State Consumer Disputes Redressal Commission
Dineshkumar R Sharma vs Max Life Ins Co Ltd. on 18 October, 2021
1
Details DD MM YY
Date of Judgment 18 10 2021
Date of filing 23 01 2014
Duration 26 08 07
IN THE CONSUMER DISPUTES REDRESSAL COMMISSION,
GUJARAT STATE AT AHMEDABAD.
Complaint No. 2014/10
[Virtual hearing]
Court No.1
Dineshkumar R. Sharma,
24, Amar Society,
Nr. Balvatika, Kankari,
Ahmedabad-380008. ...Complainant
Vs.
1. Max Life Ins. Co. Ltd.
Rembrandt, Opp. Associated Petrol Pump,
C. G. Road, Ahmedabad.
2. Max Life Ins. Co. Ltd.
Max House, 3rd Floor, Dr. Jha Marg,
Okhla, New Delhi-110 020. ...Opponents
Complainant- Learned advocateMr. M. K. Dudhiya,
Opponents-Learned advocate Mr. N. S. Dave
Coram :Hon'ble Mr. Justice V. P. Patel, President
Smt. U. P. Jani, Member
Order by Hon'ble Mr. Justice V. P. Patel, President
1. The complainant has filed the consumer complaint u/s. 17 of the Consumer Protection Act, 1986 (For short "The Act) against the opponent insurance company claiming main relief in terms of para 11 which reads as under:
(A) Honourable Commission be pleased to admit and allow this complaint and direct the opponents to reinstate the policy bearing No 253480586 upon submission of necessary premiums by complainant.
Or In substitute direct the opponents to refund the premiums paid by the complainant to the tune of Rs. 23,92,561/- along with the M. B. Desai CC-14-10 Page 1 of 22 2 interest @ 10% from the date of payment of the premiums till its realizations to the complainant towards the monetary loss due to deficient service and unfair trade practice adopted by the opponents.
(B) Honourable Commission may further direct opponents to pay complainant any suitable amount towards the exemplary compensation for mental stress and harassment suffered by him and unfair trade practice adopted by the opponents. (C) Hon‟ble Commission may also direct the opponents to pay Rs. 50,000/- towards the cost of this complaint.
2. Heard ld. advocate Mr. M. K. Dudhiya, for the complainant and Learned advocate Mr. N. S. Dave for the opponents.
Facts of the complaint:
3.Short facts giving rise to the present complaint are as under: During January, 2005 the complainant was approached by the officer and advisor of the opponent and given information about various insurance policies. That complainant informed the opponent that complainant was suffering from diabetes and then opponent stated that the opponents will issue policy though the complainant was suffering from diabetes. Opponents has shown rosy picture and hence complainant has decided to obtain the "Whole Life Participating Policy" for the sum insured Rs. 50,00,000/-. That the signature of the complainant was obtained on application form and premium amount Rs. 54,100/- was paid by the complainant.
3.1 That the complainant had disclosed true and correct facts in the proposal form and informed the opponents that complainant is suffering from diabetes, opponents have proposed to increase the premium amount from Rs. 54,100/- to Rs. 82,502.12/-. That the complainant was asked them why premium was increased upto 50%, in response the officer of the opponent has informed that as the complainant was having diabetes and coverage of risk is high therefore, in form of loading amount is required to be imposed as per the company norms and hence, premium amount is increased and officer of the opponent has also assured that the said increase in the premium amount does not affect the policy condition and after adding M. B. Desai CC-14-10 Page 2 of 22 3 rider in form of additional premium the policy is quite beneficiary to the complainant. After getting amount and considering the information given in the proposal the opponents have issued Whole Life Participating to Age 100 Plan policy having face value of Rs. 50,00,000/- bearing policy No. 253480586 in favour of the complainant.
