As you are aware that Insurance is a contract between insured and insurance company, and it covers injuries /damages due to insured perils/risks. The time of commencement of risk cover is the utmost important in the insurance policy. Generally, risk cover commences from the date of acceptance of insurance plan or the date of receipt of first premium in full (except in some cases), whichever is later. Please note that date of issue of insurance policy in some cases not considered as effective date of commencement of risk coverage. Generally, it is mentioned in the Insurance Policy the date and the time from which your risk coverage starts.
DATE OF COMMENCEMENT OF RISK
It means the date as mentioned in the Policy Schedule from which the insurance benefits start under the Policy or on which date the risk commences under the Riders, if opted for.In simple terms, the Date of Commencement is when the policy comes into effect. It is also referred to as the risk commencement date. The risk covered under the policy starts after the realisation of the premium payment. The policy begins to cover the risk only after compliance with the conditions as specified by the insurance company.
SECTION 64VB IN THE INSURANCE ACT, 1938 64VB
No risk to be assumed unless premium is received in advance.
(1) No insurer shall assume any risk in India in respect of any insurance business on which premium is not ordinarily payable outside India unless and until the premium payable is received by him or is guaranteed to be paid by such person in such manner and within such time as may be prescribed or unless and until deposit of such amount as may be prescribed, is made in advance in the prescribed manner.
It is important to check effective date of commencement risk in your insurance policy. In case of specified contract with insurer , the risk coverage commences on date which is specifically mentioned in the Insurance Contract /Policy. In a case which is not specific and where no date is mentioned for commencement of risk, the risk starts midnight of the same day.
Suppose Mr. X has paid premium to the agent on 01.04.2022 at 10.30 AM and insurance company issued policy on the 01.04.2023 effective from 0.00 hours on 02.04.2022 for further one year. In this case it does not mean that the risk coverage will start on 02.04.2022 at 0.00 hours onwards but the time of payment of premium is an important criterion , soon after payment of premium contract of insurance begins.
PLEASE NOTE THAT:
Therefore, as per Section 64VB of the Act above stated, the provision is very clear that soon after the receipt of the payment of premium by the owner and received by the Insurance Company then the contract of insurance begins between them. Issuance of policy is consequent effect after receipt of premium.
If there is a specific contract is made between the insurer and the insured that the risk is to be covered from that point of time itself is concerned, then that shall be specifically stated in the Insurance Policy, and it is a specific contract between the insurer and insured so far as time of commencement of risk.
If there is no specific contract stating to cover the risk from that particular point of time, then generally in the Insurance Policy it is stated that the Insurance Policy commences from 00.00 hours by mentioning the next day date commencing from 00.00 hours (midnight) on next date.
Therefore, where there is no specific contract of mentioning time between insurer and insured regarding mentioning of time so as to cover the risk then generally the policy commences from 00.00 hours (mid night) by mentioning the date of the next day.
In absence of mentioning specific time of commencement of covering risk, therefore upon considering this and applying the same in the present facts and circumstances and by following the legal provision enshrined under Section 64VB of the Act it can be safely held that from the time of making payment of premium itself covering risk starts.
LET'S CONSIDER SOME JUDICIAL DECISIONS
1. In New India Assurance Co. v. Bhagwati Devi reported in 1998 (6) SCC 534, the accident occurred at 11 A.M., on 17.02.1989. The policy was issued at 4.00 P.M., on the same date. The Claims Tribunal awarded compensation to be paid by the Company, following two decisions of the Apex Court in New India Assurance Co. Ltd. v. Ram Dayal reported in 1990 ACJ 545 (SC) and National Insurance Co. Ltd., v. Jikubhai Nathuji Dhabhi reported in 1997 ACJ 351 (SC).
Testing the abovesaid decisions, the Apex Court, following larger Bench decisions, which held that when there is a special contract mentioning the time in the policy and it would be operative from that time and not fictionally, from the previous midnight and having regard to the facts of the case, held that,
i) the policy had been bought at about 4 p.m., on the day of the accident and, thus, was not allowed to be operative from midnight; the accident having occurred around 11 a.m., on that date. The principle deduced is thus clear that should there be no contract to the contrary, an insurance policy becomes operative from the previous midnight, when bought during the day following. However, in case there is mention of a specific time for its purchase then a special contract to the contrary comes into being and the policy would be effective from the mentioned time.
2. In Balbir Kaur v. New India Assurance Co. Ltd., reported in 2009 ACJ 1848, the accident took place on 18.03.1996.The company received the premium on 15.03.1996 and issued a cover note with effect from 19.03.1996.The Tribunal, allowed compensation against the Insurance Company. The High Court held that the Insurance Company was not liable and directed the claimant to refund the compensation withdrawn by him, to the Insurance Company. Owner of the vehicle did not file any appeal against the order of the High Court.
