No — the Federal Insurance Ombudsman cannot adjudicate insurance claims, as this authority lies with the Insurance Tribunal under the Insurance Ordinance, 2000.
Discover how a 2018 Supreme Court ruling clarified the limits of the Insurance Ombudsman’s role, ensuring insurance disputes are handled by the right forum.
In Karachi, a dispute over insurance claims led to a landmark decision that reshaped the handling of such cases in Pakistan.
The case began when multiple insurance companies, including East West Insurance Company, Adamjee Insurance Company, and United Insurance Company, faced claims from policyholders. These claims arose from insurance policies, such as a Marine Cargo Policy for water-damaged consignments. The policyholders sought redress through the Federal Insurance Ombudsman, believing it could resolve their disputes. The Ombudsman issued orders directing the insurance companies to pay claims, ranging from Rs. 500,000 to Rs. 1 million, along with liquidated damages for delays. The Securities and Exchange Commission of Pakistan (SECP), as the appellate authority, upheld these orders.
However, the insurance companies challenged the Ombudsman’s jurisdiction, arguing that only the Insurance Tribunal, established under Section 122 of the Insurance Ordinance, 2000, could adjudicate such claims. The dispute reached the Lahore High Court, which, on January 16, 2017, ruled in favor of the insurance companies, setting aside the Ombudsman’s orders. The SECP then appealed to the Supreme Court, leading to a pivotal ruling.
The core issue was whether the Federal Insurance Ombudsman could settle insurance claims or if this power was reserved for the Insurance Tribunal. The stakes were significant: if the Ombudsman could intervene, it might streamline dispute resolution for policyholders. However, if the Tribunal held exclusive jurisdiction, policyholders would need to navigate a different legal pathway, potentially affecting access to justice.
The SECP argued that the Ombudsman, established under Section 125 of the Insurance Ordinance, 2000, was empowered to investigate maladministration by insurance companies, such as delays or wrongful claim denials, and could recommend payments to protect policyholders. The insurance companies countered that the Ombudsman’s role, as defined under Section 127, was limited to investigating maladministration, not adjudicating claims, which fell under the Insurance Tribunal’s authority.
The Supreme Court, led by Justice Mushir Alam, examined the legal framework. Section 127 of the Insurance Ordinance, 2000, clearly defined the Ombudsman’s role as investigating complaints of maladministration, with powers to make recommendations under Section 130. However, adjudicating claims required judicial authority, reserved for the Insurance Tribunal under Section 122. The court found that the Ombudsman had overstepped its jurisdiction by ordering claim payments, a role not supported by the Ordinance. The Lahore High Court’s judgment was upheld, and the SECP’s petitions were dismissed on February 12, 2018.
The ruling also addressed the SECP’s standing to appeal. The court noted that, as an appellate authority, the SECP could not challenge the High Court’s decision unless the policyholders themselves contested it. Citing precedents like Syed Yaqoob v. K.S. Radhakrishnan (AIR 1964 SC 477), the court emphasized that tribunals or appellate bodies should not defend their orders in adversarial proceedings unless directly implicated.
This verdict clarified that insurance claims must be adjudicated by the Insurance Tribunal, not the Ombudsman, ensuring a structured legal process. For policyholders, it meant redirecting their claims to the Tribunal, while insurance companies gained clarity on the proper forum for dispute resolution.
This story is based on a real judgment passed by the Supreme Court of Pakistan in 2018 (Civil Petitions No. 1191, 1192, and 1193 of 2017).
FAQs
Can the Federal Insurance Ombudsman settle insurance claims in Pakistan?
No, the Ombudsman cannot adjudicate insurance claims. Its role is limited to investigating maladministration by insurance companies, with claims falling under the Insurance Tribunal’s jurisdiction per Section 122 of the Insurance Ordinance, 2000.
What happens if an insurance claim is filed with the wrong authority?
If a claim is filed with the Insurance Ombudsman instead of the Insurance Tribunal, the Ombudsman’s orders may be set aside for lack of jurisdiction, requiring the claim to be refiled with the Tribunal.
What is maladministration under the Insurance Ordinance, 2000?
Maladministration includes actions like undue delays or wrongful denials of insurance claims by companies, which the Ombudsman can investigate and address through recommendations.
Who can appeal an Insurance Ombudsman’s order?
Under Section 130(2) of the Insurance Ordinance, 2000, an insurance company, its officials, or a complainant can appeal the Ombudsman’s order to the Securities and Exchange Commission of Pakistan (SECP).
What laws govern the jurisdiction of insurance disputes in Pakistan?
The Insurance Ordinance, 2000, particularly Sections 122, 125, and 127, governs the jurisdiction of insurance disputes, assigning claim adjudication to the Insurance Tribunal and maladministration investigations to the Ombudsman.
Disclaimer
This blog is for public awareness only and does not constitute legal advice.