3.2 That the agent of the opponents was collecting premium amount from the complainant but he stopped to collect the premiums and at that time due to personal difficulty and oversight complainant was not able to pay the premium during April, 2012 to October, 2012. In November, 2012 complainant was requested the opponent to reinstate the policy and opponent has informed the complainant that the amount of Rs. 2,53,230/- is required to be paid which includes three due installments with interest. The said amount was paid by the complainant through cheque on 10.11.2012 and after sometime opponent no. 1 has informed the complainant to pay further amount of Rs. 1,650/- to reinstate the policy which was also paid by the complainant on 3.1.2013. That officer of the opponent has informed the complainant to undergo for blood test and complainant has done the same test. That report shows sugar level 200 mg. was submitted to the opponent.
3.3 However, to the utter shock and surprise to the complainant has received letter dated 15.3.2013 by the opponents wherein, opponent has declined the request of the complaint regarding reinstatement and refund amount of Rs. 2,56,530.42 ps. That upon receipt of the letter the complainant has met the officer of the opponent no. 1 and inquired about their letter and complainant came to know that due to blood sugar level is higher therefore, company has decided not to revive the policy and refunded the premium. After that during July, 2013 complainant had again approached opponent for reinstatement of the policy. That after calculating due premiums with interest, opponent no. 1 has informed that till July, 2013 six premiums were due and an amount of Rs. 5,22,712/- including payable interest is M. B. Desai CC-14-10 Page 3 of 22 4 required to be paid towards the due premiums for reinstatement of the policy. That the complainant was also informed to undergo blood sugar test from opponent recognized laboratory and report showing blood sugar level of 90 mg. and the amount of Rs. 5,22,712/- was submitted at opponent no. 1 office.
3.4 That once again, with utter shock and surprise to the complainant, opponent by letter dated 7.8.2013 decline the request of the complainant based on their internal assessment and refund the amount of Rs. 5,22,712/- to the complainant.
3.5 That the complainant had paid premiums for more than 7 years and disclosed the true and correct facts at the time of proposal however, opponent has refused for reinstatement of the policy. Complainant has issued the legal notice dated 16.9.2013 to the opponent no. 1 and the same was served to them but opponent no. 1 has not replied. Hence, complainant has filed present complaint to get his policy reinstated and in alternate to get refund of the premiums paid by the complainant from January, 2005 to January, 2012.
Argument of the complainant:
4. We have gone through the synopsis/brief note of argument submitted by the ld. advocate for the complainant. The complainant has stated factual aspects in his brief note of argument, which are already narrated in earlier para therefore, there is no need to repeat factual aspect.
4.1 It is argued by the ld. advocate for the complainant that the opponent has mainly defended the complaint speaking that on the basis of medical report at the time of reinstatement of policy as reviewed by respondent's chief medical officer, policy could not be reinstated. That the complainant has obtained the loan for amount of Rs. 2,39,700/- and it was disclosed by them, thus not come with clean hands, which is incorrect as the complainant has produced documents at page 70 wherein, outstanding loan is mentioned. It is further argued that in the statement issued by the opponent at page M. B. Desai CC-14-10 Page 4 of 22 5 70 wherein, cumulative bonus amount of Rs. 4,77,193.70/- is shown as the amount of total PUA (Paidup addition) of Rs. 13,35,201.93/- is also mentioned. That the opponent has paid Rs. 4,76,860.63/- as surrender value to the complainant on 23.3.2018. This shows that opponent tried to settle the issue of refund of the premiums by paying small amount against hue demand. Thus, the act of the opponent to pay the amount is duly contradictory to the written statement filed by the opponent.
4.2 It is further argued that the unfair trade practice of the opponent is clearly reflects through the conduct. That the condition no. 14 non- forfeiture options on nonpayment of premiums is not considered. As per the clause A of the condition no. 14 the amount of Rs. 7,75,401.06/- are required to be paid and as per the clause B of the condition no 14 the amount of Rs. 13,35,201.93/- is required to be paid. It is further submitted that if the amount of Rs. 4,76,860/- paid is calculated as surrender value paid to the complainant, the rest of the amount required to be paid by the opponent. He has relied upon the certain judgments which will be discussed hereinafter.
