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NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION, NEW DELHI
Deepa Sharma, Presiding Member and Subhash Chandra, Member
United India Insurance Copmany Ltd. —Appellant
versus
Tilda Riceland Pvt. Ltd. —Respondent
First Appeal No.2356 of 2019
(Against the Order dated 30/05/2019 in Complaint No. 123/2007 of the State Commission Delhi)
Decided on 31.10.2022
Counsel for the Parties:
For the Appellant:Mr. Abhishek Kumar, Advocate
For the Respondent:Mr. Sanjeevi Seshadri, Advocate
IMPORTANT POINT
Since the appellant has charged premium for a policy on ‘first loss basis” as if it were a regular policy and the EAR policy is a continuing policy, the difference in the premium should be refunded with interest to the respondent.
Headnote:
Consumer Protection Act, 1986—S.17[Consumer Protection Act, 2019—S.47(1)]—Services – Insurance - EAR policy -“first loss basis” – Premium to be charged on reduced rate - It is the appellant’s case that the premium charged on the EAR policy was correct and that the refund being sought after almost six years of taking of the policy. The subsequent MOUs and letters in confirmation amounted to the respondent agreeing to all the terms of the policy. This cannot be un-done now - It is evident that the EAR policy that was taken in 1999 for a period of three years initially was also renewed subsequently on payment of additional premium. It is not disputed that the EAR Policy was supplemented by way of MOU in 1999 and by two joint letters between the parties dated 29.03.2001 and 28.03.2003. From these documents, it is evident that a discount of 50% had been offered on the premium to be paid on the policy and that the risk covered for earthquake was on “first loss basis”. In its conclusion, the State Commission has held that since the risk covered was on “first loss basis”, premium to be charged should have been on a reduced rate which was admitted in the joint letter dated 29.03.2001 and 28.03.2003. However, since the appellant has charged premium for a policy on ‘first loss basis” as if it were a regular policy and the EAR policy is a continuing policy, the difference in the premium should be refunded with interest to the respondent. Therefore, the impugned order of the State Commission cannot be found fault - The impugned order has correctly set right this anomaly in directing refund of the excess premium that was charged and compensating the respondent with interest at the rate of 6% - Thus, the impugned order which is hereby affirmed. Accordingly, the appeal is dismissed without merits. [Paras 9 to 12].
Result: Appeal dismissed.
ORDER
Subhash Chandra, Member—The present first appeal has been filed under section 17 of the Consumer Protection Act, 1986 (in short, ‘the Act’) against order dated 30.05.2019 in complaint no.123 of 2007 passed by the Delhi State Consumer Disputes Redressal Commission, Delhi (in short, ‘the State Commission’) directing the appellant to refund the excess amount of premium charged along with simple interest @ 6% per annum from the date of excess amount was taken within one month of the order.
2. The impugned order of the State Commission reads as under:—
“18. I have given a careful consideration to the subject matter. “From the records I notice that the premium charged in indisputably not in accordance with the agreed terms and thus in violation thereof. In these circumstances, the insurance company has been found to be in default, they having charged the premium more than the amount as agreed to. Insurance is also a contract like any other contract as settled by the orders passed by the Hon’ble NCDRC or the Hon’ble Apex Court from time to time. Hon’ble Apex Court in Civil Appeal no.1557 of 2004 – Export Credit Guarantee vs M/s Garg Sons International is pleased to observe as under:—
It is a settled legal proposition that while construing the terms of a contract of insurance, the words used wherein must be given paramount importance, and it is not open for the court to add, delete or substitute any words. It is also well settled, that since upon issuance of any insurance policy, the insurer undertakes to indemnify the loss suffered by the insured on account of risks covered by the policy, its terms have to be strictly construed in order to determine the extent of the liability of the insurer. Therefore, the endeavor of the Court should always be to interpret the words used in the contract in the manner that will best express the intention of the parties. (Vide M/s Suraj Mal Ram Niwas Oil Mills (P) Ltd., vs United India Insurance Co. Ltd., (2010) 10 SCC 567).
From the above, it is apparent that the terms of the policy has to be followed in letter and spirit. Insurance like any other contract is also contract, the terms of which are binding to the parties to the contract.
19. Having regard to the discussion done and the legal position explained I am of the considered view that the complaint deserves to be allowed. It is ordered accordingly. Having done so insurance company is directed to refund the excess amount as prayed for with simple interest at the rate of 6% from the date of excess amount was taken, within one month from the date of receipt of the certified copy of this order.
20. Ordered accordingly.”
3. The brief facts of the present appeal are that the respondent had taken an Erection All Risk Policy (in short, ‘the EAR Policy’) from the appellant bearing no. 040201/21/1/0003/99 dated 01.04.1999. The period of insurance was from 01.04.1999 till 31.03.2003 (with a three month testing period) for which premium paid was Rs.66,76,171/- paid in instalments between 01.04.1999 to 01.10.2002. Along with the issuance of this policy in 1999, a Memorandum of Understanding (in short, ‘the MOU’) was also entered into between the appellant and the respondent which provided cover for third party liability, additional custom duty, debris removal, escalation, design defects and earthquake on “first loss basis”. According to the respondent, as per the insurance law, “first loss basis” means coverage for an amount that is less than the sum insured. In the instant case, the insured covered for earthquake risk was limited to 20% of the sum insured. For this purpose, the insured received a discount of 50% of the premium at the time of the MOU.
4. The said EAR policy was subsequently renewed from time to time by mutual consent. The first extension was from 01.04.2003 to 30.09.2004 for which an additional premium of Rs.5,84,169/- was paid. The second extension was from 01.10.2004 till 31.03.2005 for which additional premium of Rs.15,37,508/
