The Telegraph
Since 1st March, 1999
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SC cheer for insured

New Delhi, July 30: The Supreme Court has held that insurance companies are liable to pay the insured sum to policy-holders even if employers default with payment of premiums in the Salary Savings Scheme.

Under the Salary Savings Scheme of the Life Insurance Corporation of India, several establishments have agreed to pay the premiums of individual employees by deducting the amount from their salaries and depositing it in one cheque.

An employee would know nothing about the correspondence between his company and LIC save the amount cut every month under “deductions” in his salary slip.

In the instant case, one Rajiv Kumar Bhasker had died and his legal heirs claimed his money from LIC under the Salary Savings Scheme. LIC declined to pay on the grounds that Bhasker’s employer did not pay premiums leading to termination of the policy.

But on an appeal from the heirs, the consumer forum and the high court upheld the claim. Then LIC moved the Supreme Court.

The court dismissed the appeal saying LIC would have to pay the amount to the insured and could realise the money from the employer.

Conditions under the Salary Savings Scheme stipulate that “no individual premium due notice” would be sent and the employers act as agents for LIC.

The employer accepts sole responsibility to collect the premium from employees and remit the same by means of one cheque to LIC under the scheme, the court said.

If it failed to remit the premium to LIC, the employee could not be deprived. But LIC would retain the right to recover the default amount from the employer.

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