Insurance Policy Clauses Restricting Claim Submission Timelines Are Void Under Section 28 of Contract Act

The Petitioner, an employee of Export Import Bank of India, held a Group Health Insurance Policy (Family Floater basis) issued by Respondent No. 1 for the period 01/04/2021 to 31/03/2022

On 24/05/2022, the Petitioner submitted four reimbursement claims totaling Rs. 1,13,487.49 for medical expenses incurred by himself and his spouse

Respondent No. 1 rejected the claims on the grounds that they were time-barred under Clause 7.2 of the policy, which required submission within 30 days of discharge or 15 days from post-hospitalization treatment, and stipulated that bills more than 90 days old would not be reimbursed

The Petitioner challenged this rejection via a Writ Petition.

1. Whether a clause in an insurance policy prescribing a strict time limit for filing claims, upon the expiry of which the right to claim is extinguished, is legally valid

2. Whether the rejection of the Petitioner’s claim by the Insurance Company on the ground of limitation is sustainable in law

Section 28(b) of the Indian Contract Act, 1872, which mandates that any agreement is void to the extent that it extinguishes the rights of a party, or discharges a party from liability, upon the expiry of a specified period so as to restrict the enforcement of rights

The Supreme Court precedent The Oriental Insurance Company Ltd. v. Sanjesh & Anr. (2022), which held that time-lines for lodging claims in insurance policies are contrary to Section 28 and thus void

United India Insurance Co. Ltd. v. Harchand Rai Chandan Lal (2004) regarding the strict interpretation of insurance contracts, as subject to the statutory mandates of the Contract Act

The Court reasoned that while an insurance policy is a contract between parties, it is strictly governed by the Indian Contract Act

Clause 7.2 and the associated notes in the subject policy imposed a limitation on the invocation of rights by stating that no claim would be entertained after 90 days

The Court found that this clause effectively extinguished the insured’s right to claim reimbursement solely due to the lapse of a contractually specified period

Following the "authoritative pronouncement" in Sanjesh, the Court determined that such an inhibition attracts the embargo under Section 28(b) of the Contract Act

Consequently, even if the terms were clearly agreed upon, they were "void and non-est" to the extent they restricted the period for availing benefits the insured was otherwise entitled to under law

It held that the time-limiting clauses in the policy were void under Section 28 of the Indian Contract Act

Respondent No. 1 was directed to reimburse the Petitioner’s claim of Rs. 1,13,487.49 within eight weeks, along with interest at the rate of 6% per annum from the date it became due