Will a life insurance claim be denied if the insured died in an accident where he was the driver without a valid driver's license or valid vehicle insurance? Thanks to a question by Ganapathy Krishnan at Facebook group, Asan Ideas for Wealth, I was able to obtain an authoritative answer to this question from the insurance ombudsman case files.
I am not one to beat around the bush. So the answer to the question is, NO, the life insurance claim will not be denied if the driver met with an accident without a valid drivers license and/or vehicle insurance.
However, if the life insurance policy had an accident insurance rider and/or if there is a separate accidental death claim, the claim will be rejected as an invalid drivers license and/or invalid vehicle insurance constitutes a breach of the Motor Vehicles Act, 1988 (and amendments there upon).
Now, let us investigate the evidence. I am fan of reading through the insurance ombudsman case files because it can so illuminative. See:
No insurer will hand life insurance claim amount on a platter!
or The Games Life Insurers play!
Of course, those posts had a negative tone as opposed to this one (wrt life insurance).
So let us explore the evidence:
Case No. LIC/332/Karnal/Sonipat/24/06
Source: http://www.gbic.co.in/LIC/deathclaim/DeathClaim-Book5.pdf
Page 36.
A person with a valid license for driving 2 and 4 wheelers (light motor vehicles) met with an accident and died while driving a tractor.
The life insurance claim was paid and the accident rider claim was denied. When the nominee appealed to the ombudsman, they upheld the decision of the insurer.
Case No. LI - 156 of 2005-06
Source: http://www.gbic.co.in/LIC/deathclaim/DeathClaim-Book4.pdf
Page 220.
A person died while driving a vehicle under the influence of alchohol. The life insurance claim was honored but the accidental death benefit was denied. The nominee went to the Ombudsman stating that the levels of alchohol was "slight".
The ombudsman ruled that any level of intoxication is breach of section 185 of Motor Vehicles Act, 1988 (“driving by a drunken person is a punishable offence") and sided with the insurance. The accident benefit was denied.
Case No. : IO (CHN)/ 21.07.2407/2007-08
Source: http://www.gbic.co.in/LIC/deathclaim/DeathClaim-Book8.pdf
Page: 46
A person with 3 life insurance policies met with an accident while driving a two wheeler with two other passengers. The life insurance claims were settled by the insurer but the accident riders were not.
The ombudsman gave an interesting verdict! They said prima facie, three people on a two wheeler is a breach of law and the accident claim should be denied, However,
"in a case where the accused had succumbed during the accident we need to go in-depth into the facts. Wherever there is a loss of life in an accident the police generally frame a charge of negligent or rash driving under the relevant provision of law in Indian Penal Code and if the accused succumbed to the injuries then the ‘charges’ are abated and case is treated as ‘closed’ by the competent authority. In the eyes of law no person is guilty of breach of law unless he is tried in a court and guilt is established. In fact, technical offences which have not been established in a court of law need not constitute breach of law as contemplated by the insurer for paying accident benefit unless moral turpitude is also established. In view of this legal position depriving the nominee the benefit of accident benefit appears to be wrong. The complaint was allowed"
This verdict is baffliling to say the least. The same logic can be applied to the above two cases, can it not?!
There are four lessons here
- Any breach of the motor vehicles act is not relevant to a life insurance claim. It will be honoured.
- However, accident claims will definitely be denied by the insurer (at least initially).
- The verdict depends on the Ombudsman - Chennai Centr, Mumbai Centre etc.
- We should instruct our nominees to search in the Ombudsman case files for precedents in case there is a problem with the claim. This will help us fight our case better.
Ombudsman Case Files
http://www.gbic.co.in/LIC/deathclaim/DeathClaim-Book1.pdf (Change no from 1 to 8 for a delightful read!)
The steps to approach the ombudsman can be found here
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