Statutory timelines are often a farce
An accidental fire broke out in a factory destroying all the plant, machinery, raw materials and finished products. The loss claimed was well within the total coverage of the company's fire insurance policy and filed almost immediately with the necessary documents. There has been considerable back and forth between the insured, the insurer, the surveyor and a private investigating agency hired by the insurance company. Close to a year later, the claimant has neither received settlement, not even a provisional reinstatement amount, nor a rejection. Escalation to the insurance ombudsman, Insurance Regulatory & Development Authority has drawn a blank.
Imagine the plight of this industrialist. In the absence of at least partial reinstatement, with every passing day, he is losing customers, employees, vendors; and his partnership with an overseas player is in jeopardy. With his entire business operation having come to a complete standstill, where does it leave his guaranteed fundamental rights to life, which includes livelihood, under Article 21 and to practise any trade or occupation under Article 19(1)(g) of the Constitution of India?
As the policy stipulates arbitration only for the quantum of settlement and not for delays or rejection of the claim, what are his legal options? In this state of limbo, a consumer complaint for an unfair trade practice and deficiency in service, seems the only legal window open. Statutory timelines are so terribly out of sync with reality. A Constitution Bench of the Supreme Court may have held that the period for filing a written version cannot be extended beyond the stipulated 45 days. But what about the time frame for disposal of a consumer complaint itself ? So when the industrialist is given a realistic picture of about 3 to 5 years for a verdict in the National Consumer Disputes Redressal Commission, as opposed to the joke of 3 to 5 months promised in the Consumer Protection Act, he begins to think of other remedies. Enter brokers and 'risk consultants'. They promise settlement in a few months in return for a fat fee and settlement linked commission. If you are in the industrialist's shoes, what route will you take? For those who think judicial delays only benefit lawyers, this toss up is a suitable awakening.
It's not just court delays but also the sheer impotence of statutory regulations that business establishments make a mockery of. Grievance redressal is so porous that it is often a mere formality with no relief.
Consider Clause 15 of the Insurance Regulatory and Development Authority (Protection of Policy Holders Interests) Regulations, 2017. It stipulates timelines for the claim process. There are 10 different stages and scenarios enumerated. It envisages the appointment of a surveyor within 72 hours of the claim intimation, a week to call for essential documents, 48 hours to start the survey, 15 days for an interim report, 30 days for the submission of a final report for routine claims, 90 days for a report on big commercial claims and large risks. For complicated claims, or difficulties in reinstatement, the surveyor can seek more time to submit the report. It is intriguing that no outer limit has been specified. In such an eventuality, the insurer must update the claimant on a fortnightly basis and importantly, make a provisional on account payment towards an admitted claim liability.
Sub regulations enable the insurer to seek up to one additional report from the surveyor to address specific issues within 15 days of receipt of the first report. The settlement or rejection of the claim must be done within 30 days from the date of submission of the final or additional report or further documents and information. Here's the loophole. To circumvent this timeline in sub regulation(7), insurers and surveyors strategically keep seeking inane and repetitive information and irrelevant documents. Queries may be designed to induce self incrimination, violating Article 20(3) of the Constitution!
Non settlement of a claim for admitted liability, within the stipulated time frame will entail in interest at 2% above the prevailing bank rate till the date of actual payment. This is hardly a deterrent.
The National Consumer Disputes Redressal Commission in Magppie International Limited Vs Oriental Insurance Company Limited (2017) had pulled up an insurer for a procedural delay, ruling that “there is no reason why an insured should suffer on account of delay on the part of the surveyor in submitting his report considering the fact that the surveyor is appointed by the insurer without consulting the insured. The insurer, therefore, must compensate the insured for this deficiency in the service if the payment of the claim has been delayed.” The commission did not stop there. It further reasoned that “had the surveyor submitted his report in time and the settlement been offered within the time limit prescribed in the regulations, the amount to which the complainant was lawfully entitled continued to be used by the insurer. Having used the amount which lawfully belonged to the insured, the insurer must suitably compensate the insured by paying appropriate interest on that amount.”
Insurance companies are known to hire private investigators to pad up their intended rejection of claims. The National Commission in United India Insurance Company Limited Vs Shital International (2019) had debunked the appointment of an investigator, aside of the surveyor as “improper.”
Birds of a feather must not be allowed to adjudicate together. If former insurance officials end up as members of the Insurance Regulatory and Development Authority (IRDA), will it inspire confidence in the grievance redressal mechanism? Moreover, under Section 8(b) of the IRDA Act,1999, there is just a cooling period of 2 years for an IRDA member to get an appointment in an insurance company after his tenure ends! Compare this with retired High Court judges who cannot practise as advocates in any high court or retired Supreme Court judges who cannot appear before any court. Now I'm not getting into gubernatorial appointments!
(The writer is an advocate at the Madras high court, columnist & author)