State Consumer Disputes Redressal Commission
The Sbi Life Insurance Co. Ltd vs Srimati Ashalata Parida on 21 August, 2009
STATE CONSUMER DISPUTES REDRESSAL COMMISSION:ORISSA:CUTTACK STATE CONSUMER DISPUTES REDRESSAL COMMISSION:ORISSA: CUTTACK FIRST APPEAL NO.213 OF 2008 From an order dated 14.02.2008 passed by the District Consumer Disputes Redressal Forum, Cuttack in C.D. Case No.234 of 2007 The SBI Life Insurance Co. Ltd., 2nd Floor, Turner Morrison Building, G.N.Vaidya Marg, Fort, Mumbai-400023 represented through the Circle Coordinator, SBI Life Insurance Co. Ltd., At-A/5/1 City Centre, Near BDA, Nicco Park, Sachivalaya Marg, Unit-IX, Bhubaneswar, Dist. Khurda Appellant -Versus- 1. Srimati Ashalata Parida, wife of late Prashant Kumar Parida, C/O Maguni Ch. Sahu, At-Aparna Nagar, Chauliaganj, Dist. Cuttack 2. Branch Manager, State Bank of India, Cuttack City Branch, College Square, Cuttack-753003 Respondents For the Appellant : Mr. R.C. Mohanty & Associates For Respondent No.1 : Mr. R.K.Pattnaik & Associates For Respondent No.2 Mr. G.B. Dash THE HONBLE SHRI JUSTICE A.K. SAMANTARAY, PRESIDENT, AND SHRI SUBASH MAHTAB, MEMBER O R D E R
DATE:- The 21stAugust, 2009.
Justice A.K. Samantaray, President.
The appellant was opposite party no.1 before the District Forum, Cuttack in the complaint filed by respondent no.1 wherein respondent no.2 was opposite party no.2. By means of this appeal, the appellant assails the order of the afore-mentioned District Forum dated 14.02.2008 passed in C.D. Case No.234 of 2007 whereby the District Forum has directed the appellant-SBI Life Insurance Co. Ltd., 2nd Floor, Turner Mirrison Building, G.N. Vaidya Marg, Fort, Mumbai, represented through its Circle Coordinator at A/5/1 City Centre, near BDA, Nicco Park, Sachivalaya Marg, Unit-IX, Bhubaneswar to clear up the loan amount of opposite party no.2 for its deficiency in service. At the same time, the District Forum has directed opposite party no.2, i.e., the Branch Manager, State Bank of India, Cuttack City Branch, College Square, Cuttack, to pay compensation of Rs.50,000/- to the complainant.
2. Here, we would like to mention that against the order imposing compensation, opposite party no.2 has filed appeal in First Appeal No.196 of 2008 before this Commission, and this Commission by a separate judgment has set aside that part of the order of the District Forum.
3. The sole grievance of the complainant is inaction on the part of the appellant, i.e., the SBI Life Insurance Co. Ltd. (SBI Life, for short) in the matter of payment of insurance claim under LBI Life Insurance Scheme after the death of the loanee, who is her husband, on the ground that the proposal had not culminated in a policy and was still at the stage of proposal. In the complaint, it is stated that the aforesaid inaction/deficiency in service on the part of the appellant amounts to gross and abysmal inefficiency, for which they are liable to make good the loss sustained by the complainant. The factual background, as laid down through the complaint filed, is as under:-
The complainants husband approached the State Bank of India, City Branch, Cuttack for sanction of a loan to the tune of Rs.12,50,000/- under Housing Loan Scheme for construction of a house at Sector-VI, Markat Nagar (CDA), Cuttack. Pursuant to such approach, opposite party no.2, i.e., the State Bank of India, sanctioned a loan of Rs.12,50,000/- on 08.07.2004 bearing Loan Account No. LAN 1593039144. As per the prevalent practice, opposite party no.2- Bank advised the complainants husband to take life insurance policy on the said housing loan in order to make it secured, as under the scheme for housing loan each one of the borrowers has to take an insurance cover from the SBI Life as a protection against the risk of death due to any reason during the tenure of the loan, which otherwise means that in the event of death of the husband of the complainant prior to liquidation of the loan, opposite party no.1, i.e., the present appellant would pay the amount to the Bank-opposite party no.2. Furthr, the said group insurance comes under the Super Surakshya Plan of SBI Life. The husband of the complainant being impressed by the suggestion of opposite party no.2 decided to secure the loan account in order to secure the property in case of his unnatural death/mishap. The late husband of the complainant paid the premium amount of Rs.55,288/- on 12.07.2004, which was debited from his loan account by opposite party no.2-Bank and remitted to to the SBI Life. At the time of submission of the proposal form, the complainants husband had given declaration of good health and other related documents for consideration of issuance of insurance policy by the appellant-opposite party no.1. The proposal form was sent through opposite party no.2. As per the terms and conditions of the scheme, opposite party no.2 is the group administrator (policy holder) and the loanee under the scheme is the beneficiary. The period of insurance cover is available to the housing loan borrower from the date of enrolment and is to continue till the tenure of the loan, which was insured with opposite party no.1. The insurance cover will cease when the housing loanee/borrower will complete 70 years of age or when the loan account is reduced to nil balance for any reason. In the said scheme, it is also provided that in the event of death of the insured borrower due to any cause, the sum assured will become payable to the group administrator. The sum assured will be equivalent to the outstanding loan amount including interest as per the EMI schedule. After payment of the premium by opposite party no.2 to opposite party no.1, the complainants husband was not informed by the opposite parties about the outcome of the insurance contract nor was any policy bond issued in his favour till February, 2005. When the matter stood thus, the husband of the complainant suffered from massive heart attack and expired on 27.03.2005 at Kalinga Hospital, Bhubaneswar. After the sad demise of her husband, the complainant got totally upset. A few days after the death of her husband, she came to know about existence of a loan account in the Bank-opposite party no2 and further that the said loan had been insured with opposite party no.1.
