The impact of Covid-19 on the global insurance industry – India

India

General questions

Yes/ No/ N/A

Additional comments, if any.

1

Does the country that you are reporting on follow common law jurisprudence?

Yes

2

If the answer to the above question is no, does the country you are reporting on follow a civil code? Please describe the judicial system in short.

India has a hybrid legal system having elements of common law, civil law, equitable law, and customary and religious laws. Having features of both federal and unitary constitutions, the Constitution of India is neither purely federal nor purely unitary, and is widely considered as quasi-federal in nature. The main sources of law are as follows:

• The Constitution of India is the supreme source of law.
• Statutes are enacted by the parliament or the state legislatures. At local level, subordinate delegated legislation (such as rules, regulations and by-laws) is passed by local authorities (such as government departments, municipal corporations, municipalities and gram panchayat).
• In certain aspects, international law, local customs and conventions (usually religious in nature) that are not against any statute or morality are also applicable.
• While technically not law, judicial decisions of superior courts like the Supreme Court of India and High Courts are another important legal source, and have precedential value.

3

Please provide a brief description of the legal framework applicable to insurance coverage disputes in the country you are reporting on. In so doing, please consider the following questions:

The legal framework that covers insurance-related disputes is listed below:

• Insurance Act, 1938;
• Marine Insurance Act, 1963; and
• Insurance Regulatory and Development Authority (IRDA) Act, 1999.

In accordance with the IRDA, the Insurance Regulatory Authority was established as a statutory body to regulate, promote and ensure orderly growth of insurance and reinsurance business as also to protect policy holders’ interests.

4

Does the insured bear the burden of establishing coverage of a claim, or does the insurer bear the burden of establishing no coverage? Please give a short description of the legal basis in your country.

In India, the burden of establishing coverage of a claim rests on the party, whether insured or insurer, who substantially asserts the issue before an adjudicatory authority.

In United India Fire And General Insurance v Kalsum Begum And Ors, the High Court of Gauhati held that the burden of proof in any particular case depends on the circumstances in which the claim arises. The rule is ei qui affirmat, non ei qui negat, incumbil probatio. It is just that the person who invokes the aid of law should be the first to prove their case.

5

Are coverage provisions in policies interpreted broadly or is there a presumption in favour of coverage? Please give a short description of the legal basis in your country.

The Supreme Court of India, in Vikram Greentech India Ltd v New India Assurance Co Ltd, (2009) 5 SCC 599, held that an insurance contract, is a type of commercial transactions and must be construed like any other contract to its own terms and by itself. Since on issuance of insurance policy, the insurer undertakes to indemnify the loss suffered by the insured on account of risks covered by the insurance policy, ‘its terms have to be strictly construed to determine the extent of liability of the insurer. The endeavour of the court must always be to interpret the words in which the contract is
expressed by the parties. The court while construing the terms of policy is not expected to venture into extra liberalism that may result in re-writing the contract or substituting the terms which were not intended by the parties.’ The insured cannot claim anything more than what is covered by the insurance policy.

6

Are exclusions interpreted narrowly or is there a presumption against finding that an exclusion to coverage applies? Please give a short description of the legal basis in your country.

Please refer the response provided to Question 5.

7

Are there universally accepted definitions for:

• event
• occurrence
• damage
• cause
• originating cause
• natural peril
• force majeure
• loss
• consequential loss

If the answer is yes, please give a short description of each definition and the legal basis for that definition (ie, a rule of law, case law etc).

The term ‘damages’ has not been defined under India’s statutes. However under Section 73 of the Indian Contract Act, 1872 the party, who breaches a contract, is liable to compensate the injured party for any loss or damage caused, due to the breach of contract. According to Section 73, the burden of proof is on the injured person to show that they have actually suffered damages.

The term ‘consequential loss’ has not been defined under any of the Acts of India, however ‘consequential damage’ has been defined under Section 73 of the Indian Contract Act, 1872 as damages that are mainly associated with the pecuniary loss suffered by the party such as the delay in prospective profits if the breach would not have occurred or the expenses incurred by the injured party in order to rectify the injury or harm caused due to the breach of agreement. It arises due to the existence of certain special circumstances.

