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‘Cheque bounce no excuse to reject insurance claims’

With such cases coming up a dime a dozen,the Delhi Consumer Commission has now ruled that insurance companies will no longer be able to reject claims on the pretext of cheques being dishonoured.

Submit cheques in 48 hrs: consumer commission

Imagine this: * You deposit a cheque for your car insurance to the insurance company’s agent on January 1.

* A mishap on January 15,and the car is damaged.

* You approach the company to get the insurance amount.

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* The company tells you that the cheque,which they presented to your bank on,say,January 7,was dishonoured due to lack of funds in your account.

* The result? You are told that you are not entitled to the benefits,for the contract between the two parties did not stand on the date of the incident.

With such cases coming up a dime a dozen,the Delhi Consumer Commission has now ruled that insurance companies will no longer be able to reject claims on the pretext of cheques being dishonoured.

The commission has directed all insurance companies to present a cheque to the insurance-holder’s bank within 48 hours of receiving it. The ruling extends to all kinds of policies: life insurance,accident cover,theft,fire and others.

The commission in its recent decision also asked the insurance firms to inform a consumer in writing if his/her cheque bounces,or in case of any other problem in getting the imbursement.


Commission president Justice J D Kapoor observed that the directives have been issued as there are many cases of delay in presenting cheques to the concerned bank,and the insurance firm’s failure to alert a consumer if a cheque bounces. “All insurance companies are directed to present cheques of premium or any other payment on the same day or the next day,” Justice Kapoor ruled.

“They shall also intimate through their agents,or personally,the insured (consumers) about dishonouring of a cheque in writing to facilitate the insured consumer to reap the benefit of their policies.”

The commission reasoned that any undue delay in presenting the cheque,and thereafter not informing the consumer in case of problem in disbursement,takes away the benefits of insurance if a mishap like accident,theft or fire occurs in the intervening period.


Justice Kapoor said the commission had come across “hundreds of” such instances and held that an insurance firm cannot be allowed to keep a consumer in “suspended animation” by retaining the cheque for a few days and eventually rejecting his claim on the pretext that it had bounced.

The commission sent a copy of the order to the chairman of the Insurance Regulatory and Development Authority (IRDA) and observed that it is up to the companies to evolve their own mechanism to receive payments. The panel noted that the companies are bound to follow its directives if the mode of payment is through cheques.

The commission’s directives came while deciding an appeal of SBI Life Insurance Company Limited against a consumer forum order that directed the company to amend the date of policies of a couple. Ashok and Santosh Sardana had claimed that they deposited cheques for annual premium on January 8,2007 but the company waited till January 25 to deposit them. They also contended the SBI mentioned February 8,instead of January 8,as the risk date — when the policy period starts.

Holding that the couple was entitled to the policy cover from the date they paid the premium,the forum directed the SBI to mention January 8 as the risk date.

First published on: 28-01-2009 at 12:02:14 am
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