Argument/Defense of the opponent:
5. It is submitted that the complainant has suppressed the material facts and tried to mislead the Hon'ble State Commission merely on this ground complaint is required to be dismissed. That due to history of diabetes is disclosed by the complainant, the policy was issued with extra premium and the same was accepted by the complainant. That the policy in question got lapsed on 25.4.2012 due to nonpayment of due premium at the relevant point of time. Complainant has requested to revive the lapse policy, for that purpose he has filed a health declaration form along with the medical reports on 8.12.12. He has paid amount of Rs. 2,56,530/- for the lapsed premiums. However, opponent has refunded the amount and decline to revival on 15.3.2013.
M. B. Desai CC-14-10 Page 5 of 22 65.1 It is further argued that again complainant has requested to revive policy in July, 2013, at that time complainant has paid Rs. 5,22,712/- as amount of lapsed premium along with interest. However, upon medical findings, after internal assessment the second revival request was also declined and the amount paid by the complainant was refunded. It is further submitted that the decision as regards to the revival/reinstatement of policy in question was based upon the terms and conditions of the policy in question more particularly condition No. 11 of the policy. Therefore, the opponent has not shown any deficiency in service or unfair trade practice.
5.2 It is further argued that policy coverage along with the benefits were provided to the complainant by the opponent insurance company for whatever the period the premiums were paid regularly. Thus, against the premium paid, the opponent had provided the service and upon stopping the premium paid to the insurance cover was discontinue. Thus, opponent has provided the service for which period premiums were paid and therefore, there is no question of refunding the amount of premium. It is further argued that the policy was lapsed and was not revived/reinstated on medical ground. Complainant is not entitled for any refund of premium as prayed for in the complaint. That the decision is taken by the opponent is supported by the conditions nos. 10, 11 and 14 of the policy then the denial was as per the terms of the policy which cannot be termed as either deficiency of service or unfair trade practice.
5.3 It is also argued that the complainant has not disclosed in the complaint that the complainant had taken loan for an amount of Rs. 2.39.700/- in the year 2008 the same is not even disputed later on. It is further submitted that the opponent is ready and willing to provide the loan account statement if Hon'ble Commission direct to the opponent. The amount of Rs. 4,76,860.63/- have been paid by the opponent on 18.3.18. The said fact was declared on record through pursis. It is concluded that the complainant is not entitled for entire amount of premium paid by the complainant. The complainant was M. B. Desai CC-14-10 Page 6 of 22 7 already paid the amount for which he was entitled after deduction complainant's liability under the policy and therefore, complaint is required to be dismissed. He has relied upon certain judgment which will be discussed hereinafter.
5.4 After filing the synopsis/brief note of argument, opponent has produced the detail calculation on the surrender value calculation as well as loan account of the complainant.
Merits of the case:
6. Some details regards to the policy are required to be place which read as under:
(A) Policy Name: Whole Life Participating policy (B) Type of policy: Participating (C) Policy No.: 253480586 (D) Proposal date: 14.3.2005 (E) Name of the policy holder: Mr. Dinesh Kumar Ramgopal Sharma (F) Date of birth of life insured: 26.1.1958 (G) Effective date of coverage: 25.1.2005 (H) Premium mode: Quarterly (I) Duration of coverage: to age 100 (J) Sum insured: 50,00,000/- bonus (K) Model Premium: Rs. 85,502/-.
7. The complainant has asked first reliefs in para 11, (a) to direct the opponents to reinstate the policy being policy No. 253480586 by the submission of necessary premium by the complainant.
7.1 The insurance company has declined reinstatement of policy vide letter dated 15.3.13 which is produced at page 63 which reads as under:
"This is with reference to your request regarding Reinstatement for policy number 253480586. We are constrained to decline your request based on our internal assessment.