The other terms do not have a universally accepted definition and are determined case by case and contract by contract.

Loss causation

Yes/No/N/A

Additional comments, if any.

8

Did the country that you are reporting about issue lockdown, stay-at-home or no-travel restrictions in response to Covid-19?

Yes

The Ministry of Home Affairs (MHA), Government of India issued an order dated 24 March 2020 vide order no 40-3/2020-DM-I(A), wherein a nationwide lockdown was initially imposed for a 21-day period until 14 April 2020. All transport, industrial establishments, commercial and private establishments and hospitality services were closed, with only essential services unaffected.

Subsequently, as phase two of the lockdown, MHA eased the restriction in various phases. On 15 April 2020 the MHA issued an order under which agriculture activities, movement of care and some industrial activities were permitted.

As phase three of the lockdown, MHA issued another order on 4 May 2020 where construction activities and movement of vehicles for selected activities were allowed. On 18 May 2020 MHA issued an order under which the movement of vehicles was allowed.

9

If the answer to the question above is yes, were such orders issued nationally, by state/region or by local city/town. Please give a short description of the issuing authority and the orders issued.

Yes

The Ministry of Home Affairs, Government of India issued an order dated 24 March 2020 vide order no 40-3/2020-DM-I(A) which imposed a lockdown initially for a 21-day period until 14 April 2020, later further extended to 31 May 2020.

Various states also issued their own particular orders from time to time.

10

If the answer to the above question is yes, were the lockdown, stay-at-home or no-travel restrictions mandatory or recommended?

Yes

The lockdown, stay-at-home and no-travel restrictions were mandatory.

11

If the country that you are reporting about did issue lockdown, stay-at-home or no-travel restrictions, were those orders suspended or revoked at any point in time? If the answer is yes, please give a short description of the timeline.

Yes

Please refer to the response given to Question 8.

12

If the answer to the above question is yes, were subsequent lockdown, stay-at-home or no-travel restrictions issued at any point in time? Please give a short description of the timeline.

Yes

The Government of India did not issue any nationwide lockdown after the first wave of Covid-19. However, the state governments were issued with guidelines to impose lockdowns in their respective states.

13

Has the country that you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is a ‘cause’ of insured loss?

No

14

Has the highest court in the country you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is a ‘cause’ of insured loss? If the answer is yes, please give a short description of the conclusions in the judicial opinions or guidance.

No

15

If the answer to the question above is yes, did the highest court in the country you are reporting about determine that losses related to Covid-19 were ‘caused’ by the virus? Please give a short description of the conclusions in the judicial opinions or guidance.

No

16

If the answer to the above question is no, did the highest court in the country you are reporting about determine that losses related to Covid-19 were ‘caused’ by government lockdown or stay-at-home orders? Please give a short description of the conclusions in the judicial opinions or guidance.

N/A

17

Has the country that you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is an ‘originating cause’ of insured loss? If the answer is yes, please give a short description of the conclusions in the judicial opinions or guidance.

No

18

If the highest court in the country you are reporting about has not issued judicial opinions or guidance analysing whether Covid-19 is a ‘cause’ of insured loss, have other courts in the country issued such opinions?

No

The subordinate courts follow the same principle of not rewriting or creating a new contract between the parties through its interpretative process. The court must simply apply the terms and conditions of the agreement as agreed between the parties.

19

If the answer to the above question is yes, have courts in the country you are reporting on interpreted this issue consistently? In other words, is there uniformity in jurisprudence as to whether Covid-19 is a ‘cause’ of insured loss? Please give a short description of the conclusions in the judicial opinions or guidance.

N/A

20

If the answer to the above question is yes, do courts in the country you are reporting about hold that losses related to Covid-19 were ‘caused’ by the virus? Please give a short description of the conclusions in the judicial opinions or guidance.

N/A

21

If the answer to the above question is no, do courts in the country you are reporting about determine that losses related to Covid-19 were ‘caused’ by government lockdown or stay-at-home orders? Please give a short description of the conclusions in the judicial opinions or guidance.

