SC Raps Insurers for Unnecessary Appeals, Delaying Payouts

Supreme Court Slams Insurance Companies for Filing Unnecessary Appeals and Delaying Compensation

Apex Court warns insurers against raising technical objections that deny justice to workers and accident victims

Judges stress that insurance firms must share liability with employers under the Employees’ Compensation Act

By Our Legal Reporter

New Delhi: October 18, 2025: The Supreme Court of India has strongly criticised insurance companies for filing unnecessary appeals and raising technical objections in compensation cases. The Court observed that such practices delay justice, burden the judiciary, and deprive injured workers and accident victims of timely relief.

A bench of Justices Manoj Misra and N. Kotiswar Singh made these remarks while hearing a case involving the liability of an insurance company under the Employees’ Compensation Act, 1923. The Court expressed “anguish” at the repeated tendency of insurers to avoid their responsibility by hiding behind technicalities, even when their liability is clear under the insurance contract.

The Case Before the Court

The matter arose from a dispute where an employee was injured during employment. The employer had an active insurance policy covering such risks. However, when compensation was awarded, the insurance company challenged its liability, arguing that the employer alone should bear the burden.

The Calcutta High Court had earlier absolved the insurer of liability, but the Supreme Court overturned that decision. The apex court held that both the employer and the insurer are jointly and severally liable to pay compensation.

Justice Misra, speaking for the bench, noted that the purpose of the Employees’ Compensation Act is to provide quick and fair relief to workers. Insurance companies, by filing repeated appeals on flimsy grounds, are defeating the very spirit of the law.

Court’s Observations

The Supreme Court made several important observations:

Unnecessary Appeals: The Court said insurers often file appeals even when they have no valid defence, simply to delay payments.
Technical Pleas: Many appeals are based on hyper-technical grounds, such as minor errors in documentation, which do not affect the core liability.
Delay in Justice: Such tactics cause long delays, forcing victims and their families to wait years for compensation.
Judicial Burden: The flood of unnecessary appeals clogs the judicial system, wasting valuable court time.

The Court emphasised that insurance companies must act responsibly and honour their contractual obligations.

Impact on Workers and Victims

The Court highlighted that the victims of such disputes are often poor workers or families of accident victims. For them, compensation is not just money—it is survival.

Injured workers may lose their ability to earn.
Families of deceased workers depend on compensation for basic needs.
Delays in payment push them into financial distress.

By filing unnecessary appeals, insurers are effectively denying justice to the most vulnerable sections of society.

Legal Background

The Employees’ Compensation Act, 1923 (formerly known as the Workmen’s Compensation Act) requires employers to compensate workers for injuries or death arising out of employment.

Employers often take insurance policies to cover this liability.
Once insured, the insurance company is bound to share the liability.
Courts have repeatedly held that insurers cannot escape responsibility by citing technical objections.

In this case, the Supreme Court reaffirmed that principle.

Past Criticism of Insurance Companies

This is not the first time the judiciary has criticised insurers. In several earlier cases, courts have noted that insurance companies:

File appeals even when liability is admitted.
Use procedural loopholes to delay payments.
Exploit poor claimants who cannot afford long legal battles.

The Supreme Court has now sent a strong message that such conduct will not be tolerated.

Broader Implications

The ruling has wide implications for the insurance sector and for workers’ rights in India.

For Insurance Companies:
- They must review their litigation strategy.
- Frivolous appeals could attract judicial rebuke and even penalties.
- Companies may need to settle claims faster to avoid reputational damage.
For Employers:
- Employers can be assured that insurers cannot abandon them after collecting premiums.
- Joint liability ensures that the financial burden is shared.
For Workers and Victims:
- The judgment strengthens their right to timely compensation.
- It reduces the chances of being trapped in endless litigation.

Expert Reactions

Legal experts have welcomed the ruling. Many believe it will discourage insurers from misusing the legal system.

Labour rights advocates say the judgment is a victory for workers.
Insurance analysts note that companies may now adopt more transparent claim settlement practices.
Lawyers point out that the ruling reinforces the humanitarian purpose of compensation laws.

The Way Forward

The Supreme Court’s strong words are expected to influence future cases. However, experts suggest additional steps:

Regulatory Oversight: The Insurance Regulatory and Development Authority of India (IRDAI) could issue guidelines discouraging frivolous appeals.
Fast-Track Tribunals: Special tribunals could be set up to handle compensation disputes quickly.
Penalties for Delay: Courts may impose costs on insurers who file unnecessary appeals.

Such measures would ensure that justice is not delayed for workers and their families.

Conclusion

The Supreme Court’s criticism of insurance companies marks an important moment in India’s labour and insurance law. By calling out the misuse of appeals, the Court has reaffirmed the principle that justice must be swift, fair, and accessible.

Insurance companies, which profit from collecting premiums, cannot shirk their duty when it comes to paying compensation. The ruling is a reminder that the law exists to protect the vulnerable, not to serve corporate interests.

As the Court observed, unnecessary appeals not only waste judicial time but also deny justice to those who need it most. The message is clear: insurers must act responsibly or face the consequences.