We hope you would appreciate that declining an option based on assessment of medical, health and other relevant information is an accepted, practice in the industry the world over. We are refunding amount of Rs. 2,56,530.42 lying in your policy account."M. B. Desai CC-14-10 Page 7 of 22 8
7.2 The insurance company has again declined the request of reinstatement of policy on 7.8.13 which is produced at page 65 which reads as under:
"This is with reference to your request regarding Reinstatement for policy number 253480586. We have carefully reviewed your request for reinstatement in your life insurance policy along with other information that you have provided to us. We are constrained to decline your request based on our internal assessment. We hope you would appreciate that declining an option based on assessment of medical, health and other relevant information is an accepted, practice in the industry the world over. We are refunding amount of Rs. 522712.00 lying in your policy account."
8. Complainant has passed pursis on 6.4.21 which is produced at Exb. 24 which reads as under:
"In captioned matter, the complainant has in para (11) (A) of the complaint prayed for reinstatement of policy NO. 253480586or in substitute refund of the premium paid by the complainant towards the policy. However, looking to the present scenario, the complainant now does not wanted to reinstate the policy."
8.1 It is stated in the clause 11 of the terms and conditions of the policy that "11. Reinstatement of policy in non-forfeiture under section 14 The Company, upon written request from the Policy Holder, and on production of satisfactory evidence of insurability (cost to be borne by the Policy Holder), may at its discretion reinstate this Policy, only if this Policy is under Non - Forfeiture and has not lapsed with no value, on such terms and conditions as are applicable at the time of reinstatement. Subject to payment of applicable reinstatement charges reinstatement may be done at any time after the expiry of grace period but within Policy's reinstatement time limit (which may be decided by the Company from time to time).
9. Considering discretion of the company to reinstate policy and the pursis passed by the complainant he has waive the relief of reinstatement of policy therefore, we have not discussed anything regarding the reinstatement of the policy. There is no dispute about the amount of lapsed premium paid by the complainant for reinstatement of the policy was refunded by the opponent i.e. (1) Rs. 2,56,530.42/- and (2) Rs. 5,22,712.00/-.
M. B. Desai CC-14-10 Page 8 of 22 910. We have considered the ratio laid down by the Hon'ble Supreme Court in the judgment cited by the ld. advocate for the complainant which reads as under:
10.1 IV (2011) CPJ 4 (SC): LIC of India & Anr. vs. Hira Lal.
"2 (25). It is by now well settled that when two interpretations are possible, while examining a case of the present nature, one beneficial to the consumer has to be followed."
10.2 I (2004) CPJ 22 (SC): United India Insurance Co. Ltd. vs. M/s. Pushpalaya Printers.
6.... It is also settled position in law that if there is any ambiguity or a term is capable of two possible interpretations one beneficial to the insured should be accepted consistent with the purpose for which the policy is taken, namely, to cover the risk on the happening of certain event. Although there is no ambiguity in the expression "impact", even otherwise applying the rule of contra proferentem, the use of the word "impact" in clause 5 in the instant policy must be construed against the appellant. Where the words of a document are ambiguous, they shall be construed against the party who prepared the document. This rule applies to contracts of insurance and clause 5 of the insurance policy even after reading the entire policy in the present case should be construed against the insurer. A Constitution Bench of this Court in General Assurance Society Ltd. vs. Chandumull Jain & Anr. [1966 (3) SCR 500] has expressed that "in a contract of insurance, there is requirement of uberrima fides, i.e. good faith on the part of the assured and the contract is likely to be construed contra proferentem i.e. against the company in case of ambiguity or doubt."
11. We have considered the ratio laid down by the Hon'ble Supreme Court in the judgment cited by the ld. advocate for the opponent which reads as under:
11.1 2004 (8) SCC 664: United India Insurance Co. Ltd. vs. Harchand Rai Chandan Lal.