N/A

22

Has the highest court in the country you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is an ‘originating cause’ of insured loss?

No

23

If the highest court in the country you are reporting about has not issued judicial opinions or guidance analysing whether Covid-19 is an ‘originating cause’ of insured loss, have other courts in the country issued such opinions? If yes, please give a short description of the conclusions in such judicial opinions or guidance.

No

24

Has the country that you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is a covered ‘event’?

In light of the Covid-19 pandemic, the Insurance Regulatory and Development Authority of India advised Insurers to design appropriate health insurance products covering risks arising from Covid-19, issuing the following guidance in relation to health insurance products:

• General and Health Insurers were asked to devise comprehensive health insurance policies to enable all employers and organisations to comply with the directions issued under the Ministry of Home Affairs’ Order of 15 April 2020 regarding containment of the pandemic and the extension of lockdown measures.
• Insurers were allowed to offer Covid-19 related short-term health insurance policies until March 2021.
• Subsequently, in July 2020, General and Health Insurers were directed to mandatorily offer standardised individual health insurance products covering Covid-19, namely the Corona Rakshak product and Corona Kavach product.

25

Has the highest court in the country you are reporting about issued judicial opinions or guidance analysing whether Covid-19 is a covered ‘event’? Please give a short description of the conclusions in the judicial opinions or guidance.

No

The High Court of Madras, in the case of R Narayanan v The Government of Tamil Nadu, noted that Covid-19 was justified to be treated as a force majeure event. The question was whether treating the lockdown as a force majeure event would be justified, notwithstanding the contractual stipulation that cast a duty on the petitioner to ensure the absolute performance of the contract.

The High Court answered in the affirmative, noting that force majeure is defined as an ‘event outside the control of the parties, which prevents one or both of the parties from performing their contractual obligations.’ The Court further noted that the government itself chose to treat the lockdown as a force majeure event by offering relaxations in the licence fee for the period 1 April to 31 May 2020. 

26

If the answer to the question above is yes, did the highest court in the country you are reporting about determine that losses related to Covid-19 were covered ‘events’? Please give a short description of the conclusions in the judicial opinions or guidance.

N/A

27

If the highest court in the country you are reporting about has not issued judicial opinions or guidance analysing whether Covid-19 is a covered ‘event’, have other courts in the country issued such opinions?

No

28

If the answer to the above question is yes, have courts in the country you are reporting on interpreted this issue consistently? In other words, is there uniformity in jurisprudence as to whether Covid-19 is a covered ‘event’? Please give a short description of the conclusions in such judicial opinions or guidance.

N/A

29

If the answer to the above question is yes, do courts in the country you are reporting about hold that losses related to Covid-19 are covered ‘events’? Please give a short description of the conclusions in the judicial opinions or guidance.

No

30

If the answer to any of the above questions regarding your country’s jurisprudence was no, please comment on whether there are any other official sources or authorities that have issued contributions to the interpretation of Covid-19 in the context of loss causation.

No

Aggregation of claims                           

Yes/ No/ N/A

Additional comments, if any.

31

Does the country you are reporting on permit aggregation of claims arising out of a single originating cause? Please give a short description of the legal basis.

In the event that multiple covered claims are made by the insured in the course of the policy year, the insurer is liable to indemnify the insured until such time as the limit of liability set out under the policy is exhausted.

There can therefore be no predetermined number of covered occurrences to which a policy may respond, and the number of occurrences that trigger coverage under the policy is solely determined by the limit of liability set out under the policy and the time at which such sum is exhausted. There are certain policies that make the deductible applicable individually to each and every loss that arises under the policy.

32

Does the country you are reporting on permit aggregation of claims arising out of a single cause? Please give a short description of the legal basis.

No

33

Does the country you are reporting on permit aggregation of claims arising out of a single event? Please give a short description of the legal basis.

No

34

Does the country you are reporting on use an accepted test for determining whether claims can be aggregated? For example, does the country you are reporting on apply to four unities test to determine whether aggregation is appropriate? Please give a short description of the legal basis.

