Model Answer
0 min readIntroduction
Insurance contracts are based on the principle of *uberrimae fidei* – utmost good faith. Policies define covered perils, and ‘theft’ is a common one. However, the definition of ‘theft’ is crucial. The present case involves a seemingly straightforward sale transaction gone wrong, with a dishonoured cheque. The core issue is whether the loss suffered by the plaintiff due to the cheque’s dishonour falls within the ambit of ‘theft’ as defined in the insurance policy, and consequently, the rights available to the plaintiff if the insurer refuses to pay the claim.
Understanding the Insurance Contract and ‘Theft’
The insurer’s liability hinges on the precise wording of the ‘theft’ clause in the insurance policy. Generally, ‘theft’ implies the unlawful taking of property with the intent to permanently deprive the owner of it. A key question is whether the transaction with the buyer, even with a dishonoured cheque, constitutes ‘theft’ in the legal sense.
Was there ‘Theft’?
- Dishonoured Cheque & Fraud: A dishonoured cheque, in itself, doesn’t automatically equate to theft. However, if the plaintiff can demonstrate that the buyer *knowingly* presented a cheque with insufficient funds, intending to deceive the plaintiff and obtain the goods without paying, it could be construed as fraudulent misrepresentation, which may fall under the definition of ‘theft’ depending on the policy wording.
- Delivery of Goods: The plaintiff willingly handed over the watch and ring upon receiving what appeared to be a valid form of payment. This voluntary transfer of possession complicates the claim. The insurer might argue that there was no unlawful taking, as the plaintiff willingly relinquished the items.
- Policy Specifics: The policy wording is paramount. Some policies explicitly include losses due to dishonoured cheques under ‘theft’ or a similar category. Others may require proof of a criminal act, such as forgery or fraudulent intent.
Breach of Contract and Insurer’s Obligations
If the policy covers losses arising from dishonoured cheques (or fraudulent transactions resembling theft), the insurer’s refusal to pay constitutes a breach of contract. The plaintiff has several rights:
Rights of the Plaintiff
- Demand for Payment: The plaintiff can formally demand payment from the insurer, citing the policy terms and providing evidence of the transaction (advertisement, phone call record, cheque copy, dishonour notice).
- Legal Notice: If the insurer continues to deny the claim, the plaintiff can issue a legal notice, outlining the breach of contract and demanding payment within a specified timeframe.
- Consumer Court: The plaintiff can file a complaint with the Consumer Disputes Redressal Commission (CDRC) under the Consumer Protection Act, 2019. Consumer courts are known for their speedy resolution of disputes and focus on consumer rights.
- Civil Suit: Alternatively, the plaintiff can file a civil suit for breach of contract in a competent court. This route may be more time-consuming and expensive but allows for a more detailed examination of the evidence.
Potential Defenses by the Insurer
The insurer might raise several defenses:
- Lack of ‘Theft’: As discussed earlier, the insurer could argue that the transaction doesn’t meet the definition of ‘theft’ under the policy.
- Non-Disclosure: If the plaintiff failed to disclose any material facts during the insurance application process (e.g., previous instances of fraudulent transactions), the insurer might argue that the policy is voidable.
- Delay in Claiming: If the plaintiff delayed unreasonably in reporting the loss to the insurer, it could prejudice the insurer’s ability to investigate and assess the claim.
Criminal Remedies
Independently of the insurance claim, the plaintiff can also pursue criminal remedies against the buyer. Section 420 of the Indian Penal Code (IPC) deals with cheating and dishonestly inducing delivery of property. If the buyer intentionally deceived the plaintiff, a First Information Report (FIR) can be filed with the police.
Conclusion
The plaintiff’s rights depend heavily on the specific wording of the insurance policy and the evidence available to demonstrate fraudulent intent on the part of the buyer. While a dishonoured cheque alone doesn’t automatically trigger insurance coverage, evidence of deception could strengthen the claim. The plaintiff has multiple avenues for redressal, including demanding payment, approaching consumer courts, or filing a civil suit. Pursuing criminal charges against the buyer is also a viable option.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.