The Jammu and Kashmir and Ladakh High Court explained on December 30 that "cause of action" in an insurance dispute can also accrue on the date the insured's claim is rejected by the insurance provider. 

The court stated that the Supreme Court had ruled in Kendimalla Raghavaiah & Co. V.s National Insurance Co. and ors that the date on which a fire first breaks out must be the date on which a cause of action first accrues with respect to a fire insurance policy. The cause of action may, in some situations, accrue on more than one occurrence and at a different date, it was noted, but the top court did not mention this.

"... in view of the clear exposition of law by the Hon’ble Supreme court in the case of [M/s Transport Corporation of India Ltd.] V.s Veljan Hydrair Ltd., it is abundantly clear that the cause of action in the case of a contract of insurance shall also accrue on the date the claim, if any, lodged by the insured is repudiated," said the court.

Whether answering a query about when a cause of action to make a complaint as required by the J&K Consumer Protection Act, 1987, accrues in case of loss suffered to the insured car in an accident, the division bench of Justices Sanjeev Kumar and Moksha Khajuria Kazmi made the observations. 

The court was hearing an insurance company's appeal of the decision of the J&K State Consumer Disputes Redressal Commission, Srinagar, which, while hearing an appeal, had reversed the Divisional Consumer Forum's decision to dismiss a complaint because it had expired under section 18-A of the relevant Act.

The division bench, while relying on a Judgement of the high court in Insurance Company Vs. Posnkar Nath Pandita & Sons, observed that a perusal of Section 18-A in its entirety would mean that ordinarily a consumer complaint is required to be filed within two years from the date of accrual of cause of action.

The Divisional Forum or Consumer Commission may, at their discretion, decide to consider a complaint even after the two-year window has passed. This decision must be supported by grounds that must be documented while tolerating the delay, the bench noted. 

In its discussion of the term "cause of action" in relation to Section 18-A of the Consumer Protection Act of 1987, the bench noted that the aggrieved party may have a cause of action with respect to a contract of insurance on the date the contract of insurance is signed, the date an accident involving the insured vehicle occurs, or even the date the insured's claim for indemnification is rejected.

Applying the aforementioned legal theory, the court said that the rejection of the claim cannot be anything other than a reason to file a complaint. The cause of action may arise at many times and places, but for the purposes of calculating the statute of limitations, the date on which the cause of action last arose is what matters. 

After the aforementioned debate, the bench dismissed the appeal, giving the Commission the freedom to continue with the complaint and make a merits-based decision.

Case Title: United India Insurance Company Vs Ghulam Nabi Bhat & Ors.
Citation: OWP No. 278/2013
Link: https://hcservices.ecourts.gov.in/hcservices/cases/display_pdf.php?filename=T2Oj5Y97nX2tmju2FyqIU%2F93E%2FzhctdY6hKnOFux8ghZofughSEYU1Eybs0jTngv&caseno=OWP/278/2013&cCode=2&appFlag=