The Supreme Court has ordered Oriental Insurance to pay a ₹32.67 lakh motor accident claim, rejecting the insurer's argument over territorial limits. The court criticized insurers for using vague policy language that delays compensation for policyholders.
The Supreme Court on Monday directed Oriental Insurance Company to pay ₹32.67 lakh in compensation for a motor accident claim, settling a dispute that had reached the apex court after a challenge to a Chhattisgarh High Court order. The case involved a vehicle accident in Nepal that resulted in three fatalities. While the initial tribunal had placed liability on the vehicle owner, the High Court had subsequently moved that responsibility to the insurer.
Court Criticizes Vague Policy Drafting
A bench comprising Justices Sanjay Karol and N Kotiswar Singh strongly observed that insurance companies frequently employ ambiguous and sloppy language in their standard policy documents. The court noted that this practice is not only unfair to policyholders but also creates unnecessary legal hurdles. By failing to use precise terminology, insurers often find themselves in situations where they either evade rightful liabilities or face unintended claims due to poor drafting.
Territorial Limits and Cross-Border Gaps
Oriental Insurance had contested the claim by arguing that its policy did not extend to accidents occurring outside India. The Supreme Court dismissed this contention, emphasizing that if the insurer intended to exclude extraterritorial coverage, it was their responsibility to explicitly state this in the contract. Since the vehicle possessed the necessary legal permits to travel into Nepal, the court ruled that the insurer could not deny coverage based on a lack of clarity in its own policy document.
Need for Regulatory Clarity
The apex court highlighted a broader issue regarding a regulatory vacuum for vehicles traveling across international borders. While Indian vehicles are frequently permitted to enter neighboring countries, the court observed that domestic insurance policies often lack clear clauses defining whether coverage extends to these foreign jurisdictions. To address this, the court suggested that the Insurance Regulatory and Development Authority of India (IRDAI) should issue a master circular to standardize cross-border coverage terms in motor insurance policies.
Impact on Claims and Tribunals
Beyond this specific case, the court also raised concerns about the quality of orders issued by Motor Accident Claims Tribunals. The bench noted that many tribunal orders lack clear reasoning, which contributes to protracted legal battles and a high volume of appeals. The court directed Oriental Insurance to deposit the compensation amount within four weeks. For investors and stakeholders in the insurance sector, the key monitorable will be potential future directives from the IRDAI aimed at reducing policy ambiguity and standardizing coverage for cross-border travel.