No

35

Have courts in the country you are reporting on issued jurisprudence concerning whether insureds can aggregate claims arising out of Covid-19? Please give a short description of the legal basis.

No

36

Has the highest court in the country you are reporting about issued judicial opinions or guidance concerning whether insureds can aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

No

37

If the answer to the question above is yes, did the highest court in the country you are reporting about determine whether insureds can aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

No

38

If the highest court in the country you are reporting on has not issued such jurisprudence, have other courts in the country you are reporting on interpreted this issue consistently? In other words, is there uniformity in jurisprudence as to whether insureds may aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

No

39

If the answer to the above question is yes, do courts in the country you are reporting about permit insureds to aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

No

40

Do the courts in the country you are reporting on permit an insured to aggregate claims related to multiple properties or business locations arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

No

41

Do the courts in the country you are reporting on permit an insured to aggregate claims related to multiple lockdown or stay-at-home orders arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

No

42

Have courts in the country you are reporting on issued jurisprudence concerning whether cedents can aggregate claims arising out of Covid-19? Please give a short description of the legal basis.

No

43

If the answer to the above question is yes, have courts in the country you are reporting on interpreted this issue consistently? In other words, is there uniformity in jurisprudence as to whether cedents may aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

No

44

If the answer to the above question is yes, do courts in the country you are reporting about permit cedents to aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

No

45

If the answer to any of the above questions regarding your country’s jurisprudence was no, please comment on whether there are any other official sources or authorities that have issued contributions to the interpretation of Covid-19 and aggregating claims.

No

Property damage

Yes/ No/ N/A

Additional comments, if any.

46

Have courts in the country you are reporting on issued jurisprudence concerning whether losses arising from Covid-19 qualify as property damage losses? Please give a short description of the legal basis.

No

47

Has the highest court in the country you are reporting about issued judicial opinions or guidance concerning whether losses arising from Covid-19 qualify as property damage losses? Please give a short description of the conclusions in such judicial opinions or guidance.

No

48

If the answer to the question above is yes, did the highest court in the country you are reporting about determine whether losses arising from Covid-19 qualify as property damage losses? Please give a short description of the conclusions in such judicial opinions or guidance.

No

49

If the highest court in the country you are reporting on has not issued such jurisprudence, have other courts in the country you are reporting on interpreted this issue consistently? In other words, is there uniformity in jurisprudence as to whether losses arising from Covid-19 constitute property damage? Please give a short description of the conclusions in such judicial opinions or guidance.

No

50

If the answer to the above question is yes, do courts in the country you are reporting about permit insureds to aggregate claims arising out of Covid-19? Please give a short description of the conclusions in such judicial opinions or guidance.

No

51

If the answer to any of the above questions regarding your country’s jurisprudence was no, please comment on whether there are any other official sources or authorities that have issued contributions to the interpretation of Covid-19 and property damage.

Exclusions

Yes/ No/ N/A

Additional comments, if any.

52

Has Covid-19 been deemed a ‘natural peril’ in the country you are reporting on? Please give a short description of the legal basis and relevant jurisprudence.

In its response to Covid-19 on 24 March 2020, India issued Orders prescribing lockdown for containment of Covid-19 referring to it as an ‘epidemic’ in the country. The Government of India has also invoked powers under the Epidemic Diseases Act, 1897 to enhance preparedness and containment of the virus and all the states and Union Territories of India have been advised to invoke the provisions under Section 2 of the Epidemic Disease Act 1897, which includes special measures to be taken by the Centre to ‘prescribe regulations as to dangerous epidemic disease’. Subsequently, multiple states such as Karnataka, Haryana and the National Capital Territory of Delhi declared Covid-19 as an ‘epidemic’.

In addition, various states such as Karnataka, Haryana and the National Capital Territory of Delhi had declared Covid-19 as an ‘Epidemic’. The Government of India also believes that the spread of Covid-19 falls within the definition of ‘Acts of God’ like a ‘natural calamity’. It has recently clarified that for the purposes of considering disruption of the supply chains due to spread of Covid-19, in China and other countries, Covid-19 may be considered as a ‘natural calamity’ and force majeure clauses may accordingly be invoked.

