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THE STATE CONSUMER DISPUTES
REDRESSAL COMMISSION, PONDICHERRY
Honble Mr. Justice David Annoussamy,
President & Mr. A. Veerapandian, Member
DIVISIONAL MANAGER, NEW INDIA
ASSURANCE COLTD. & ANR.—Appellants
versus
PATANJALI GUHA—Respondent
Appeal No. 46 of 1997—Decided on 21.8.1997
Counsel for the Parties :
For the Appellants :Mr. M.V. Vaithilingam, Advocate.
For the Respondent: In person.
A medi-claim policy will continue unless rescinded for valid reasons. If the policy is to continue, the premium for a further period is a deferred payment as contemplated in the Consumer Protection Act, 1986 under Section 2(d)(ii).
Headnote:
INSURANCE - MEDI-CLAIM POLICY - CANCELLATION - UNILATERAL REPUDIATION - DEFICIENCY IN SERVICE - RENEWAL - JURISDICTION - CONSUMER PROTECTION ACT, 1986 - SECTION 2(d)(ii) - SECTION 14.
Fact of the Case:
The complainant had a medi-claim policy with the opposite party. The opposite party cancelled the policy due to an adverse claim ratio. The complainant approached the District Forum for a direction to continue the policy.
Finding of the Court:
The District Forum held that the unilateral repudiation of the policy by the opposite party was a deficiency in service and directed the opposite party to restore the policy, settle any medical claim made or to be made by the complainant and his wife during the period of the policy, renew the policy when it fell due for renewal, pay compensation for mental agony, and pay costs.
Issues: 1. Whether the opposite party was justified in cancelling the policy? 2. Whether the District Forum had jurisdiction to direct the renewal of the policy? 3. Whether the amount of compensation awarded by the District Forum was appropriate?
Ratio Decidendi: 1. The opposite party was not justified in cancelling the policy based solely on an adverse claim ratio. An insurance company cannot eliminate all those having an adverse ratio and keep only those having a positive ratio. 2. The District Forum had jurisdiction to direct the renewal of the policy as the complainant was a consumer within the definition of the Act under Section 2(d)(ii) and the cause of action had already arisen. 3. The amount of compensation awarded by the District Forum was reduced to Rs. 2,500/- as the opposite party was not highly negligent.
Final Decision: The appeal was partly allowed. The amount of compensation was reduced to Rs. 2,500/- and the rest of the order of the District Forum was upheld.
Mr. Justice David Annoussamy, President—The opposite parties appeal.
2. The facts of the case are as follows : The complainant and his wife are covered by a medi claim policy with the second opposite party which he started in Calcutta several years ago and which he continued in Pondicherry from 19.5.1992. He did not make any claim till 1994 during which period he claimed Rs. 16,062/- for the treatment of his wife which was settled on 23.8.1996. Thereupon the opposite parties by letter dated 31.10.1996 cancelled the policy and asked the complainant to get back the amount of premium for the remaining period which was to come to an end on 18.5.1997. The complainant approached the District Forum for a direction to the continuance of the policy.
3. The opposite parties placing reliance on Clause 3.11 of the contract of insurance contended that it has every right to cancel the policy. For cancelling the policy of the complainant the opposite parties put forth a very curious reason. It stated that from 1994 to 1997 the expenditure for the opposite parties was Rs. 32,406/- whereas the total premium collected was only Rs. 8,671/-. So the claim ratio was 373.68% adverse claim for the Company.
4. The District Forum placing reliance on the decision of the National Commission in Life Insurance Corporation v. Sri Bavanam Srinivasa Reddy (First Appeal 79/90 dated 5.6.1991) found that unilateral repudiation of a contract by an Insurance Company is wrong and is a deficiency in service and accordingly passed the following order :
"The opposite party shall :
(a) immediately restore the Medi-claim Policy No. 48 711002 02561 which is unilaterally cancelled from 3.10.1996 and settle any medical claim made or is to be made by the complainant and his wife during the period of policy from 19.5.1996 to 18.5.1997;
(b) renew the said policy when it has fallen due for renewal on 18.5.1997;
(c) jointly and severally pay a compensation of Rs. 5,000/- for the mental agony caused to the complainant and his wife; and
(d) pay a cost of Rs. 300/- to the complainant.
(e) This shall be executed within 2 weeks from the date of the receipt of this order failing which the amount of compensation and costs shall bear interest @ 12% p.a."
5. Aggrieved by that order the opposite parties have filed this present appeal.
6. The learned Counsel for the appellants would contend that the District Forum had no jurisdiction in respect of the continuance of the policy, since no payment was made in respect of the period starting from 18.5.1997. In order to justify the cancellation of the policy he placed again reliance on Clause 3.11 of the Terms and Conditions of the policy.
7. To deal with these points it is necessary to reproduce Clause 3.11 of the Terms and Conditions of the policy which reads as follows :
"3.11. The policy may be renewed by matual consent. The Company shall not however be bound to give notice that it is due for renewal and the Company may at any time cancel this policy by sending the insured 30 days' notice by registered letter at the insured's last known address and in such event the Company shall refund to the Insured a pro-rata premium for unexpired period of insurance. The Company shall, however, remain liable for any claim which arose prior to the date of cancellation. The Insured may at any time cancel this Policy and in such event the Company shall allow refund of premium at Company's short period rate only provided no claim has occurred upto the date of cancellation".
It is true that usually parties are bound by the terms of a contract between them. Even in ordinary contracts coming before the Civil Courts, clauses against fundamental principles of public policy will not be given effect to. The machinery under the Consumer Protection Act has a greater responsibility. Any clause of the contract providing a service to a consumer wilI have to be assessed by the machinery and any exorbitant clause which will be highly detrimental to the consumer cannot be
