No Need For Notice Of Cancellation Of Insurance Policy If It Was Cancelled Immediately After Preparation: Kerala High Court
The Kerala High Court recently held that there is no need for an insurance company to send a separate notice of cancellation of policy if the same was cancelled immediately after preparation and if the insured was aware of the factum of cancellation of the policy.In the present case, the insurance policy was cancelled immediately after its preparation due to non-payment of the premium and...
The Kerala High Court recently held that there is no need for an insurance company to send a separate notice of cancellation of policy if the same was cancelled immediately after preparation and if the insured was aware of the factum of cancellation of the policy.
In the present case, the insurance policy was cancelled immediately after its preparation due to non-payment of the premium and the Customer copy of the policy was retained by the insurance company. In such a case, the Court held, it can be said that the factum of cancellation of the policy was very much known to the insured.
The judgment was passed by Justice C. Pratheep Kumar while considering a Motor Accidents Claims Appeal (MACA) preferred by the Insurance Company.
Facts
The proceedings before the Motor Accidents Claims Tribunal, Irinjalakkuda arose when the wife, mother and minor children of the deceased person filed an original petition. The insurer of the offending vehicle filed written statement stating that there was no valid insurance policy on the car at the time of the accident. RW1 was examined on behalf of the insurance company. RW1 deposed that though Exhibit B1 policy was prepared, it was cancelled then and there itself since no premium was paid. Moreover, all the four copies, including the original and customer copies were retained by the insurance company. The insurer also produced Exhibit B1 series of documents, including the proposal form cum cover note, as evidence to substantiate its arguments.
No oral or documentary evidence was brought in by the de facto owner or RC owner of the vehicle to prove that premium was actually paid.
The Tribunal was pleased to award a sum of Rs. 42,34,589/- as compensation upon observing that insurer might have received the original cover note from the RC owner subsequently. Further, the insurance company was directed to pay the amount. The present appeal was preferred by the insurance company against the award of the Tribunal.
Finding
The Court considered two main issues in the matter:
- Whether the offending vehicle had valid insurance policy at the time of the accident?
- Whether failure to give notice of cancellation of policy is fatal, in the facts of the case?
The Court observed that the position of law is clear that the insurer would be liable to third parties if the factum of cancellation of policy is not intimated to the insured through written communication. However, in the present case, there is no consistent case regarding payment of the premium for Ext. B1 policy, by cheque or by cash.
The learned Single Judge also noted that if the premium was paid, there was no reason to cancel the policy. Also, if Ext. B1 was issued, the original would have been with the RC owner instead of the insurance company. It observed:
“…If Ext.B1 was issued to the 2nd respondent, it's original would have been in his possession. The 2nd respondent has not offered any explanation as to how the original of Ext.B1 along with it's all four copies (including customer copy-1, customer copy-2, insurer's copy and copy for office use) happened to be in the possession of the Insurance Company. In the absence of any such explanation, the only presumption that can be arrived at on the basis of the evidence on record is that, Ext.B1 never reached the hands of the 2nd respondent/owner.”
The Court was of the opinion that the Tribunal was not justified in finding that the original cover note might have been received from the RC owner subsequently. It concluded that the policy was retained by the insurer since it was cancelled then and there itself.
The learned Single Judge also found that a separate notice is not necessitated in the present case since the purpose of notice is to intimate the insured about the factum of cancellation. Therefore, absence of notice is not fatal to the case of the insurance company.
The Court further observed:
“Since Ext.B1 was cancelled immediately after its preparation and execution as the owner of the vehicle failed to pay the premium and it was retained by the Insurance Company itself, it is to be held that the factum of it's cancellation was very much known to the owner of the vehicle then and there...
…In other words, separate notice or intimation regarding cancellation of policy is required only when the policy was cancelled after it was executed and delivered to the insured…”
Thus, the Court allowed the appeal and set aside the direction made to the insurance company to pay the compensation award. Instead, the RC owner was directed to pay the compensation amount awarded.
Case No: MACA No. 285 of 2017
Case Title: HDFC Ergo General Insurance Company Ltd. v. Zeenath and Ors.
Citation: 2025 LiveLaw (Ker) 346
Counsels for the Appellant: Sri. George Cherian (Sr.), Smt. Latha Susan Cherian – SC, Smt. K.S. Santhi
Counsels for the Respondents: N. Ajith – R1 to R3, Nireesh Mathew – R5 & R6, N.L. Bitto - R7