim, but would have to be calculated from the date when the claim was rejected for the second time after reconsideration. The judgement being mis–interpreted: In Kandimalla Raghavaiah & Co. V/s National Insurance Co. Ltd. & Anr. [ III (2009) CPJ 75 (SC), a fire had occurred in March 1998. Although the insured intimated the insurance company about the fire, the claim was not lodged for years together. The insured asked for the claim form in November 1992 after four–and–a–half years. As the insurance company ignored the request and did not issue the claim form, the insured filed a consumer complaint in the year 1997. The Supreme Court held that the cause of action would be the date when the incident of fire occurred and the limitation period would begin to run from that date and accordingly held that the complaint was time–barred.
Observations: One sentence from the judgement in the case of Kanimall Raghavaiah is being picked up and misquoted to argue that in insurance matters, the limitation period would run from the date of the accident and not the date of rejection of the claim.
What is lost sight of is the fact that in Raghavaiah’s case, the claim itself was not lodged and hence there was no question of repudiation of the claim and it is in this context that the Supreme Court held that the cause of action would run from the date of the incident when the fire occurred. The well settled principles of law ought not to be given a go–by in view of the peculiar facts in Raghavaiah’s case. If a claim is settled, there is no cause of action; whereas if it is rejected, the insured is aggrieved and thus the rejection of the claim gives rise to a cause of action for initiating legal proceedings. Hence limitation has to be construed from the date of rejection of the claim.
Impact: The misinterpretation of Raghavaiah’s case is playing havoc with regard to insurance claims. Unless the law and facts are properly distinguished, consumers will continue to find themselves at the receiving end with genuine complaints being thrown out for being time– barred.
i need help regarding delay in service when the petitioner had filled her case after filling the case of other when they get relief by the hon’ble court then our petitioner had filled the application. in this case court says that after delay of 7 years the party is not entitled to succeed. please help me regarding any division bench judgment.
it should be important to note that limitation on insurance laws under the consumer protection act, is defined under S.24(A) of the same, and that the delay con-donation is defined under S.24(a)(2) of the Consumer Protection Act, itself. However i am in agreement that the Kandimallah judgement is erroneous to the effect that, it does not specifically imply that the facts are of substance only and only to the issues taken therein, the cause of action to run from the date of the event is nothing merely than ridiculous and absurd for the mere reason that in case of a damage i am supposed to approach the consumer forum as well as the insurance company simultaneously even though the Insurance company may in all likelihood honour my claim, once my claim is honoured i have no cause of action to approach the redressal forum it is only on repudiation of my claim shall the cause of action arise. The facts in the Kandimallah judgement differ in totality as the consumer did not even file a claim form until four years from the incident haven taken place. Hence the judgement to that effect holds good and is right in barring the suit by limitation, but using that judgement’s application to cases in which the claim has been filed and the insurance company is in correspondence with the insured, this judgement slits the throat of the insured as then the cause of action isnt the repudiation of the claim but the occurrence of the event.
the limitation act itself provides that the period of limitation shall be three years and the limitation will start running from the date when the claim was repudiated as the cause of action will ari=ose only after repudiation of claim though it is open to the claimant to go beofre the court even before repudiation, if the claim has not been settled within reasonable time say two months from the date of lodging the claim as observed by the National Consumer Commission in few cases that the claim must be settled within two months and the IRDA Regulation also provides for a fixed period of settling the claim. Though the IRDA guidelines is only a guidelines and having no force of law and will not prevail over the Limitation Act or the Consumer Protection Act. The limitation for filigncomplaint under consumer protection Act is only two years in terms of section 24 A and will prevail being a special provision providing the limitation.
There should be a mechanism available with full authority,
to peruse the issues on case to case basis both technically and legally which arise out of differenet intrepretations on the judgements of the Supreme Court
and declare their official views,
which should have a judicial approval as final and hence need not be referred to Supreme Court again. Here this mechanism should in a broad sense look into the welfare of the citizen and not the state and this can be headed by a senior retired supreme court judge of repute. If a time limit could be fixed for arriving at their final views it will do a yeoman service to the public. This body should sit in selected metros of North,East,West,and
Southern India in rotation, atleast onece in three months to
hear the cases and decide.