Insurance Company Cannot Rely on Hidden or Undisclosed Clauses to Deny Compensation: Himachal Pradesh High Court
The Himachal Pradesh High Court has ruled that an insurer cannot invoke exception clauses not disclosed to the insured at the time of policy issuance in order to deny its liability. Upholding the principle of good faith, the Court held that it is the insurer’s duty to clearly inform the insured of all policy clauses.
Relying on the doctrine of blue-pencil (which allows striking off unjust clauses as void from the outset) and the Supreme Court’s precedent in Texco Marketing (P) Ltd. v. Tata AIG General Insurance Co. Ltd. (2023), the bench struck down an undisclosed exception clause and a stamp-affixed condition added later.
In the case United India Insurance Co. Ltd. v. Jamna Devi & others, the deceased, Kesar Singh, working under a contractor, was hit by a vehicle and died. His wife, children, and mother claimed compensation under the Employees’ Compensation Act, 1923. The insurer resisted, arguing that the policy excluded employees of contractors and that the deceased was not among the insured workers.
However, the Court observed that:
Kesar Singh’s name was listed among the insured workers.
The exclusion clause was neither visible nor disclosed at the time the policy was issued and appeared to have been later stamped on.
Even if engaged through a contractor, the principal employer is still liable under Section 12 of the Employees’ Compensation Act, 1923.
Accordingly, the Court held that the insurer cannot rely on hidden or after-added exclusion clauses to shirk its liability and affirmed that the claim must be honoured subject to policy terms properly disclosed.
