TOPIC: BURDEN OF PROFF IN INSURANCE DISPUTES

FINAL DRAFT OF LAW OF INSURANCE

Submitted by:- Submitted to:-

Priyanka Kumari Ms. Nidhi Kumari

Roll No: 1752 Assistant Professor of Law

4th year, 8th Sem

B.A, LL.B, Section A

APRIL, 2021
CHANAKYA NATIONAL LAW UNIVERSITY
NYAYA NAGAR, MITHAPUR, PATNA-1

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 ACKNOWLEDGEMENT

Writing a project is one of the most significant academic challenges, I have ever faced. Though
this project has been presented by me but there are many people who remained in veil, who
gave their all support and helped me to complete this project.
First of all I am very grateful to my subject teacher, Nidhi Ma’am, without the kind support of
whom and help, the completion of the project was a herculean task for me. He donated his
valuable time from his busy schedule to help me to complete this project and suggested me
from where and how to collect data.
I am very thankful to the librarian who provided me several books on this topic which proved
beneficial in completing this project.
I acknowledge my friends who gave their valuable and meticulous advice which was very
useful and could not be ignored in writing the project. Last but not the least, I am very much
thankful to my parents and family, who always stand aside me and helped me a lot in accessing
all sorts of resources.
I thank all of them !

Priyanka Kumari
Roll No. 1752,
Sem-8th

B.A, LL.B. (Hons.)

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Aims and Objectives:

The objective of the researcher is to:

1. have a deep analysis of the concept of burden of proff.

2. analyze the nature of life insurance policies and disputes.

Hypothesis:
The researcher believes that the insured has the burden of proof to demonstrate that a loss is
covered under the policy.

Research Methodology:
For the purpose of research, the researcher will rely or depend upon the doctrinal method of
research.

Sources of data:
The secondary sources include books, research papers, articles, journals and other online
materials.

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 Table of Contents

Chaper 1: Introduction ............................................................................................................... 5

chapter 2: Burden of Proff in insurance disputes……………………………………………………………………………..7

Chapter 3: Case Analysis ......................................................................................................... 10

Chapter 4: Conclusion.............................................................................................................. 12

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 Chapter 1: Introduction

The concept of insurance has been prevalent in India since ancient times amongst Hindus.
Overseas traders practised a system of marine insurance. The joint family system, peculiar to
India, was a method of social insurance of every member of the family on his life. The law
relating to insurance has gradually developed, undergoing several phases from nationalisation
of the insurance industry to the recent reforms permitting entry of private players and foreign
investment in the insurance industry.1

The profits and loss of a person carrying on the business of insurance are to be computed
separately from the profits and gains from any other business. Though the profits of life
insurance business are to be computed separately from the profits of non-life insurance business
or other business carried on by the assessee, any loss incurred in life insurance business can be
set off against profits of non-life insurance business or other business. In computing the profits
of life insurance business, the profits and gains of the business is taken to be the annual average
of the “surplus”. This surplus is arrived at by adjusting the surplus or deficit disclosed by the
actuarial valuation made in respect of the last inter-valuation period ending before the
commencement of the assessment year. The tax payable, computed in the manner stated above,
will be reduced by tax withheld at source for income from interest on securities in respect of
annual average of income tax.2 In computing the profits of any business other than life
insurance, the profits and gains is taken to be the balance of the profits disclosed in the annual
accounts.

Life insurance is a contract between an insurer and a policyholder in which the insurer
guarantees payment of a death benefit to named beneficiaries upon the death of the insured.
The insurance company promises a death benefit in consideration of the payment of premium

1
Insurance Law Regulations in India, available at:
http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Insurance_Law_-_Regulations_in_India.pdf, (Visited
on April 13, 2018).

2
Ibid.

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by the insured.3 The purpose of life insurance is to provide financial protection to surviving
dependents after the death of an insured. It is essential for applicants to analyze their financial
situation and determine the standard of living needed for their surviving dependents before
purchasing a life insurance policy.

Burden of proof is a legal standard that requires parties to demonstrate that a claim is valid or
invalid based on facts and evidence presented. Burden of proof is typically required of one
party in a claim, and in many cases the party that is filing a claim is the party that must
demonstrate that the claim is valid and carry the burden of proof.

Life insurance doesn't necessarily mean that you have to keep paying the premium every year.
There are single premium life insurance (SPLI) policies as well, which provide similar benefits
of protection and savings as the regular premium ones. The term of SPLI policies is usually 10
years, but one can exit after five years.4 Being a life insurance policy, SPLI too qualifies for
tax benefits, both under Section 80C (at the time of investment) and for making the maturity
proceeds tax-free under Section 10(10D).