On appeal filed by the claimant, the Apex Court, at Paragraphs 13 to 15, held as follows:
"13. For the purpose of this case, we would assume that an insurance policy, in law, could be issued from a future date. A policy, however, which is issued from a future date must be with the consent of the holder of the policy. The insurance company cannot issue a policy unilaterally from a future date without the consent of the holder of a policy. Even the said circular letter had not been produced and/ or no material was placed as to why the policy was issued from a later date. It is, however, not necessary for us to delve deep into the matter in view of the limited notice issued by this Court.
14. Respondent No. 3, however, owner of the vehicle has not questioned that part of the order passed by the High Court. He, therefore, accepted the judgment of the High Court. Accordingly, liability to pay the awarded amount by him is not in question.
15. Keeping in view the peculiar facts and circumstances of the case and in particular having regard to the fact that the appellants have already withdrawn the amount, the interest of justice would be subserved if this Court in exercise of its discretionary jurisdiction under Article 142 of the Constitution of India direct the insurance company not to recover the amount from the appellants herein, subject of course to its right of recovery from the owner and the driver of the vehicle."
3. In National Insurance Co. Ltd., v. Geetha reported in 2004 (1) TNMAC 174 (DB), the accident occurred on 15.06.1998, about 5.30 A.M. The policy was issued on the basis of the premium paid on 12.06.1998, but effective only from 15.06.1998 at 10.00 A.M., to Midnight of 14.06.1999. Having regard to the receipt of premium on 12.06.1998, the Tribunal fastened liability on the Company. On appeal, though the learned counsel for the claimant therein relied on a Hon'ble Division Bench judgment of this Court in United India Insurance Company v. S.Viswanathan reported in 2003 (2) CTC 72, distinguishing the said case and after considering the binding nature of the contract, as per the insurance under, the Contract Act and following the decisions in Oriental Insurance Co. Ltd. v. Vedathal [Letter Patent Appeal No.190 of 1999, dated 12.11.2002], stated supra, National Insurance Co. Ltd., v. Jikubhai Nathuji Dhabhi reported in 1997 ACJ 351 (SC), Oriental Insurance Company v. Sunita Rathi reported in 1998 ACJ 121 and New India Assurance Co. Ltd., v. Rula reported in AIR 2000 SC 1082, this Court in Geetha's case, cited supra, held as follows:
15. In view of the above settled principles of law, the appellant-Insurance Company is correct in challenging the award of the Tribunal on the ground that they are not liable as the Insurance policy was issued with the specific mention of the time and date of commencement of the insurance and the accident took place before the said time mentioned in the policy. There is, thus, a basic fallacy in the conclusion reached by the Tribunal on this point.
4. In Oriental Insurance Co. Ltd., v. Porselvi reported in 2009 (2) TNMAC 161 (SC), the accident occurred on 28.05.1996. The policy cover was for the period from 29.05.1996 to 28.05.1997. Since cover note had been issued on 28.05.1996, which was also entered in the Policy, the High Court felt that the finding of the Tribunal, fastening liability on the Insurance Company, cannot be termed as perverse. Being aggrieved by the same, the Insurance Company took the matter on appeal to Supreme Court. Though strong reliance has been made on the cover note, dated 28.05.1996, after examining the same, and the relevant portion in the policy, effective date of commencement of insurance for the purpose of the Act, from 0' Clock on (date) 29.05.1996 to midnight of 28.5.1997 and following a Three Judges Bench Judgment of the Apex Court in New India Assurance Co. Ltd. v. Sita Bai (Smt.) and Ors. reported in 1999 (7) SCC 575, the Supreme Court in Porselvi's case, referred to above, set aside the judgment of the High Court. Sita Bai's case, (cited supra), referred to in the above reported case, is extracted hereunder:
The correctness and applicability of the judgment in Ram Dayal's case (supra) came up for consideration before this Court subsequently in a number of cases.
5. In New India.Assurance Col Ltd. Vs, Bhagwati Devi and Ors. - Civil.appeal No. 1550 of 1994, decided on 10.2.1998. a three- Judge Bench of this Court relied upon the view taken in National Insurance Co. Ltd. Vs. Jikubhai Nathuji Dabhi (Smt) and Ors., [1997 (1) SCC 66], wherein it had been held that if there is a special contract, mentioning in the policy the time when it was bought, the insurance policy would be operative from that time and not from the previous midnight as was the case in Ram Dayal's case, where no time from which the insurance policy was to become effective had been mentioned. It was held that should there be no contract to the contrary, an insurance policy becomes operative from the previous midnight, when bought during the day following; but. in cases where there is a mention of the specific time for the purchase of the policy. then a special contract comes into being and tile policy becomes effective from the time mentioned in the cover note/the policy itself.
