Payment delays to cost more for insurers
The Supreme Court (SC) has ruled that insurance companies are liable to pay the interest as damages on delayed payment of the insured amount only from the date on which the compensation is awarded.
By TNN |
NEW DELHI: The Supreme Court (SC) has ruled that insurance companies are liable to pay the interest as damages on delayed payment of the insured amount only from the date on which the compensation is awarded. Such damages will not be claimed from the date of correspondence in this regard started between the parties concerned.
In saying so, the apex court has discouraged the insured parties seeking such claims from the day of commencement of correspondence prior to the compensation award. The apex court has settled the question of claims and counter claims on computation of the damages for delay in payment.
It took into account the submission of the insurance company that such delay was not because of its fault. However, the other party said the communication in this regard was started prior to awarding to the compensation.
A bench comprising Justice HK Sema and PK Balasubramyan said, “the important question to be decided in such circumstances is the date on which the quantum of compensation and to whom it should be paid finally was decided and not from the date on which correspondence ensued between the parties.”
The ruling came on an appeal filed by the National Insurance Company challenging the order of the National Consumer Disputes Redressal Commission directing it to pay interest at 6% from December 1990 to June 1994 to the party as damages for delay in payment.
An export company in 1990 had obtained five transit insurance policies for its consignment to Sudan. It was discovered that on arrival of the consignment in Sudan, there was some damage on account of rust. The company had submitted that the foreign company by a letter dated March 17, 1991 had vested the right, title and interest with it.
The company, which received the amount in June 1994 from the insurer demanded interest from 1990 onwards for delay in payment. However, the court said that though the communication in this regard started in 1991, the interest could only be paid from April 8, 1994, the date on which the compensation amount was decided.
In saying so, the apex court has discouraged the insured parties seeking such claims from the day of commencement of correspondence prior to the compensation award. The apex court has settled the question of claims and counter claims on computation of the damages for delay in payment.
It took into account the submission of the insurance company that such delay was not because of its fault. However, the other party said the communication in this regard was started prior to awarding to the compensation.
A bench comprising Justice HK Sema and PK Balasubramyan said, “the important question to be decided in such circumstances is the date on which the quantum of compensation and to whom it should be paid finally was decided and not from the date on which correspondence ensued between the parties.”
The ruling came on an appeal filed by the National Insurance Company challenging the order of the National Consumer Disputes Redressal Commission directing it to pay interest at 6% from December 1990 to June 1994 to the party as damages for delay in payment.
An export company in 1990 had obtained five transit insurance policies for its consignment to Sudan. It was discovered that on arrival of the consignment in Sudan, there was some damage on account of rust. The company had submitted that the foreign company by a letter dated March 17, 1991 had vested the right, title and interest with it.
ADVERTISEMENT
The company, which received the amount in June 1994 from the insurer demanded interest from 1990 onwards for delay in payment. However, the court said that though the communication in this regard started in 1991, the interest could only be paid from April 8, 1994, the date on which the compensation amount was decided.
Start a SIP with as low as ₹500 with ET Money App!
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