Ministry of Finance Vide Order No OM No 18/42020-PPD dated 19 March 2020 inter alia stated that ‘A force majeure means an extraordinary events or circumstances beyond human control such as an event described as an Act of God (like natural calamity)’ and has clarified that the spread of Covid-19 should be considered as a case of natural calamity and force majeure may be invoked. In continuation of the above Government of India clarification the Ministry of Shipping, Government of India, vide its Order No PD-1313312020-PPP/e-339106 dated 20 March 2020 and Letter dated 24 March 2020 intimated that the major ports in the country that the Covid-19 pandemic can be considered as a ‘natural calamity’ which would entitle the invocation of force majeure clauses under various contracts.

While such guidance may not be universally applicable as law, it may still have persuasive strength in interpreting contracts with the Government of India, which are based on common procurement guidelines. Such an observation may be considered a possible tool for interpretation on the grounds of contemporanea exposito, that is, contemporaneous construction which the authorities have put on the law entitled to considerable weight and is highly persuasive.

53

Has Covid-19 been deemed force majeure in the country you are reporting on? Please give a short description of the legal basis and relevant jurisprudence.

Yes

The Delhi High Court’s judgment in M/s Halliburton Offshore Services Inc vs Vedanta Limited O M P (I)(COMM) No 88/2020 was one of the earliest judgments wherein Covid-19 was specifically held to be a force majeure event. However, the court prescribed a caveat by observing that whether Covid-19 would justify non-performance or whether the non-performance is a breach of a contract, has to be examined on the facts and circumstances of each case, and only in genuine cases where the party was prevented or could justify its non-performance because of the epidemic/pandemic, the recognition of Covid-19 as force majeure event would be justified. The judgment also holds that a force majeure clause has to be interpreted narrowly and if there is a breach from before the Covid-19 period, then the party will not be entitled to take the benefit of the force majeure clause.

54

Is Covid-19 acknowledged as a notifiable disease in the country you are reporting on? Please give a short description of the legal basis and relevant jurisprudence.

Yes

In order to classify any disease including Covid-19 as ‘notifiable disease’ in the States/Union Territories where a dedicated Public Health Act is in place, a notification to that effect must be issued by the Central/State Government.

In view of the above provisions of law, various state governments have declared Covid-19 to be a notifiable disease, including:

• Vide Notification No G O (Ms) No 95, dated 13 March 2020, the Government of Tamil Nadu declared Covid-19 a ‘notifiable disease’ in the State of Tamil Nadu.
• Vide Notification No 23/20/2014-I/PHD/Part IV/552, dated 13 March 2020, the Government of Goa declared Covid-19 a ‘notifiable disease’ in the State of Goa.
• Vide Notification No 197, dated 7 March 2020, the Government of Madhya Pradesh declared Covid-19 a ‘notifiable infectious disease’ in the State of Madhya Pradesh.
• Most other states including Punjab, Haryana, Delhi, Maharashtra, Kerala and Gujarat do not have a dedicated Public Health Act in place. Therefore, a specific notification issued by these governments declaring Covid-19 as a notifiable disease may not be available.

However, it may be noted that the Covid-19 Regulations issued under the provisions of the Epidemic Diseases Act, 1897 by most of these states including Punjab, Haryana, Delhi, Kerala, Gujarat, Maharashtra, etc provides that all information on suspected/confirmed Covid-19 cases shall be immediately recorded and reported to the concerned local authorities and/or the State Integrated Surveillance Unit. Furthermore, these Covid-19 Regulations provide that any person failing to comply with them shall be deemed to have committed an offence punishable under Section 188 of the Indian Penal Code, 1860.

It appears from the general definition of ‘notifiable diseases’ that the essentials of a ‘notifiable disease’ are that: (1) it is required to be reported by law; (2) there is collation of such reported information facilitates monitoring and containment of such disease; and (3) failure to report the notifiable disease is an offence under law.

Accordingly, in view of the above relevant legal provisions, Notifications and Regulations issued by various states including Regulations directing to immediately report the cases of Covid-19, it appears that Covid-19 would fall under the definition of ‘notifiable diseases’.