3
Developing Life Insurance in the enomies in transition, available at:
http://www.oecd.org/finance/insurance/1857819.pdf, (Visited on April 15, 2018).

4
Single Premium Life Insurance Policy, available at: https://economictimes.indiatimes.com/wealth/insure/is-
your-single-premium-life-insurance-policy-eligible-for-tax-benefits/articleshow/57427124.cms, (Visited on
April 17, 2018).

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 Chapter 2: Burden of Proff in Insurance Disputes

Our criminal justice system functions around the concept that every accused individual is
innocent until proven guilty. The concept of “burden of proof” means that the accuser must
provide evidence supporting his or her claims. The accused doesn’t necessarily have to prove
his or her innocence – the accuser must prove the accused is guilty. The reason for these laws
is to ensure that individuals aren’t wrongfully convicted of crimes and not sentenced based
solely on conjecture and circumstantial evidence. The same logic applies to our civil system.
The plaintiff must show that the defendant is liable for whatever actions (or inactions) are
alleged. Furthermore, the concept of burden of proof not only applies to disputes between
individuals, but also has bearing in almost any type of official legal dispute – including
insurance claims5.

The burden of proof requirement is designed to ensure that legal decisions are made based on
facts rather than by conjecture6. As a result, the party bringing a case or lawsuit to court must
often back up their claims with facts and evidence, physical or otherwise.

As in all civil cases, the ruling is based on a preponderance of the evidence—i.e. more than
50% of the evidence provided must point to something useful in determining whether the
case should proceed7. Burden of proof and collection of evidence is part and parcel that
lawyers engage in to collectively bill millions of hours for every year.

In insurance, it is used in the courts to determine whether a loss is covered by a insurance

policy. Typically, the insured has the burden of proof to demonstrate that a loss is covered
under the policy, while the insurer has the burden of proof to demonstrate that a loss was
excluded under the terms of the policy contract8.

5
https://www.surranoinsurancebadfaith.com/what-is-burden-of-proof-and-how-does-it-apply-to-insurance-bad-faith-cases/

6
Ibid

7
https://www.investopedia.com/terms/b/burden-proof.asp

8
Ibid

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Sorting Out Insurance Claim Responsibility
Insurance companies will often use the courts to determine which company is responsible for
providing coverage when more than one insurer is involved9. This situation occurs in
circumstances in which the insured has several different policies covering similar or related
risks or when one party's insurance company sues another, for instance in the case of a car
accident involving two or more vehicles.

The insurers are required to demonstrate either that the loss was caused by an event that was
not covered under the policy, or that another insurance company is responsible for the
coverage. The courts may decide that a particular policy is responsible for providing
coverage, but may also determine that the different insurers are responsible for a portion of
the loss.

Providing information to prove that insurance coverage applies can be complicated. For
example, a homeowner's house is destroyed during a hurricane. The homeowner’s policy may
provide coverage for losses caused by wind, but not by water. The insured must prove that
the destruction was caused by wind damage, while the insurer will try to prove that the
damage was caused by water. The courts may find that both types of risk caused the damage.

In a fair number of insurance cases that get to court,negligence is alleged. This has been
defined as the failure to exercise reasonable care. Insurers will try to prove that the insured
failed to do something a reasonable person would do, or conversely, did something a
reasonable person wouldn't do.

Insurance companies essentially sell a promise to pay their clients for covered losses. If they
attempt to argue with the insured about the covered damages or the amount of a claim, they
must do so in good faith and make every effort to honor the insured’s policy. If an insurance
claim agent denies a policy or refuses to pay the full policy amount, he or she must provide a
clear and reasonable explanation for such actions.

BAD FAITH LAWSUITS

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https://www.surranoinsurancebadfaith.com/what-is-burden-of-proof-and-how-does-it-apply-to-insurance-bad-faith-cases/

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If an insurance company receives a letter claiming bad faith, the company will more than
likely attempt to avoid a lawsuit by reviewing the case and offering a better settlement—if
it’s warranted. If the case goes to trial, the insured must provide evidence of his or her claim
of bad faith. This could include written correspondence between the insured and the
insurance claim agent or testimony concerning the conversations that the insured had with the
agent. Typically, if the insurance company suspects that a claimant’s assertion that the
company is acting in bad faith holds any water, they will offer a more attractive settlement. If
you find yourself embroiled in insurance claim difficulties, it’s vital to understand your rights
and the insurance company’s obligations. If you believe your insurer is acting in bad faith,
the best thing you can do is to consult with an attorney. Most insurance companies will make
every effort to avoid a bad faith lawsuit. If you believe your claim is worth more than their
offer, consulting with an attorney is a great way to take steps toward a fair settlement.

