Widows, heirs entitled to interest on delayed insurance payouts: LHC

The Lahore High Court has upheld the right of widows and legal heirs of deceased policyholders to receive statutory interest on delayed group insurance payments, dismissing four appeals filed by State Life Insurance Corporation of Pakistan, 24NewsHD TV reported on Saturday.

Justice Raheel Kamran issued a detailed 13-page judgment, maintaining that widows and families of deceased policyholders are entitled to an additional five percent interest on delayed insurance payments.

The court ruled that providing financial protection to consumers in cases of delayed payment is a fundamental objective of the law. It stated that insurance companies are legally bound to pay interest if claims are not settled within 90 days.

Justice Raheel Kamran issued the ruling in insurance disputes dating back to the late 1990s involving widows and heirs of deceased State Life employees and sales officers.

According to the judgment, the corporation had initially rejected the group insurance claims, forcing the families to pursue lengthy litigation before the Wafaqi Mohtasib, the president, insurance tribunals, and courts over several years.

Although the principal insurance amounts were later paid following intervention by the ombudsman and courts, State Life refused to pay statutory interest on delayed settlements under Section 47B of the Insurance Act, 1938.

Trial courts had earlier ruled in favour of the claimants and ordered the insurer to pay interest at a rate five percent higher than the prevailing bank rate from the date of death of each insured person until payment of the amount.

State Life challenged the rulings, arguing that Section 47B had become ineffective after being declared repugnant to Islamic injunctions by the Federal Shariat Court and later upheld by the Supreme Court’s Shariat Appellate Bench.

However, the high court rejected the argument, stating that the insurer’s reliance on earlier judgments was misplaced because those rulings were later set aside in review proceedings and remanded for fresh determination.

Justice Kamran also noted that implementation of the Federal Shariat Court’s later judgment on interest-related laws had been deferred until Dec. 31, 2027.

The court observed that the insured individuals had died and their claims had arisen when Section 47B remained fully enforceable, giving beneficiaries vested statutory rights protected under Section 6 of the General Clauses Act despite the later repeal of the Insurance Act, 1938.

The judge further rejected objections related to limitation and maintainability, observing that the claimants had pursued legal remedies in good faith amid uncertainty over the appropriate legal forum for insurance disputes.

The court ultimately dismissed all four appeals filed by State Life and upheld the decrees in favour of the widows and heirs of Riyaz Hussain, Aslam Shah, Syed Alamdar Hussain Taqi, and Muhammad Azam.