Insurer to indemnify third parties even if cheque for premium is dishonoured: SC

The Supreme Court of India clarified that where insurance policy is issued by an authorized insurer on receipt of cheque towards payment of premium and such cheque is returned dishonoured, the liability of authorized insurer to indemnify third parties in respect of the liability which that policy covered subsists unless the policy of insurance is cancelled by the authorized insurer and intimation of such cancellation has reached the insured before the accident.

The Court said “In other words, where the policy of insurance is issued by an authorized insurer to cover a vehicle on receipt of the cheque paid towards premium and the cheque gets dishonored and before the accident of the vehicle occurs, such insurance company cancels the policy of insurance and sends intimation thereof to the owner, the insurance company’s liability to indemnify the third parties which that policy covered ceases and the insurance company is not liable to satisfy awards of compensation in respect thereof.”

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