The Insurer Dictates Terms Of Insurance Contracts: SC

The insurer dictates the terms of insurance contracts, leaving little choice for the consumer except to sign on the dotted lines, the Supreme Court said on Wednesday.

The division bench of Justices Surya Kant and M M Sundresh made the observation while putting away an order passed by the National Consumer Disputes Redressal Commission in a case seeking compensation for a shop that met with a fire accident.

The court also stated that insurance contracts are prepared by the insurer in accordance with a standard format, which the consumer is required to sign.

According to the court, consumer has very little option or choice but to sign on the dotted line in order to negotiate the terms of the contract.

The insurer, as the dominant party, dictates its own terms, leaving it up to the consumer to accept or reject them, according to the Supreme Court.

Due to the consumer's lack of bargaining power, such contracts are obviously one-sided and grossly in favour of the insurer, according to the apex.

The apex court said the concept of freedom of contract loses significance in a contract of insurance.

The Supreme Court mentioned that, though a contract of insurance is a voluntary act on the part of the consumer, the obvious intendment is to cover any contingency that might happen in future.

As a result, an insurer is expected to keep that goal in mind, and to do so from the consumer's perspective, in order to cover the risk rather than a plausible repudiation, the apex added.

In this case, the court said that the terms of the contract were unfair, particularly the exclusion clause.