After coming to know about this, the complainant informed the Bank-opposite party no.2 on 07.06.2005 that her husband had died in the meantime and requested the Bank to settle the death claim. On receipt of the death claim, opposite party no.1 wrote to opposite party no.2 that it had already received the death claim and expressed condolence. In the said letter, opposite party no.1 requested opposite party no.2 to send necessary documents, such as treatment report, post medical reports and original EMIs payment receipt as well as the certificate of insurance. In pursuance of the aforesaid request vide communication dated 18.07.2005, opposite party no.2-Bank complied with the requirements and requested opposite party no.1 to settle the claim. After knowing about all these developments, the complainant eagerly waited for the outcome of the settlement, which was to be done by opposite party no.1. At this stage, the SBI Life by its letter dated 29.12.2005 intimated opposite party no.2 that the claim under the policy could not be considered since the policy was at the stage of proposal due to non-fulfilment of medical requirement and the risk was not covered under the policy. After receipt of the letter of repudiation, which was communicated to the complainant, she wrote to opposite party no.2 that neither she nor her late husband had committed any fault with regard to the policy and they had complied with all the requirements as asked for by opposite party no.1. Since opposite party no.1 had received the premium and declaration of good health and remained silent for nine months, they were estopped to take the plea that the policy was at the proposal stage due to want of medical reports. The complainant also requested opposite party no.1 to reconsider the claim.
Since the opposite parties did not reconsider the decision already taken by opposite party no.1, finding no other alternative, the complainant approached the Insurance Ombudsman by filing a complaint on 18.01.2006 against opposite party no.2 for realization of the insurance amount, which was registered as Complaint No.21-002-0203. The Insurance Ombudsman, after hearing the grievance of the complainant, by order dated 29.11.2007 upheld the repudiation made by opposite party no.1 and dismissed the complaint. However, the Ombudsman observed that after receipt of premium, neither the insurer nor their agent had taken any step for medical examination of the proposer. Therefore, for such negligent conduct of the insurer, the complainant was at liberty to take appropriate legal action against the insurer, who were responsible for keeping the premium amount of the proposer on hold for more than eight months without processing medical examination.
The complainant, thereafter, being aggrieved with the order of the Ombudsman as well as the action of both the opposite parties, filed the complaint petition alleging deficiency in service and unfair trade practice against the opposite parties. The prayer in the complaint is mainly for a direction to the opposite parties to pay the life insurance cover under the Housing Loan Scheme in the facts and circumstances of the case, to pay the sum assured till liquidation of the loan amount and to pay compensation for the mental agony and harassment suffered by the complainant.
