Supreme Court: Proximate Cause Necessary for Insurance Coverage under Accidental Death

Supreme Court: Proximate Cause Necessary for Insurance Coverage under Accidental Death

The Supreme Court of India by its two judges bench Justices Sanjay Kishan Kaul and Abhay S. Oka observed that during election duty death due to sun stroke will not be covered under the scope of payment of compensation in the event of "death only resulting solely and directly from accident caused by external violent and any other visible means," as per the insurance policy.

The Apex Court was hearing an appeal filed by the National Insurance Company Ltd.- appellant. The appellant and respondent No.1, the Chief Electoral Officer, Bihar, Patna, entered into a Memorandum of Understanding (hereinafter referred to as 'MoU') on 9th February, 2000 to provide insurance cover to the persons deployed for election related work for Bihar Legislative Assembly Elections in the year 2000. The relevant Clause in question of the MoU is Clause 3 which read:

"Scope of Cover The insurance is intended to provide for the payment of compensation in the event of death only resulting solely and directly from accident caused by external violent and any other visible means."

The husband of Respondent No.2, late Deval Ravidas, Constable, Shivhar District Force, was a member of the Static Armed Force, who died due to a sun stroke/heat stroke while performing election duty for the Bihar Legislative Assembly. In the year 2008 Respondent No.2, wife of the deceased Constable Deval, sought to raise the issue of compensation vide her letter dated 21st November, 2008.

The Assistant Election Officer, Bihar-cum-Under Secretary to the Government, vide letter dated 20th November, 2009 addressed to the Under Secretary to the Lokayukta, Patna, Bihar, noted that the death of the deceased Constable had occurred on account of heat stroke on 26th May, 2000 during election duty and had not occurred on account of any external violent activity/accident. Thus, compensation to Respondent No.2 could not be found admissible for payment.

Respondent No. 2 filed a Writ Petition before the High Court of Judicature at Patna for quashing the aforementioned letter dated 20.11.2009 and sought payment of compensation amount of Rs.10 lakhs as per the insurance policy. The Court opined that the primary responsibility to raise the claim under the policy was with the officials of the State Government and that they did not raise the claim within the duration of the policy and permitted the policy to lapse. Therefore, the liability to pay the amount to the deceased wife was assigned to the Chief Electoral Officer and the District Magistrate, Vaishali. The Chief Electoral Officer, preferred an appeal before the High Court.

Two aspects were flagged before the Apex Court, first, the consequences of delay in claiming the amount from the Appellant insurance company; second, whether at all the insurance policy covered the scenario of the death of the constable.

On the first aspect, the admitted position before the Court was that Respondent No.2 never raised a claim even on the Chief Electoral Officer seeking an entitlement of the claim till the letter dated 21st November, 2008 after seven and a half years. Thus, by any standards this claim was beyond any reasonable time period.

The Court held, "in their own wisdom Respondent No.1 never thought that it was a case for which claim should be lodged with the Appellant insurance company. Thus, whether the claim was admissible under the insurance policy or not, the conduct of Respondent No.1 would not entitle them to fasten the liability on the Appellant and would have to be borne by them if they are of the view that such an amount ought to have been made. It would be negligence of Respondent No.1 in lodging the claim. If it was not admissible then there is no reason to forward the claim to the Appellant. Respondent No.1 has been actually playing ducks and drakes with this issue for reasons best known to them."

Further, the bench elucidated the principles on which a claim under any insurance policy is examined and stated that the terms of the insurance policy are to be strictly construed. The bench observed, "the insurance contracts are in the nature of special class of contracts having distinctive features such as utmost good faith, insurable interest, indemnity subrogation, contribution and proximate cause which are common to all types of insurances. Each class of insurance also has individual features of its own. The law governing insurance contracts is thus to be studied in three parts, namely, (1) general characteristics of insurance contracts, as contracts; (2) special characteristics of insurance contracts, as contracts of insurance, and (3) individual characteristics of each class of insurance."

Additionally, various judgments were relied upon which the court has held that the insurance contract must be read as a whole and every attempt should be made to harmonize the terms thereof, keeping in mind that the rule of contra proferentem does not apply in case of commercial contract, for the reason that a clause in a commercial contract is bilateral and has mutually been agreed upon.

With respect to the specific clause in the MoU, which governs the insurance policy providing for payment of compensation in the event of death (only) resulting "solely and directly" from the accident caused by external violent and any other visible means. The Court was of the view that leaving aside the question of strict interpretation of the clauses, it was quite apparent that the admissibility of the claim is in the event of death. The second part of the same sentence begins with "only." Thus, even in the event of a death, it is only in the scenario where the consequent situation arises, i.e., it must be solely and directly from an accident caused by external violence.

"Here the death is by sun stroke. There was no semblance of any violence being the cause of death. The last aspect which reads as "any other visible means" would be an expression to be read in the context of ejusdem generis with the external violent death and cannot be read in isolation itself," stated the bench.

Lastly, to conclude the bench set aside the impugned judgment of the Division Bench of the Patna High Court while allowing the appeal and were of the view that the Appellant insurance company was not liable.