Monday, 1 July 2019

Whether insurer is bound to prove conclusively that intimation of cancellation of policy reached to insured prior to accident

 A period of one week from the date of dispatch can safely be adopted as the time necessary to serve the letter in the ordinary course after which the intimation is presumed to have been served on the addressee. The period is so fixed in the absence of any provision to the contrary for the limited purpose of the cases of this nature to avoid disputes as to the date of receipt of the intimation. The insured in some cases may try to evade the service of notice and the letter would be returned with postal remarks like 'addressee left', 'house locked', 'insufficient address' etc. The burden is on the addressee to rebut the presumption by conclusive evidence that he did not really receive the letter and it is not a case of deliberate avoidance. The burden is not on the insurer to establish conclusively that the intimation of cancellation of insurance coverage was in fact served on the insured or the registering authority. The judgment in M.A.C.A. No. 2471/2015 to the effect that it is the obligation of the insurer to establish the service of the intimation on the addressee is hereby overruled. Needless to say that no liability can be fastened on the insurer for any compensation payable in respect of an accident that occurs after the service of the intimation aforesaid.

IN THE HIGH COURT OF KERALA

M.A.C.A. No. 2017 of 2013

Decided On: 31.10.2018

 Prasanna  Vs.  Kabeer

Hon'ble Judges/Coram:
V. Chitambaresh, P.B. Suresh Kumar and Sathish Ninan, JJ.

Citation: AIR 2019 Kerala 82


1. It is settled law that the liability of the insurer to indemnify the third parties subsists unless the insurance coverage is cancelled by the insurer and intimation thereof has reached the insured and the registering authority. On whom does the burden lie to prove that the insurer has so intimated about the cancellation on the dishonour of the cheque received towards premium? This is the question referred to the Full Bench for the sake of clarity in view of the following observations in United India Insurance Company Limited v. Laxmamma & Ors. (MANU/SC/0314/2012 : 2012 (2) KLT SN 79 (C. No. 75) SC : (2012) 5 SCC 234):

"26. In our view, the legal position is this: where the policy of insurance is issued by an authorised insurer on receipt of cheque towards the payment of premium and such a cheque is returned dishonoured, the liability of the authorised insurer to indemnify the third parties in respect of the liability which that policy covered subsists and it has to satisfy the award of compensation by reason of the provisions of Ss. 147(5) and 149(1) of the M.V. Act unless the policy of insurance is cancelled by the authorised insurer and intimation of such cancellation has reached the insured before the accident. In other words, where the policy of insurance is issued by an authorised insurer to cover a vehicle on receipt of the cheque paid towards premium and the cheque gets dishonoured and before the accident of the vehicle occurs, such insurance company cancels the policy of insurance and sends intimation thereof to the owner, the insurance company's liability to indemnify the third parties which that policy covered ceases and the insurance company is not liable to satisfy awards of compensation in respect thereof."

(emphasis supplied)

Is it sufficient if there is proof that the insurer has sent intimation about the cancellation of the insurance coverage to the insured and the registering authority or is it necessary to prove that the addressees have received the same? A reference to S. 147(4) of the Motor Vehicles Act, 1988 ('the Act' for short) is apposite and the same is extracted hereunder:

"147. Requirements of policies and limits of liability.-

(1) xxxxxx xxxxxx xxxxxx xxxxxx

(2) xxxxxx xxxxxx xxxxxx xxxxxx

(3) xxxxxx xxxxxx xxxxxx xxxxxx

(4) Where a cover note issued by the insurer under the provisions of this Chapter or the rules made thereunder is not followed by a policy of insurance within the prescribed time, the insurer shall, within seven days of the expiry of the period of the validity of the cover note, notify the fact to the registering authority in whose records the vehicle to which the cover note relates has been registered or to such other authority as the State Government may prescribe."

2. A cover note mentioned in S. 147(4) of the Act precedes the certificate of insurance and would normally be issued by the insurer or its agent on receipt of a cheque from the insured towards premium. The cover note is an interim insurance binding on the parties as per its terms till it is superseded by a certificate of insurance issued subject to the realisation of the cheque. The cheque issued by the insured towards premium may get dishonoured due to a variety of reasons like 'insufficiency of funds' or 'difference in the signature of the holder'. The insurer under such circumstances is justified in cancelling the insurance coverage and intimating the same to the insured as well as the registering authority. The insurer has on many occasions sent the intimation aforesaid under 'Certificate of Posting' as provided under Rule 195 of the Indian Post Office Rules, 1933 which was in vogue earlier. Such a certificate is issued to the sender to afford an assurance that the letter or other articles entrusted to servants or messengers for posting have actually been posted. The practice of Issuing a Certificate of Posting has since been discontinued by deleting Rule 195 of the Rules aforesaid by Notification dated 31.1.2011 of the Union Government. A Certificate of Posting raises a presumption under S. 114 of the Indian Evidence Act, 1872 that the common course of business has been followed in the particular case. It is for the addressee to rebut the presumption that he did not in fact receive the intimation notwithstanding the Certificate of Posting produced by the sender.

3. The surest way to prove that the intimation has been sent by the insurer about the cancellation of the insurance coverage is to dispatch it by registered post with or without postal acknowledgment. The production of the receipt evidencing the dispatch by registered post raises a presumption in favour of the insurer that the intimation has been sent to the addressee for secured delivery. The fundamental difference between speed post and registered post is that the former is address specific and time bound whereas the latter is addressee specific. A presumption in favour of the sender for a properly addressed and prepaid post is supported in law too by S. 27 of the General Clauses Act, 1897 which is extracted hereunder:

"27. Meaning of service by post.- Where any Central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, whether the expression 'serve' or either of the expression 'give' or 'send' or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, prepaying and posting by registered post, a letter containing the document, and unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post."
It would suffice if the insurer establishes prima facie that the letter about the cancellation of insurance coverage sent under Certificate of Posting or by registered post would have been delivered in the ordinary course.

4. A period of one week from the date of dispatch can safely be adopted as the time necessary to serve the letter in the ordinary course after which the intimation is presumed to have been served on the addressee. The period is so fixed in the absence of any provision to the contrary for the limited purpose of the cases of this nature to avoid disputes as to the date of receipt of the intimation. The insured in some cases may try to evade the service of notice and the letter would be returned with postal remarks like 'addressee left', 'house locked', 'insufficient address' etc. The burden is on the addressee to rebut the presumption by conclusive evidence that he did not really receive the letter and it is not a case of deliberate avoidance. The burden is not on the insurer to establish conclusively that the intimation of cancellation of insurance coverage was in fact served on the insured or the registering authority. The judgment in M.A.C.A. No. 2471/2015 to the effect that it is the obligation of the insurer to establish the service of the intimation on the addressee is hereby overruled. Needless to say that no liability can be fastened on the insurer for any compensation payable in respect of an accident that occurs after the service of the intimation aforesaid.

The reference is answered accordingly. The appeal shall be listed for hearing before the Division Bench as per roster.


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