NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION, NEW DELHI
K.S. Chaudhari, Presiding Member and Prem Narain, Member
SBI Life Insurance Co. Ltd. —Appellant
versus
D. Srinivas and Ors. —Respondents
First Appeal No.560 of 2012
(Against the Order dated 16/07/2012 in Complaint No. 63/2011 of the State Commission Andhra Pradesh)
Decided on 3.2.2017

IMPORTANT POINT
In absence of insurance policy, no concluded contract comes into force between deceased and appellant.

Headnote:Per Prem Narain, Member—

       Consumer Protection Act, 1986—Section 2(1)(g), 2(1)(o)—Insurance—Group Insurance Scheme for Housing Loanees—Repudiation of death claim on the ground that proposal for policy was never accepted by appellant as insured did not present himself for medical examination in spite of repeated requests made by appellant—State Commission allowed complaint directing insurance company to pay entire amount due under home loan account and discharge debt and on such discharge, opposite parties directed to issue ‘No Due Certificate’ to complainant, Rs.25,000/- towards compensation and Rs.10,000/- towards costs—Story of refunding premium amount in year 2008 itself on account of non-appearance of proposer for medical examination is not proved—Medical examination should have been done prior to accepting premium amount as is evident from undertaking given by proposer—Order of State Commission which is based on correct appreciation of facts, evidence and law— However, liability of appellant would be limited to unpaid loan amount on the date of death of insured subject to limit of policy amount which is Rs. 30,00,000/- only.

       Held: From the above examination, it is amply clear that the story of refunding the premium amount in the year 2008 itself on account of non-appearance of the proposer for medical examination is not proved. From the record, rather, it seems as an afterthought on the part of the appellant after the death of the insured. The premium was actually refunded by way of cheque No.480557 dated 23.02.2011and meaning thereby the proposal was pending with the Insurance Company for about three years as against the directions of the regulator to decide within 15 days.

       From the above examination, it is also clear that the medical examination should have been done prior to accepting the premium amount as is evident from the undertaking given by the proposer. This also gels with the need to decide the proposal within 15 days. From these considerations, we do not find any merit in the argument of the appellant that the appellant is not liable because the contract of Insurance, was not concluded. In this regard, based on our examination, we tend to agree with the following observations of the State Commission:-

        “17. Obviously to cover up their latches in not considering the proposal, the insurance company came up with the above evidence which the bank itself did not admit when the insurance company under Ex.B6 informed the bank that the premium was not accepted and the amount was refunded by cheque. The very bank repudiated it. The insurance company, despite the fact that a complaint has been filed did not substantiate the fact of non-acceptance of premium was informed to the bank, and the said bank had received back the premium set by it. Equally the proposal that said to have been repudiated on the ground that the proposer did not attend to the medical requirements. All this has been created evident from non-reply or reference to any of the notices given by the complainant, acknowledged by the bank. It is unfortunate that the nationalised bank and the insurance company are acting against the interests of proposer and to cover up their latches they are going to an extent of creating documents. The extraordinary delay and not acting on the proposal from 30.11.2008 till 25.2.2011 shows that the delay was abnormal, unconscionable and does not sustain. Where there is negligence writ large on the fact, necessarily, we have to hold that OP3 insurance company is guilty of deficiency in service. We can go to an extent stating that it is indulging in unfair trade practise. Only after coming to know that the insured is no more, they started repudiating. Equally they started creating documents and contending that since there was no policy, it was not liable to pay any amount. This case does not pertain to the claim basing on a policy. It is based on the deficiency in service in not issuing policy. Due to this act they were forced to discharge loan, which otherwise OP3 had to discharge. Therefore, we hold that OP3 insurance company was undoubtedly guilty of abnormal delay amounting to deficiency in service, though we cannot hold so in regard to OPs 1 &2.”

       Thus, the deficiency on the part of the appellant is proved and the State Commission has decided the compensation for this deficiency relying on the judgment of State of Gujarat Vs. Shantilal Mangaldas, AIR 1969 SC 634. In the case of SBI Life Insurance Company Ltd. Vs. Asha LataParida & Anr. (supra), this Commission has also allowed the payment of full loan amount by confirming the order of the District Forum.

       Based on the above discussion, we find no error in the order dated 16.07.2012 of the State Commission, which is based on correct appreciation of facts, evidence and law. Accordingly, we find no force in the First Appeal No.560 of 2012 and the same is dismissed with no order as to costs. However, the liability of the appellant would be limited to unpaid loan amount on the date of death of insured i.e. 17.12.2009, subject to the limit of the policy amount, which is Rs.30,00,000/- only. (Paras 18 to 21)

       Per Juctice K.S. Chaudhari, Presiding Member (With Justice Ajit Bharihoke, Member (Concurring) (Majority View)

       Consumer Protection Act, 1986—Section 2(1)(g), 2(1)(o)—Insurance—Whether Insurance Company is bound to discharge loan amount on the ground of receipt of premium for issuing policy though, proposal was neither accepted nor policy was issued—No insurance policy was issued by appellant in favour of deceased—In absence of insurance policy, no concluded contract comes into force between deceased and appellant—Neither medical examination required by OP was got done by deceased nor any acceptance of proposal was communicated nor any policy document was prepared and issued—In absence of any concluded contract between parties, no claim was payable and OP has not committed any deficiency in repudiating claim and refunding premium amount—State Commission committed error in allowing complaint and appeal is to be allowed.

       Held: Learned counsel for the appellant further argued that the insured had nominated his wife Smt. DeekondaShakaja as nominee and therefore, the respondent No.1/complainant has no claim over the insurance claim amount. Thus, the complaint filed by the complainant is not maintainable and the State Commission has erroneously entertained the complaint. It was also argued that the State Commission has erroneously found the deficiency in service on part of the appellant for not concluding and issuing the policy to the proposer which was not prayed for by the complaint, as the complaint was filed for the payment of the policy amount to liquidate the loan amount. As per the policy terms,when no policy has been issued, how can any question of liquidating the loan outstanding on the date of death of the proposer arise?.

       11. It was argued that facts and issues involved in the present case are similar to the case of SBI Life Insurance Company Ltd. Vs. Asha LataParida & Anr.(supra). In respect of the nomination of the wife of the deceased in the proposal form, the learned counsel argued that proposed policy was under Group Insurance Scheme for the Housing loanees of the bank and policy stipulates the payment of due amount of the loan on the date of death of the insured. In the proposal form, the insured had clearly agreed as follows:-

        “I agree that all benefits due under the Scheme in the event of my death would be payable to the Bank for applying towards liquidation of the outstanding loan amount under the Housing loan or any other loan provided by the Bank. In the event of any surplus remaining with the Bank after liquidating the outstanding loans, I nominate Smt. DeekondaShakaja, who is related to me as wife as the Nominee to receive such surplus amount.”

       Learned counsel argued that it is clear from the above statement that insurance amount would go to the bank for liquidating the loan amount andif there is some surplus that may go to nominee. The State Commission has only ordered the payment to the tune of due unpaid loan amount on the date of death of the insured only. (Paras 8, 11 and 12)

       Result: In the light of majority judgement, appeal filed by appellant allowed and impugned order passed by State Commission set aside and complaint dismissed.