4. Opposite party no.1, the present appellant, in the written version challenged the maintainability of the complaint and stated that the complainant has no cause of action to bring such a complaint. It is stated therein that the complainants husband Prashant Kumar Parida had taken home loan amounting to Rs.12,50,000/- from opposite party no.2 and the said loan was sanctioned on 08.07.2004. Thereafter, he had taken an insurance policy on the said loan in order to secure the loan advanced. As per the scheme of the housing loan, the borrower has to take an insurance cover as a protection against the risk of death due to any reason during the 10 years of the loan, so that in the event of death of the insured prior to liquidation of the loan, Insurance Company shall pay the amount to the financing Bank. It is admitted that the premium of Rs.55,288/- was debited on 12.07.2004 from the loan account of the complainants husband and bank draft of the said amount was received by the SBI Life. At the time of submission of the proposal form, the complainants husband had given declaration of good health and other related documents for consideration of his case for issuance of policy through opposite party no.2-Bank and the SBI Life had received the same. The complainants husband died on 23.03.2008 at Kalinga Hospital, Bhubaneswar due to heart attack. But, prior to his death, neither the policy bond was issued by the SBI Life nor was there any query about its non-issuance or delay in issuance by the complainants husband. After his sad demise, the complainant informed opposite party no.2-Bank regarding the death of her husband and requested for settlement of the death claim. It has been averred in the written version by the appellant-opposite party no.1 that for availing loan amount up to Rs.5,00,000/-, there is no need for any medical examination in order to qualify for the insurance cover. For cover up to Rs.7,50,000/-, the loanee is required to answer a simple questionnaire, and for higher amounts, he is required to undergo medical examination. It is further stated that medical requirement have been prescribed in the Scheme in detail including the good health-cum-consent letter. In the instant case, the deceased proposer having availed a loan in the higher side, i.e., Rs.12,50,000/-, was supposed to undergo medical examination before acceptance of the proposal and issuance of policy certificate (as the loan amount was above Rs.7,50,000/-). It is stated that though sufficient information regarding such medical examination was given to the complainants husband-the deceased proposer, who had adequate knowledge of the necessity of undergoing medical examination at the proposal stage, he did not turn up for the same till his death, which was nothing but sheer avoidance on his part to undergo medical test. Opposite party no.1 further stated that since the SBI Life was not in receipt of the medical report, the proposal was not accepted, for which no bond was issued in favour of the complainants husband and as such the contract was not complete and concluded as on the date of death of the proposer.
5. We have heard Mr. R.C. Mohanty, learned counsel for the appellant and Mr. R.K. Pattnaik, learned counsel appearing for respondent no.1 (complainant). We have also thoroughly gone through the LCR and the impugned judgment of the learned District Forum. Admittedly there was no compulsion on the part of the borrower to secure his loan through insurance policy. No doubt it is optional. Regarding the Scheme, when loan is incurred, opposite party no.2-Bank impresses the borrower. In the instant case, the borrower, being impressed opted for the insurance cover and from his loan account premium of Rs.55,288/- was deducted and the same was remitted through bank draft on 12.07.2004 to the SBI Life. The SBI Life, as we have ascertained and found, was to get the loanee-the husband of the complainant, medically examined as per the guidelines, as the loan amount exceeded Rs.7,50,000/-. In this connection, our attention was drawn to Annexure-II in the LCR, where opposite party no.2-Bank has clearly stated as follows:-
Dear Customer, We are pleased to bring to your notice that SBI Life Insurance Company Ltd (SBI Life) is offering an innovative Group Life Insurance to housing loan borrowers of State Bank Group as protection against the risk of death due to any reason during the tenure of the loan.
SBI Life is a company incorporated under the Companies Act and is authorized to extend life insurance protection to persons on individual or group basis.
We send for your information an offer from SBI Life giving a description of the Group Insurance Scheme and its benefits to you and your family.
Should; you wish to avail of this offer from SBI Life, please complete the attached letter of consent. We shall be; happy to act as the Administrator for the Scheme. As the Administrator of the Scheme, we shall collect and remit the insurance premiums to SBI Life and forward any claims under the Scheme.
We wish to clarify that our Bank is not acting as an agent of SBI Life, or on behalf of SBI Life, and is in no way liable to settle claims under the proposed Group Insurance Scheme. All liabilities to settle claims under the Group Insurance Scheme would solely be the responsibility of the SBI Life Insurance Company Ltd.
Yours faithfully, Branch Manager From the afore-mentioned caption, it is very clear that the deceased husband of the complainant had only authorized opposite party no.2-Bank to deduct the premium from his loan account. He had also authorized that in case the SBI Life would not be in a position to accept the life insurance, the initial premium amount remitted by the Bank would be refunded and credited to his account. As already stated, the borrower was required to undergo complete medical examination as per the procedure laid down in the scheme of the SBI Life. The said scheme also prescribes the effective date of life cover. The effective date of commencement of life cover for a member admitted to the benefits of the scheme would be from the date the final draft is issued to the SBI Life and 100% insurance premium payable (including extra premium if applicable based on medical reports) is debited. The said scheme further provides that the borrower should be required to undergo a complete medical examination as per the details referred to in paragraph 2(B) of Operational Procedure. Paragraph 2(B)(2) of the Operational Procedure prescribes that the third party administrator (TPA) will conduct the medical test. Paragraph 7 of the said Procedure prescribes that on receipt of Annexure X at SBI Life Mumbai office, the Operations Department will intimate/follow up with the TPA for necessary medical reports of the borrower. It was brought to our notice by the learned counsel for respondent no.1 that on receipt of proposal form by the SBI Life Mumbai office, the borrower will be referred to the respective TPA for medical test and the TPA will contact the borrower and fix appointment for medical examination. The check list of TPA Hand Book prescribes that the SBI Life Mumbai will refer the borrower to the TPA for medical examination and the SBI Life will contact the TPA. The Master Policy of SBI Life in clause 3 at 7th paragraph clearly stipulates that the insurance risk is under-written by the SBI Life and SBI Life is responsible for settling all claims.
