Supreme Court Ruling: Insurance Policy’s Effectiveness Anchored to Date of Issuance, Disregarding Proposal and Receipt Dates

In a decisive judgment, the Supreme Court established that, within the realm of insurance protection, the pivotal date for all considerations is the issuance date of the policy.

The central concern presented to the Court revolved around determining the commencement date of a policy—whether it should be the date of issuance, the commencement date stipulated in the policy, or the date of issuance of the deposit receipt or cover note.

Justices Vikram Nath and Rajesh Bindal, in their observation, stated, “In the present appeals, we do not find any such issue of backdating, but the date of issuance of the policy would be the relevant date for all purposes and not the date of proposal or the date of issuance of the receipt.”

The Court rejected the stance adopted by Consumer forums, asserting that the date of issuance of the initial deposit receipt of the premium is not synonymous with the commencement of the policy.

Further elaborating in its judgment, the Court clarified that the date of proposal cannot be considered the policy date unless there is an initial deposit. It emphasized that simply tendering a cheque for the deposit may not suffice.

“The date of proposal cannot be treated as the date of the policy until and unless, on the date of proposal, the initial deposit, as well as the issuance of the policy, occurs on the same date. For example, if the premium is paid in cash, the policy could be issued immediately. Merely tendering a cheque may not be enough, as until the cheque is encashed, the contract would not become effective.”

The Court addressed two sets of appeals involving suicide by the life assured. The lower forums held Reliance Life Insurance Company Limited liable to pay the sum assured. The matter eventually reached the Supreme Court.

Examining clause 9 of the Policy conditions and privileges, the Court highlighted that suicide within 12 months from the date of policy issuance or reinstatement would render the company not liable to pay the claim. Drawing strength from precedents, including Life Insurance Corporation of India vs. Mani Ram, the Court emphasized that the date of policy issuance prevails even in cases of backdating.

In conclusion, the Supreme Court, through its comprehensive analysis, set aside the impugned order in the case of RELIANCE LIFE INSURANCE COMPANY LTD vs. JAYA WADHWANI., Diary No.- 12162 – 2019.