"13. Similarly in the case of General Assurance Society Ltd. Vs. Chandumull Jain and Anr. reported in (1966) 3 SCR 500 the Constitution Bench has observed that the policy document being a contract and it has to be read strictly. It was observed, "In interpreting documents relating to a contract of insurance, the duty of the court is to interpret the words in which the contract is expressed by the parties, because it is not for the court to make a new contract, however reasonable, if the parties have not made it themselves......M. B. Desai CC-14-10 Page 9 of 22 10
14. Therefore, it is settled law that the terms of the contract has to be strictly read and natural meaning be given to it. No outside aid should be sought unless the meaning is ambiguous."
11.2 IV (2017) CPJ 461 (NC): T. Chitra and Ors. vs. LIC of India and Ors.
"....This Commission in Oriental Insurance Co. Ltd. Vs. Sony Cherian, II(1999)CPJ13 (NC) has observed:-
"16. The insurance policy between the insurer and the insured represents a contract between the parties. Since the insurer undertakes to compensate the loss suffered by the insured on account of risks covered by the insurance policy, the terms of the agreement have to be strictly construed to determine the extent of liability of the insurer. The insured cannot claim anything more than what is covered by the insurance policy. That being so, the insured has also to act strictly in accordance with the statutory limitations or terms of the policy expressly set out therein."
10. Hon‟ble Supreme Court in United India Insurance Co. Ltd. Vs. HarchandralChandanlal, (2004) 8 SCC 644 has observed as under:-
"6. ....The terms of the policy have to be construed as it is and we cannot add or subtract something: Howsoever liberally we may construe the policy but we cannot take liberalism to the extent of substituting the words which are not intended.
9. ...It is settled law that terms of the policy shall govern the contract between the parties, they have to abide by the definition given therein and all those expressions appearing in the policy should be interpreted with reference to the terms of policy and not with reference to the definition given in other laws. It is a matter of contract and in terms of the contract the relation of the parties shall abide and it is presumed that when the parties have entered into a contract of insurance with their eyes wide open, they cannot rely on definition given in other enactment.
14. Therefore, it is settled law that the terms of the contract has to be strictly read and natural meaning be given to it. No outside aid should be sought unless the meaning is ambiguous."
11.3 IV (2008) CPJ 156 (NC): Life Insurance Corpn. of India and Ors. vs. Siba Prasad Dash (Dr.) and Ors.
"We are unable to appreciate as to on what ground the District Forum and State Commission could direct refund of premium? The premium is given by an insured, to cover the risk for a given period, and the insurer covers the risk for the period for which the premium has been paid. It is M. B. Desai CC-14-10 Page 10 of 22 11 not the case of the complainant that the risk was not covered for the period for which the premium was given. If after that the policy lapsed, under no provision of terms of policy or law, could any Fora direct for refund of any premium for the simple reason, as already stated, that the risk stood covered for the period for which premium had been paid. The State Commission has also, in our view, wrongly appreciated „the absence of any for feature clause in the policy.‟ Without being repetitive, in our view, this was not a question of forfeiture. This was not a question of any hypothecated goods, which were forfeited. This was a simple case of lapse of policy for nonpayment of premium as a result of which the policy had lapsed. Insurer cannot be asked to refund the premium for the period when he had covered the risk. Introduction of element of „forfeiture‟ is a novation of the State Commission. when it was not warranted by the facts and circumstances of the case. Nothing is on record to show that any provision exists for refund of premium of a lapsed policy. The insured cannot be given advantage of „risk coverage‟ as also of refund of premium in the present circumstances."
Refund of premium:
12. The complainant has prayed second relief i.e. to direct the opponent to refund the premium paid by the complainant to the tune of Rs. 23,92,561/- along with 10% interest from the date of payment of premiums till its realization.
12.1 The complainant has filed pursis at page 157 on 31.7.2019 stating that the opponent had paid against the policy surrender request made by the complainant. The details showing email for payment of Rs. 4,76,861/- are produced herewith this pursis.