55

Is it common for insurance policies issued in the country you are reporting on to include a pandemic or virus exclusion? Please give a short description of the legal basis and common insurance practice.

No

It is not common for insurance policies issued in India to include a pandemic or virus exclusion. However, in light of the Covid-19 pandemic, the Insurance Regulatory and Development Authority of India (IRDAI) has issued guidelines to include a pandemic or virus exclusion and for introduction of Short-Term Health Insurance Policies providing coverage for Covid-19 disease. These short-term policies are offered to individual as well as to group products.

56

Have any courts in the country you are reporting on determined that a pandemic or virus exclusion is void as against public policy in the context of Covid-19? Please give a short description of the legal basis and relevant jurisprudence.

No

57

Have any courts in the country you are reporting on otherwise determined that a pandemic or virus exclusion is unenforceable in response to Covid-19? Please give a short description of the legal basis and relevant jurisprudence.

No

58

If the answer to any of the above questions regarding your country’s jurisprudence was no, please comment on whether there are any other official sources or authorities that have issued contributions to the interpretation of Covid-19 in the context of exclusions.

N/A

Regulatory oversight

Yes/No/N/A

Additional comments, if any.

59

Have insurance regulators in the country you are reporting on issued directives concerning coverage for claims arising out of Covid-19? Please describe the regulations that have been implemented.

Yes

In order to alleviate the hardships that may be caused to policyholders, the Insurance Regulatory and Development Authority of India issued the following directives regarding the claims reported under Covid-19 via its Notification no IRDAI/HLT/REG/CIR/054/03/2020, dated 4 March 2020:

• Where hospitalisation is covered in a product, insurers shall ensure that the cases related to Corona virus disease (Covid-19) shall be expeditiously handled.
• The costs of admissible medical expenses during the course of treatment including the treatment during quarantine period shall be settled in accordance to the applicable terms and conditions of policy contract and the extant regulatory framework.
• All the claims reported under Covid-19 shall be thoroughly reviewed by the claims review committee before repudiating the claims.
• In order to provide need based health insurance coverage, insurers shall introduce products for various specific diseases including vector borne diseases. For the purpose of meeting health insurance requirements of various sections, insurers shall also design products covering the costs of treatment for Covid-19.

60

Are regulators requiring or encouraging insurers to provide grace periods to insureds to make payments on premiums? If yes, please give a short description of the legal basis and relevant guidance.

Yes

In the interest of smooth operation of affairs during the Covid-19 pandemic, the Insurance Regulatory and Development Authority of India (IRDAI) had permitted following relaxations: (1) in case of life insurance policies, a grace period of 30 additional days for payment of renewal of premiums has been provided, if desired by the policyholders and; (2) in case of health insurance policies, the insurers may condone delay in renewal up to 30 days without deeming such condonation as a break in policy. However, insurers are requested to contact the policyholders well in advance so as not to have coverage discontinued.

Government action

Yes/No/NA

Additional comments, if any.

61

Has the government in the country you are reporting on implemented relief measures for losses sustained as a result of Covid-19?

Yes

The Insurance Regulatory and Development Authority of India (IRDAI) has issued various instructions in light of the impact of Covid-19 on policyholders as well as Insurers, inter alia, in relation to:

• setting up of helplines and providing applicable disclosures;
• offering settlement options under unit linked policies;
• admissibility of life insurance claims;
• settlement of Covid-19-related claims (including hospitalisation treatment and use of make-shift or temporary hospitals) and provision of cashless facilities;
• ensuring availability of adequate capital and rationalising expenses of management for the financial year 2020-21;
• maintenance of business continuity plan and role of crisis management committee in monitoring the current situation on a real time basis;
• rescheduling of payments under term loans and collection of premium in instalments; and
• relaxation of timelines for grace period, regulatory filings, public disclosures, and other compliance.

62

If the answer to the above question is yes, are the relief measures available to both individuals and businesses?

Yes

Yes, the relief measures are available to both individuals and businesses.

63

Briefly describe the types of relief measures available to individuals and businesses.

Please see response to Question 61.