The judgment in Jikubhai's case (supra) has been subsequently followed in Oriental. Insurance Co. Ltd, Vs. Sunita Rathi &Ors. [1998 (1) SCC 365]. by a three-Judge Bench of this Court also."
6. Sudharshan S/O Hanmanth vs Sri Subash on 2 December 2020
In this regard, as either of the parties have not produced receipt for payment of premium as to at what time premium was paid. Therefore, under these circumstances the provision stated in Section 64VB of the Act is to be considered vis-à-vis Ex.P.11-Insurance Policy. Therefore, as per Section 64VB of the Act above stated, the provision is very clear that soon after the receipt of the payment of premium by the owner and received by the Insurance Company then the contract of insurance begins between them. Issuance of policy is consequent effect after receipt of premium. If there is a specific contract is made between the insurer and the insured that the risk is to be covered from that point of time itself is concerned, then that shall be specifically stated in the Insurance Policy, and it is a specific contract between the insurer and insured so far as time of commencement of risk. If there is no specific contract stating to cover the risk from that particular point of time, then generally in the Insurance Policy it is stated that the Insurance Policy commences from 00.00 hours by mentioning the next day date commencing from 00.00 hours (mid night) on next date. Therefore, where there is no specific contract of mentioning time between insurer and insured regarding mentioning of time so as to cover the risk then generally the policy commences from 00.00 hours (mid night) by mentioning the date of the next day. In absence of mentioning specific time of commencement of covering risk, therefore upon considering this and applying the same in the present facts and circumstances and by following the legal provision enshrined under Section 64VB of the Act it can be safely held that from the time of making payment of premium itself covering risk starts.
Before issuance of policy and muchless even before receiving premium amount from the owner the agent on behalf of Insurance Company will inspect the vehicle to say that whether it is in fit condition or if any damage is caused and after verifying the said facts, then amount of premium would be collected then the same would be disbursed to the Insurance Company during the course of the day or during the banking hours. Normally the office hours of receiving payment of premium by the Insurance Company commences from 10.30 am to 3.30 pm on par with the banking business hours. Therefore, when in the present case after receipt of the premium amount by the owner and obviously it is after verification of the vehicle itself by its agent or any of the officials then starts to receive premium and starts processing the documents for issuance of Insurance Policy.
Therefore, it means the owner has paid premium during office hours soon after commencement of office hours at morning 10.30 am and therefore it can be safely held that the Insurance Company had received premium, in the present case before the time of accident on 07.05.2008 and therefore upon analyzing the entire facts and circumstances involved in to the case coupled with the legal provisions enshrined under Section 64VB of the Act and principle of law laid down by the Hon'ble Apex Court (supra) after payment of premium is made then thereafter the accident was caused in the present case, therefore the Insurance Company is liable to indemnify the owner as per the contract of insurance between them as per Ex.P.11-Insurance Certificate.
Therefore, under these circumstances when the entire facts and circumstances are considered coupled with the legal provisions as discussed above as stated in Section 64VB of the Act and also principle of law laid down by this Court and the Hon'ble Apex Court the respondent No.2 -Insurance Company is liable to pay the compensation by indemnifying the owner of the vehicle/respondent No.1. Therefore, in this regard the judgment and award made by the Tribunal is liable to be modified.
CONCLUSION
From above discussion we conclude that
1. Section 64VB of the Act above stated, the provision is very clear that soon after the receipt of the payment of premium by the owner and received by the Insurance Company then the contract of insurance begins between them. Issuance of policy is consequent effect after receipt of premium. It means that the time of payment of premium is important, and risk commences once insured has paid the premium to the insurance company. The issue of insurance policy is post compliances of the insurance contract.
2. If there is a specific contract is made between the insurer and the insured that the risk is to be covered from that point of time itself is concerned, then that shall be specifically stated in the Insurance Policy, and it is a specific contract between the insurer and insured so far as time of commencement of risk. The coverage of risk in these contracts will commence from the date specifically mentioned in the insurance contract /policy or as mutually agreed between the insured and the insurer.
3. If there is no specific contract stating to cover the risk from that particular point of time, then generally in the Insurance Policy it is stated that the Insurance Policy commences from 00.00 hours by mentioning the next day date commencing from 00.00 hours (mid night) on next date.Therefore, where there is no specific contract of mentioning time between insurer and insured regarding mentioning of time so as to cover the risk then generally the policy commences from 00.00 hours (mid night) by mentioning the date of the next day.
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