Liability Of Insurer Commences When Premium Paid & Cover Note Issued, Irrespective Of Time Mentioned In Insurance Policy: Orissa High Court

The Orissa High Court has clarified that the liability of an insurer commences from the moment the insurance premium is paid by the insured and cover note is issued to him. Therefore, an insurer cannot escape its liability merely because the insurance policy had mentioned a separate date for commencement of the policy.While fastening liability of the insurer to compensate the death of an employee which occurred in course of employment, a Single Judge Bench of Justice Bibhu Prasad Routray said,“…in the present facts of the case that, the insurance coverage commenced from 2 pm on 25th January, 2000 as mentioned in the cover note. When the accident took place at 4pm, i.e. 2 hours after the cover note was issued and premium received, undoubtedly the liability of the insurer cannot be absolved.”Brief FactsThe instant appeal was filed by the claimants impugning the judgment of Commissioner for Employee’s Compensation, Berhampur, wherein compensation to the tune of Rs.1,22,310/- was granted on account of death of deceased Purushottam Sethi arising in course of his employment as a coolie in a truck.The Commissioner had directed the owner to pay the compensation amount by exempting the insurer from the liability. The appellants had challenged the same. Contentions of PartiesThe appellants relied on the decision of the Apex Court in Oriental Insurance Co. Ltd. v. Dharam Chand @ Others, to substantiate their contention that the effect of the policy should be deemed to have commenced from the time of issuance of the cover note.However, the counsel for the insurance company placed reliance on a decision of the Madras High Court dated 3rd March, 2022 to contend that the policy coverage would operate only from the date and time mentioned in the policy and not prior to that.Court’s ObservationsThe Court took note of the ratio laid down in Dharam Chand (supra), wherein it was held that the insurance coverage must be deemed to have commenced from that time when the premium amount was received. Further, it also said, in terms of Section 64-VB of the Insurance Act, the risk on the part of the insurer commences on receipt of payment of premium from the insured.In the instant case, the Court observed, the insurance policy was issued mentioning the effective date from 00:00 hours on 27th January, 2000 to 26th January, 2001. But the cover note was issued on 25th January, 2000 at 2 PM, in which it was clearly mentioned that the premium amount in respect of the vehicle in question have been paid and received. Therefore, in terms of Section 64-VB of the Insurance Act and as per the ration of Dharam Chand (supra), it was held that in the instant case, the insurance coverage commenced from 2 PM on 25th January, 2000 as mentioned in the cover note. Thus, when the accident took place at 4 PM, i.e. 2 hours after the cover note was issued and premium received, undoubtedly the insurer cannot escape the liability.Accordingly, the insurance company was directed to pay the compensation amount of Rs.1,22,310/- on behalf of the owner as directed by the Commissioner along with interest @ 12% per annum from the date of accident, and was ordered to deposit the entire amount within a period of two months.Case Title: Smt. Renuka Sethi & Ors. v. Babu Sahu & Anr.Case No.: FAO No. 480 of 2012Judgment Dated: 1st February 2023Coram: B.P. Routray, J.Counsel for the Appellants: Mr. Kalpataru Panigrahi, AdvocateCounsel for the Respondents: Mr. Jayasankar Mishra, AdvocateCitation: 2023 LiveLaw (Ori) 25Click Here To Read/Download Judgment

Liability Of Insurer Commences When Premium Paid & Cover Note Issued, Irrespective Of Time Mentioned In Insurance Policy: Orissa High Court

Jyoti Prakash Dutta

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