Calculation of refund of premium by complainant:
13. The complainant has made calculation in para 8 and 9 of the written synopsis and come to the conclusion that at least Rs. 8,58,341/- is required to be paid by the opponent to the complainant. Para 8 and 9 of the written synopsis are read as under:
"8. The unfair trade practice of the opponent clearly reflects through their conduct that as per condition no.14 ( page 17 ) Non- Forfeiture Options on Non - payment of Premiums, the opponents are liable to pay the amount as mentioned below:
"If the premiums for least there full years have been paid, and provided there is no indebtedness to the company the minimum non-forfeiture M. B. Desai CC-14-10 Page 11 of 22 12 benefit will be a reduced paid up policy, the amount will be larger of (a) and (b) there:
A) (Total number of premiums paid ) 29 * 50,00,000 (Original Sum Insured) Divided by 187 ( Total number of premiums required ) This comes to Rs.7,75,401.06/-
B) Is the amount of paid up insurance which can be purchased by cash surrender value. "In present case paid up value is Rs.13,35,201.93/-
(page 70) Therefore as per the condition no.14 the larger amount of Rs.13,35,201.93 / - and the opponents are liable to pay at least Rs.13,35,201.93 ) - to the complainant.
9. Though the opponents were liable to pay Rs. 13,35,201/- they have paid only Rs. 4,76,860/- on 23/3/2018 to the complainant. Therefore the opponents are required to be held liable to pay Rs. 13,35,201/- Rs. 4,76,860/- = Rs. 8,58,341/- with interest from year January 2012 and also required to be held liable to pay the interest on the amount of Rs. 4,76,860/- from January 2012 to 23/3/2018.
Calculation of refund of premiums by opponent:
14. As per the defense of the opponent company, it is said that there is no question of refunding the amount as the policy coverage along with benefits were provided to the complainant by opponent for whatever the period the premium was paid regularly.
14.1 It is to be noted that in spite of such defense taken in the written statement, the amount of Rs. 4,76,861/- was paid by the opponent to the complainant as surrender value. The opponent has produced letter dated 21.3.2018 at page 170 and pursis at page 168 on 1/7/2021 as under:
"For the first time the Complainant had come out with the calculation of the amount to be paid as well as loan amount averments in the written arguments. Therefore, it is necessitated for the opponent to produce the detail calculation on the surrender value calculation as well as loan account of the complainant on record. Not only that, the documents pertains to the formalities, undergone by the complainant on his own for obtaining the surrender value are also required to be produced as the complainant has averred in his written arguments for the first time that, why the opponent company has paid the surrender value and has also claimed interest on the said surrender value from January, 2012."M. B. Desai CC-14-10 Page 12 of 22 13
15. The opponents have produced calculation at page 181-182 as under:
"yours is a Non Linked Participating Max Life Whole Life Participating Plan with policy issue date as 25 January 2005 and premiums paid to date as 25 April 2012."
Please find below the surrender value calculation logic as on surrender effective date 19 March 2018 As mentioned in the policy contract, the policy shall acquire cash value if it has been in force for three years. The company will grant a cash surrender value which will not be less than 30% of the Premium (s) (excluding the first year's Premium) received but never more than the base face amount the policy. The cash surrender value payable will be subject to the condition that the policy is in force and that there are no statutory or other restrictions to the contrary. Indebtedness, if any, to the company be deductible from the cash surrender value. Here, Guaranteed Surrender Value Here, Guaranteed Surrender Value (GSV) = 30% of premiums (excluding first) = 30% * (82,502.12 * 4 * (7.25-1)) = 30% * 20,62,553 = Rs 6,18,765.90 Cash Surrender Value (CSV) equals sum of Base Cash Value and PUA Cash Value.