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 Chapter 3: Case Analysis

1. Life Insurance Corporation vs Parvathavardhini Ammal10

The Life Insurance Corporation of India (Unit: The Oriental Government Security Life
Assurance Co., Ltd, Bombay) hereinafter called the Company is the appellant in this
appeal. The respondent, Srimathi Parvathavardhini Ammal, is the widow of one V. S.
N. C. Narasimhan Chettiar, (hereinafter referred to as the assured or V. S. N. C.), has
filed the suit O. S. No. 62 of 1958 on the file of the sub-Court, Tiruchirapalli to recover
a sum of Rs. 20,000 due under an insurance policy No. 1733287 dated 22-5-1954 and
a sum of Rs. 30,000 due under another insurance policy No. 1855372 dated 26-3-1955
on the ground that the said policies were accepted at the ordinary rate by the Insurance
company certifying the life of V. S. N. C. Aforesaid as a first class one by four eminent
doctors of the company, that the plaintiff (respondent) was the nominee under the
aforesaid two policies, that the said assured died on 20-5-1955, on account of coronary
thrombosis which attack set in on 17-5-1955, and that the Insurance company had
wrongfully repudiated the claim of the plaintiff on 26-11-1957.
The learned Subordinate Judge, in a very carefully considered judgment fully analysed
the oral and documentary evidence adduced on both sides and came to the conclusion
that the defendant company not only had not discharged the burden but that the plaintiff
had satisfactorily proved that V. S. N. C. the deceased was not guilty of any fraudulent
misrepresentation or suppression of material and important facts when he made the
proposals for insurance which were accepted by the company. We have ourselves
carefully scrutinised the evidence, both oral and documentary, bearing upon the three
relevant aspects mentioned above, and we are glad to say that the learned Subordinate
Judge's perspective of approach and his assessment or the oral and documentary
evidence are quite sound and satisfactory. We have no hesitation in accepting,
completely, his reasoning and conclusions. As we will presently show this is one of
those cases in which not only the defendant company has totally failed to discharge the
burden arising under section 45 of the Insurance Act, but the plaintiff has positively

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AIR 1965 Mad 357

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 proved that the policy was not vitiated by any of the circumstances mentioned in section
45 of the Act.

2. All India General Insurance Co. Ltd. v. S. P. Maheswari,11 a recent Bench judgment,
to which one of us was a party for the statement of the law regarding the scope of section
45 and the measure of the burden of proof cast upon the assured. In that case the assured
took a policy on 2-1-1948 and died on 13-6-1948 within the two years period and the
question arose as to how far the failure of the assured to disclose that the assured was
addicted to drinking habits and was having syphilis could entitle the Insurance
Company to repudiate the policy. On the facts the learned Judge took the view that there
was a fraudulent and deliberate suppression of material facts and there was no question
of the applicability of the rule of special burden embodied in section 45.

11
AIR 1960 Mad 484

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 Chapter 4: Conclusion

The researcher concludes that the hypothesis of this research paper proffs to be true that is the
insured has the burden of proof to demonstrate that a loss is covered under the policy, while
the insurer has the burden of proof to demonstrate that a loss was excluded under the terms of
the policy contract. The same has been proofed in the case mentioned above. In the case of All
India General Insurance Co. Ltd. v. S. P. Maheswari12 it was held that the burden of proof lies
on assured.

Life insurance policies may serve as good tax planning tools since the premium which is paid
by policy holders is something that is eligible for certain tax benefits that are listed under
Section 80C in the Income Tax Act of 1961. The Maturity Proceeds are also likely to be eligible
for exemption as per the provisions Section 10(10A)(iii) which tells that income from any
payment in commutation of pension received from a fund under clause (23AAB) is not
included in total income of the assessee.

Lastly,Insurance is going to develop rapidly in future. The main challenge is to see that it
benefits the poor and the weak in terms of better coverage and health services at lower costs
without negative aspects of cost increase and overuse of procedures and technology in
provision of health care.The point of discussion also arose at what extent they are able to proof
there also as they lack in the earning and so at what extent they will be able to afford legal
expenses. In this case it will be gateway to skip from the liablity for the company as vulnerable
group has to proof the burden lies on him.

12
AIR 1960 Mad 484

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 BIBLIOGRAPHY

 Statutes:
1. The Insurance Act ,1938.

 Articles:
1. S P Subhedar- Taxation of Life Insurance Business – Some Issues.
2. J Anita- Emerging Health Insurance in India – An overview.

 Websites:
1. www.brookings.edu
2. www. nhp.gov.in
3. www.oecd.org
4. www.actuariesindia.org
5. https://www.surranoinsurancebadfaith.com/what-is-burden-of-proof-and-how-
does-it-apply-to-insurance-bad-faith-cases/
6. https://www.investopedia.com/terms/b/burden-proof.asp

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