6. It was contended and we have also noticed keenly regarding the delay in the medical test of the deceased proposer, which is no doubt inordinate. From the available material on record and from the discussions of the learned District Forum, we have absolutely no doubt that only after the death of the complainants husband and when the complainant preferred the claim, the SBI Life got up from a deep slumber and started postmortem of the matter regarding the cause of sudden death of the proposer. Whatever documents have been referred to by Mr. Mohanty, learned counsel for the appellant, have been procured only after the claim was preferred; be that the medical report from the Kalinga Hospital or the leave availed by the proposer-the late husband of respondent no.1 while in service as Ranger in the office of the Principal C.C.F. (Wild Life) and Chief Wild Life Warden, Orissa, Bhubaneswar. To cover up their own laches, the appellant SBI Life has attempted to put the blame on the proposer-deceased Parida by advancing a case that he did not respond to the letters for medical examination, which is a must in view of his borrowed amount. Not a single scrap of paper or copy thereof could be produced in the District Forum, and this has been clearly and categorically observed by the learned District Forum in the impugned judgment.
7. It is argued by Mr. R.K. Pattnaik, learned counsel for respondent no.1 that if the medical test of the complainants husband would have commenced soon after receipt of the draft pertaining the premium by the appellant SBI Life, it might be that the premium amount could be enhanced, or if it would have been found that the deceased proposer was a chronic heart patient, the proposal would have been negatived and the amount of premium would have been refunded to the SBI, City Branch, Cuttack, wherefrom the deceased had availed the housing loan. Without taking any action in the matter at appropriate time, the functionaries of the SBI Life have subsequently collected documents regarding the health condition of the deceased, the cause of death and whether the disease was chronic or not, and have repudiated the claim of the complainant. The report of the doctor of Kalinga Hospital, who, after the deceased was referred from SCB Medical College, had attended to and treated the deceased husband of the complainant, goes to show that the deceased was admitted to the hospital on 27.03.2005 and on the very same day he expired. He was diagnosed as AORTIC STENOSIS (Severe calcified) C L.V. DYSFUNCTION (LVEF:20%) with CHF. The death, as has been opined and stated in the report by the attending doctor, was due to cardiac arrest. The doctor has further opined that the deceased Prashant Kumar Parida had chronic heart problem.
8. Be that as it may, we find after thorough deliberation that the proposer Prashant Kumar Parida died more than eight months after he availed the loan and the premium was sent to the SBI Life being deducted from the loan account of the said borrower. There is no mention as to since what time the husband of the complainant was having the heart problem, although it has been mentioned that it was a chronic one. It is also not known whether the deceased had knowledge of such problem in his heart. In our opinion and as it appears to us, the person who was able to incur loan of Rs.12,50,000/- would have certainly got his treatment in some reputed Heart Institute or even at Kalinga Hospital. We cannot agree with the learned counsel for the appellant that the husband of the complainant had knowledge of this chronic problem and for that he was avoiding medical examination, when we find that there was no intimation to him for facing medical examination. May be, it was a chronic problem, but knowledge of existence of such problem in ones heart is something else. Learned counsel for the appellant submits that after repudiation of the claim, the premium amount has already been returned to the SBI, City Branch, Cuttack for credit to the account of the deceased proposer. But, since we find clear negligence and deficiency on the part of the appellant, which was also the finding of the learned District Forum, it cannot escape liability by stating so.
9. The facts and circumstances of the case incline us to come to the conclusion that it is only due to the gross negligence and deficiency in service on the part of appellant that the complainant-respondent no.1 has suffered loss and damages and has undergone severe mental agony. For that, we decide to impose compensation to be paid by the appellant to the complainant to somewhat ameliorate her suffering and agony, which she has undergone after the sad demise of her husband. In our opinion, since the contract has not been completed, not being accepted by the appellant-SBI Life, it would not be just and proper to direct the appellant to make payment of the outstanding house loan dues of the deceased husband of the complainant. In that view of the matter, we set aside the said part of the impugned order of the learned District Forum, Instead, we direct the appellant-opposite party no.1 to pay compensation of Rs.5,00,000/- (five lakhs) to the complainant, which, in our opinion, would meet the ends of justice. We, at the same time, also direct the appellant to pay a sum of Rs.3,000/- (three thousand) to the complainant as cost of litigation. The aforesaid amounts shall be paid within a period of two months from the date of our order.
10. In the result, the appeal is allowed in part to the extent indicated above. Records received from the District Forum be sent back forthwith.
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(Justice A.K. Samantaray) President ..............................
(Subash Mahtab) Member SCDRC, Orissa, Cuttack August ,2009/Nayak