I. Base Cash Value as on NFO conversion date = Base Sum Assured multiplied by CSV rate 50,00,000 * CSV rate / 1000 =Rs 4,25,150 II. Base Reduced Paid Up CSV = Base CSV as on NFO conversion date + ((Reduced Paid Up Sum Assure Base CSV as on NFO conversion date) / RPU Term) * Term from NFO conversion date to surrender = 4,25,150 + ((8, 80,477.38 - 4,25,150) / 46.75) * 5.892473 = Rs.4,82,540.47 Where Reduced paid up Sum Assured is higher of Proportionate Sum Assured and the amount of pa insurance which can be purchased by the cash surrender value:
Proportionate Sum Assured = Sum Assured * (Total premiums paid / total premiums payable = 50,00,000 * (82,502.12 * 4 * 7.25 / 82,502.12 * 4 * 54) M. B. Desai CC-14-10 Page 13 of 22 14 = 50,00,000 * (23,92,561.48 / 1,78,20,457.92) = Rs 6,71,296.30 Paid up insurance = Base Cash value as on NFO conversion date * 1000 / RPU conversion rate = 4,25,150 * 1000 / RPU conversion rate = Rs.8, 80,477.38 Thus, Reduced paid up Sum Assured = Higher (6,71,296.30, 8,80,477.38) = Rs.8,80,477.38 II. PUA Cash Value = PUA sum assured purchased multiplied by PUA CSV rate = 13,35,201.93 * PUA CSV rate / 1,000 = Rs.6,17,502.22 Thus, CSV = Base cash value + PUA cash value = 4,82,540.47 +6,17,502.22 = Rs. 11,00,042.69 It may be noted that the CSV rates are per 1000 sum assured and are approved by IRDAI. These rates are contingent upon past and prevailing investment conditions.
Final Surrender Value = Higher of (GSV or CSV) less loan including interest accrued to the date of surrender - Service tax tolerance = Higher of (6,18,765.90, 11,00,042.69) - 6,21,531.67-1,650.42 = 11,00,042.69 -6,21,531- 1,650.42 = Rs. 4,76,860.60 Hence, surrender value disbursed is correct according to our calculations.
Hope this clarifies your query.
Please let us know in case you have any concerns."
Please note that as per INGENIUM, the final surrender value is Rs. 11,00,042.69; however, the surrender value in the amount of Rs. 4,76,860.60 was paid to the policy holder. Records indicate that Rs.6,21,531.67 was deducted for the recovery of loan including interest accrued to the date of surrender and Rs.1650.42 was deducted for the recovery of Service Tax Tolerance Paid by 25 April 2012, Rs. 1,650.42."
16. The above calculation of the surrender value is not prescribed by any statutory provision of law or guidelines issued by Insurance M. B. Desai CC-14-10 Page 14 of 22 15 Regulatory and Development Authority. Further the provision of said calculation is not incorporated as it is in the terms and conditions of the policy. Therefore, this calculation made for surrender value is not required to be considered because it is not binding to the parties more particularly the complainant.
Provision for refund of premium:
17. Now, the question is how to calculate the amount of surrender value. In other words what amount the claimant/insured is entitled. For this purpose, we have to refer certain provisions of terms and conditions of the policy which are read as under:
Clause 10. Payment of premiums and grace period:
A grace period of 30 days without interest will be allowed for receipt of every Premium after the respective due dates. During the grace period the policy will continue to be in force but in the event the Life Insured dies during the grace period, the Company shall be entitled to deduct the unpaid premium from the Benefits payable under the Policy. If any Premiums remain unpaid at the end of the grace period this Policy will go into Non - Forfeiture in accordance with Section 14, with effect from the last due date of such unpaid Premium.
Clause 12 Cash surrender value:
After the Policy has been in force for at least three years and provided all the Premiums have been paid for three full years, then the Company will grant a cash surrender value which will be not less than 30% of the Premium(s) (excluding the first year's premium) received but never more than the base face amount of the policy. The cash surrender value payable will be subject to the condition that the Policy is in full force and that there are no statutory or other restrictions to the contrary. Indebtedness, if any, the Company will be deductible from the cash surrender value.
