Legal Opinion


HiResWhether the insurance company can withhold the payment of the assessed amount unless a complete discharge is given.

It is well known that the insurance companies do not release the assessed claim amount to the insured unless the insured executes a complete discharge voucher. The question has arisen with respect to the legality of this practice.

There is no clause in the insurance policy that the amount assessed by the insurance company shall not be paid unless complete discharge is given.

No law permits the insurance company to withhold the payment of the admitted amount unless the receipt of full and final settlement is issued by the insured.

The amount assessed by the insurance company is the admitted liability of the insurance company to the insured and the insurance company is obliged to make the payment of the same to the insured whether the insured accepts the assessment or not.


Case Law Reference

1. Oriental Insurance Co. Ltd. v. Government Tool Room and Training Centre, (2008) CPJ 267 (NC)

The National Consumer Disputes Redressal Commission held the practice of insurance companies in not paying the claim amount without a discharge voucher of full and final settlement as an unfair trade practice. The National Commission directed the insurance companies to abandon this practice. The National Commission further directed Insurance Regulatory Development Authority (IRDA) to take appropriate action so that the option/choice of the insured to approach the legal forum for just settlement of his claims is not curtailed/ frustrated.

2. National Insurance Company Limited v. Boghara Polyfab Private Limited, (2009) 1 SCC 267

The Supreme Court held that the procedure of the insurance company requiring the claimant to issue an undated receipt (acknowledging receipt of a sum smaller than his claim) in full and final settlement as a condition for releasing and admitting lesser amount is unfair, irregular and illegal. In para 52(iv) of the judgment, the Supreme Court held such a discharge voucher to be not voluntary but under duress, compulsion and coercion.

3. Oriental Insurance Co. Ltd. v. Mercury Rubber Mills, 2012 (127) DRJ 650

The Division Bench of Delhi High Court held that the denial of payment to the insured at the relevant time defeats the very purpose of taking out the policy. The insurer has a superior bargaining position as the insured having suffered a loss is faced with ‘take it or leave it’ position. The Division Bench held that there was no question of final accord of satisfaction to make the insured ineligible for making a claim against the insurer.

4. Pacific Garments Pvt. Ltd. v. Oriental Insurance Co. Ltd., 2013 (133) DRJ 385

The Delhi High Court rejected the similar plea of the insurance company holding that the discharge voucher was not signed by the insured of its own free will and accord but on account of indebtedness to the banks.

5. National Insurance Company Ltd. v. Rajan Sood, 2014 SCC OnLine NCDRC 443

The National Consumer Disputes Redressal Commission rejected the similar plea of the insurance company holding that the insured who had lost household goods in fire accident and had been waiting for settlement of his claim for more than a year, accepted the cheque offered by the insurance company in full and final settlement, under coercion to salvage a part of the loss suffered by him. Thus, the settlement relied upon by the insurance company is not a settlement based on free consent and the insurance company cannot take advantage of the same.

{The above case laws on Insurance Company is quoted from a recent judgment of the Delhi High Court in the case of Worldfa Exports Pvt.Ltd. Vs United India Insurance Co. Ltd. dated 11 December 2015 authored by Justice J.R. Midha}



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