Consumer Protection – Insurance Policy – Deficiency of Service – A home loan was secured by the appellants for which obtaining a life insurance was a pre-requisite – Life insurance in the name of husband of the complainant (the insured, now deceased) was obtained – As per the appellants, respondent No.1-bank acting as an agent for respondent no.2-Insurance Company, on 25.07.17 sanctioned the home loan – From the disbursed loan amount, insurance premium was paid on behalf of the insured by the bank to the insurance company – The insured was subjected to medical tests on 30.07.17 as a pre-condition for securing the home loan – Died of cardiac arrest on 08.08.17 – Death of the insured was intimated to the insurance company on 16.08.17 with a request to process the insurance claim, however the claim was repudiated – Consumer complaint dismissed by State Commission – Appeal dismissed by National Commission – Held: On 30.07.17, the insured was called for medical examination and the treadmill test, did not flag any health issue – In such backdrop, the communication (an ante-dated letter) of the insurance company for postponing the life insurance coverage by six months by adverting to the treadmill test report and that too at a stage after intimation about the death of the insured, appears to be a malafide act – Moreover, the insurance company declining the policy by unilaterally refunding the insurance premium, suggests that the respondent no.2 was deficient in rendering services to the appellant – Impugned judgment set aside – Complaint allowed – Consumer Protection.
Consumer Protection – Insurance policy – Presumption of acceptance of the policy by the insurer – Ratio of decision in Raja Vasireddy Komalavalli Kamba case as clarified in D. Srinivas case – Discussed.
Allowing the appeal, the Court
HELD: 1.1 The reason for deferment is surprisingly shown as treadmill test finding, although, no abnormality as such was detected in the said test report. Yet, the insurance company dispatched an antedated letter (written after getting intimation about the death of the insured), informing about 6 months postponement of the proposal. This would suggest that the insurance company hurriedly dispatched the ante dated letter, purporting to postpone the proposal, only after getting information about the death of Gokal Chand on 16.8.2017. Even in this first ante-dated communication of the insurance company, there was no mention of rejection of the proposal or refund of the insurance premium (Rs. 6,24,172), remitted by the bank to the insurance company on 25.7.2017 i.e., the date when the loan amount was sanctioned. The tracking details of the insurance postponement communication of the respondent No. 2 sent through the BlueDart Courier reflects that the insurance company’s letter was dispatched only at 19:38 hours on 16.8.2017. There was no mention in this letter, about the refund of the premium. Thereafter only on 17.8.2017, the premium amount was unilaterally returned by the respondent No. 2 to the loan account, followed by the communication dated 31.8.2017 purporting to decline the insurance policy for the housing loan, sanctioned by the bank. [Paras 15-17][747-A-E]
1.2 It was a prerequisite for the home loan borrower to obtain life insurance coverage and the records show that the loan amount was sanctioned on 25.7.2017. On that very day, Rs. 6,24,172/- was remitted towards insurance premium by the bank to the insurance company. This would suggest that all the requirements for the policy as prescribed by insurance company were satisfied at that stage. On 30.7.2017, the insured was called for medical examination and the treadmill test, did not flag any health issue. In such backdrop, the communication of the insurance company for postponing the life insurance coverage by six months by adverting to the treadmill test report and that too at a stage after intimation about the death of the insured to the respondents, appears to be a malafide act. Moreover, the decision by the insurance company declining the policy by unilaterally refunding the insurance premium in the given circumstances, would suggest that the respondent No. 2 were deficient in rendering services to the appellant. [Paras 18 and 19][747-E-H]
1.3 The respondents, however, contend that there was no binding life insurance contract between the respondent No. 2 and the appellant and Life Insurance Corporation of India vs. Raja Vasireddy Komalavalli Kamba and Others was cited to argue that acceptance of an insurance contract may not be completed by mere retention of the premium or preparation of the policy document. The acceptance must be signified by some act by which the law raises a presumption of acceptance. The ratio of above decision in LIC vs. Raja Vasireddy Komalavalli Kamba was considered by this Court in D. Srinivas vs. SBI Life Insurance Company Limited and Others and it was clarified that while there is no quarrel with the proposition laid in Raja Vasireddy Komalavalli Kamba, the former only laid down a flexible formula for the court to see as to whether there was a clear indication of acceptance of insurance. The forums below have blindly relied on the same, and failed to take into cognizance the later ratio in D. Srinivas, which stressed on considering the unique facts of the case to determine whether there is a presumption of acceptance of the policy by the insurer. [Paras 20 and 21][748-A-D]
D. Srinivas vs. SBI Life Insurance Company Limited and Others (2018) 3 SCC 653 : 2018 (3) JT 10 – held applicable.
Life Insurance Corporation of India vs. Raja Vasireddy Komalavalli Kamba and Others (1984) 2 SCC 719 : [1984] 3 SCR 350 – referred to.
1.4 The conduct of the respondent No. 2 cannot be countenanced against the good faith standards that an insurance contract warrants. In this case, the pre-condition for the home loan as stipulated by the respondents was that life of the borrower will have to be insured. Only after assessment of the applicant’s credentials, the loan was approved. When the loan amount was sanctioned, the premium amount was kept aside and was credited to the insurance Company and the insured was subjected to a medical test which showed normal health status. Thus, premium was accepted and retained for the life insurance and no change of this position was found necessary even after the treadmill test result of the insured. This entire procedure would suggest, at least from the insurer’s perspective, that the insurance process was complete & all mandatory requirements were met. Significantly, there was no contrary communication by the respondent No. 2 indicating otherwise as well. Moreover, when the death information was conveyed to the respondents, most surprisingly, that was the trigger that led to the insurance company to issue a back dated letter deferring the insurance process, which was followed by refund of the premium a few days later, and then the repudiation after that. The case at hand shows clear malafide on the part of respondent No. 2 in the manner they dealt with the insurance policy, after learning of the death of the insured person on intimation from the affected persons. The way the issue was addressed by the respondent No. 2 following the information conveyed does fail, the test of Reasonable Conduct. On top of that, to cover up their late reaction, most tellingly, the ante dated letter under the garb of an unfounded medical reason was dispatched. These amount to a clear case of deficiency of service and a non-bonafide conduct by the respondent no.2. The contrary finding in the impugned order does not pass judicial scrutiny. The impugned judgment is set aside. The complaint stands allowed. The respondent No.2 is directed to process the complainant’s insurance claim and remit the payable sum. [Paras 25-27][750-E-H; 751-A-D]
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
This page is for informational and research purposes only and does not constitute legal advice. Consult a qualified advocate for advice specific to your situation.