Insurer Liable Where Cover Note Showed Premium Paid Before Accident; Directed To Pay Compensation With Interest

A single-judge bench of Justice B.P. Routray heard an appeal against the Commissioner for Employee’s Compensation, Berhampur, challenging an order that granted compensation for the death of a coolie but exempted the insurer from liability. The core issue was whether motor insurance coverage commenced from the time a cover note was issued and premium received, or only from the effective date stated in the policy.

The High Court allowed the appeal and held that the insurer was liable to satisfy the award. The court relied on Section 64-VB of the Insurance Act and the Supreme Court’s observation that “from the time the premium amount was received, the insurance coverage must be deemed to have commenced from that time.” The Court, in its reasoning, observed: “In the case at hand, the insurance policy bearing No. 034302/31/021/11/07201/1999 was issued mentioning the effective date from 00:00 hours on 27th January, 2000 to 26th January, 2001. But the cover note as stated above has been issued on 25th January, 2000 at 2 pm and it is clearly mentioned in the cover note that premium of Rs.3012/- in respect of the vehicle in question have been paid and received. Therefore, in terms of Section 64-VB of the Insurance Act and the observation given by the Supreme Court in the case of Dharam Chand (supra), it is held 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.”

Background

The claimants — Smt. Renuka Sethi and others — appealed against the Commissioner’s judgment dated 17 February 2012 in W.C. Case No.50 of 2001, under which compensation of Rs.1,22,310/- was awarded for the death of Purushottam Sethi, who worked as a coolie on the truck OR 16 2078. The Commissioner had directed the owner to pay the compensation and exempted the insurer from liability. The claimants contended that a cover note (No.706757) was issued on 25 January 2000 at 2:00 pm and expressly recorded receipt of premium of Rs.3,012/-, while the accident occurred at 4:00 pm on the same day. The corresponding formal policy, however, stated an effective date of 00:00 hours on 27 January 2000.

Counsel for the insurer relied on a Madras High Court decision and argued that coverage operated only from the policy’s stated effective date. The court found that the Madras decision was distinguishable because no cover note had been issued in that case and the accident there occurred before any premium receipt. The High Court applied Section 64-VB of the Insurance Act and followed the Supreme Court’s decision in Oriental Insurance Co. Ltd. v. Dharam Chand to hold that risk commenced upon receipt of premium as evidenced by the cover note. The court further held that interest on the compensation was payable from the date of the accident, relying on Pratap Narain Singh Deo v. Srinivas Sabata, and awarded interest at 12% per annum.

In result, the appeal succeeded. The insurer (Respondent No.2) was directed to pay the compensation amount of Rs.1,22,310/- on behalf of the owner, together with interest at 12% per annum from the date of the accident, and to deposit the amount within two months for disbursement by the learned Commissioner in the appropriate proportions. The court retained the cover note and policy copies on record and ordered issuance of an urgent certified copy of the order.

Case No.: FAO No.480 of 2012 Case Title: Smt. Renuka Sethi and Others v. Babu Sahu and Another Appearances: For the Petitioner(s): Mr. Kalpataru Panigrahi, Advocate For the Respondent(s): Mr. Jayasankar Mishra, counsel for Respondent No.2