Court quashes IRA notice cancelling Trident, Corporate Insurance policies

The High Court has invalidated a notice issued by the Insurance Regulatory Authority (IRA) that sought to cancel existing insurance policies held by customers of Trident and Corporate Insurance Companies. The court ruled that the IRA did not have the authority to invalidate these policies simply because the insurers were placed under statutory management.

According to the court, Section 67C of the Insurance Act governs the role of a statutory manager, whose job is to stabilize the insurer and protect policyholders, not to automatically terminate existing insurance contracts.

The court held that the statutory manager's role is to determine whether an insurer should be revived or liquidated, within the statutory framework. The court found that the Commissioner of Insurance had exceeded their powers when issuing the notice, as it was not part of their statutory mandate to cancel policies. Furthermore, the court found that the manner in which the directive was issued was flawed, as affected policyholders were not given the chance to be heard or provided with reasons for the decision, thereby violating the constitutional guarantee of fair administrative action.

The court also rejected the idea that the case should have first gone through the Insurance Appeals Tribunal, acknowledging the importance of the exhaustion doctrine but determining that it should not be applied rigidly in cases involving constitutional questions and wider public implications. Consequently, the judgment quashed the IRA's notice, and policies issued by Trident and Corporate Insurance before March 10 remain valid for the purpose of the motor vehicle third-party insurance framework.