Quite often the complex settlement tactics of an insurance company lead the insured persons to travel great lengths to receive the money they are entitled to under an insurance policy. Insurance Companies often adopt strategies to wiggle out from their liability to pay the insured amount to the policy holder. This, in turn, forces the policy holder to take recourse to legal remedies to ensure that they get what they are legally entitled to. A significant amount of time, energy and resources are often spent in legal proceedings. The same cause financial loss as well as mental agony to the insured.
What is an Insurance Contract?
An Insurance Contract is a species of commercial transaction and is to be construed like any other contract on its own terms and by itself. Four essentials of an insurance contract are:
- Definition of risk
- Duration of risk
- The premium
- Amount of insurance
Liability of Insurance Company
If there is a valid insurance policy in force and the insured has been regular in paying the premium and, further, if the event which occurs falls within the scope of the insurance policy, the insurance company is bound to fulfil its obligation to pay the amount due under the policy to the insured person.
It is often seen that many a times, the insurance company for one reason or the other attempts to repudiate the claim made by the insured person. In some cases, such repudiation may be valid, and the insurance company may be well within its right to refuse to pay the insured amount to the insured. For example, during intentional lapse on part of the insured.
However, it is also noteworthy that there are cases where the insured person files their claim before the insurance company in a timely manner, yet their claim is repudiated for completely bogus reasons. This causes immense mental agony and harassment to the insured in as much as after having suffered the loss, the insurance company fails to fulfil its obligation to reimburse the insured against such losses.
Legal Position in India
The failure of the insurance companies to settle the rightful claims of the insured person gives the insured person the right to file a case before the Consumer Forums established under the
Consumer Protection Act, 2019 for deficiency of service on the part of the insurance company. The insured may also prefer to file a civil suit for damages against the insurance company.
It should also be noted that a civil suit for damages solely on account of emotional distress may not be advisable since substantial time would go into the prosecution of the case coupled with the court fee that would be payable. Further, the amount which may be finally decreed by the Court solely towards emotional distress may not even be satisfactory.
However, it must be noted that the general trend in India to award damages for emotional distress, i.e., mental agony and harassment, does not lean in favor of the insured person. Quite often, the Courts may grant only a nominal amount towards the claim of emotional distress. Even this nominal amount is generally set aside/modified by an Appellate Court depending on the facts and circumstances of the case.
However, there have been cases where Courts have in fact awarded compensation for mental agony and harassment.
In the case of
Oriental Insurance Company Ltd vs. Paramjit Kaur, the National Consumer Disputes Redressal Commission (NCDRC) upheld the order of State Commission which had inter alia awarded a sum of INR 15,000 as compensation for deficiency in service and causing mental harassment to the insured.
- The case arose out of the denial by the insurance company to settle the claim of the insured person against theft of the vehicle.
- The insurance company defended the denial by contending that since the driver of the vehicle had committed criminal breach of trust, the loss was not covered under the insurance policy.
- Pertinently, the insurance policy covered loss on account of malicious act.
The insured person should not expect to be compensated adequately for the emotional stress caused by the insurance company in settling their claim.
The insured person should generally seek to be reimbursed for the losses actually caused to them due to any particular event covered under the insurance policy and may claim reasonable amount towards emotional distress. However, the chances of being adequately compensated for emotional distress are quite slim.
Conclusion
After going through this piece, you must realize that although you do have the choice to file a suit for damages on account of emotional distress, there is a very small possibility that your request shall be addressed. Besides, based upon past judgments, Courts in India have not really favored suits for damages on the account of emotional distress. As such, even if the Court accepts your application for such claims, the final amount in the Court’s judgement may not even be close to what you expected.
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