Clause 13 Policy holder bonus and bonus options: No bonus is payable for the first two policy years. Thereafter, a bonus as declared by the Company, will be paid, from the surplus arising from the actuarial valuation of the participating life insurance fund. The amount of bonus to be paid will be as determined by the Company's Appointed Actuary from time to time.
The bonus will be applied as per the options selected by the policy holder in the proposal .
Clause 14 Non- forfeiture options on non- payments of premiums M. B. Desai CC-14-10 Page 15 of 22 16 If the Premiums for at least three full years have been paid, and provided there is no indebtedness to Company, then the minimum non - forfeiture benefit will be a reduced paid up policy ("Reduced Paid Up Insurance"), the amount of which will be the larger of (a) and (b) where
(a) is:
total number of Premiums paid * Original Sum Insured total number of Premiums required)
(b) is the amount of paid up insurance which can be purchased by the cash surrender value.
If at any time the outstanding indebtedness exceeds the cash surrender value of the paid up policy, the paid up policy will lapse. In addition, the following option will also be available to the Policy Holder.
Extended Term Insurance (ETI) The cash surrender value (if any), net of indebtedness ("Policy Value") will be used as a single Premium to buy Term Insurance equal to the current Sum Insured of this Policy plus the amount of existing Paid Up Additions (if any) for a term which the Policy Value can purchase. The maximum term for this ETI cannot exceed the remaining tern of this Policy. Should the Policy Value be sufficient to buy a single premium Term Insurance for a term longer than the remaining term of this Policy, then such excess amount will be returned to the Policy Holder Such ETI can be surrendered at any time but is not eligible for loans or bonus.
The term "lapse" used in this document means expiration of coverage because the Policy Value is zero."
18. Clause 10, 12, 13 and 14 of the terms and conditions of the policy can be interpreted as under:
18.1 Clause 10. Payment of premiums and grace period:
(a) grace period of 30 days allowed after the respective due dates.
(b) During grace period the policy will continue in force.
(c) In the event the Life insured dies during the grace period, the Company shall be entitled to deduct the unpaid premium from the Benefits payable under the Policy.
(d) If Premiums is not paid after grace period Policy will go into Non -
Forfeiture as per clause 14.
18.2 Clause 12 Cash surrender value: This is qualifying clause. In other words the candidates are to be satisfied for refund of premium. the conditions are;
(a) Minimum 3 years premiums should be paid.
M. B. Desai CC-14-10 Page 16 of 22 17(b) Cash surrender value will not be less than 30% of the Premiums. It may be more than 30% of premiums.
(c) Cash surrender value will not be more than the base value of the amount of policy i.e. sum insured.
(d) There should not be statutory and other restrictions to the contrary. (It should not be against public policy, against law etc.) In other words not against aim and objects of law as per the Section 23 of the Contract Act.)
(e) If any indebtedness, company will deduct the said amount.
18.3 Clause 13 Policy holder bonus and bonus options: It is for payment of bonus.
(a) No bonus will be paid for first two policy years.
(b) Bonus will be paid form surplus actuarial valuation fund.
(c) Company will determine the amount of bonus from time to time.
(d) Bonus will be applied as per the options selected by policy holder.
18.4 Clause 14 Non- forfeiture options on non- payments of premiums:
(a) This clause provides the calculation of refund of premiums subject to the subject to clause 10, 12 and 13 of the terms and conditions of the policy.
(b) There are 2 modes prescribed for the calculation of refund of premium on non-forfeiture options of non-payments of premiums.
(c) Out of this two modes, larger amount will be considered.
(d) The only rider is that if indebtedness exceeds the cash surrender value of the paid up policy, the paid up policy will lapse. It means indebtedness is more no surrender premium will be required.
(e) The another option for extended term insurance is available to the policy holder.
(f) The maximum term for extended term insurance cannot exceed the remaining term of the policy.
19. As per para 8 of the brief note submitted by the complainant, he arrived at Rs. 7,75,401.06/- by adopting the calculation of mode (a) of the clause 14 of the terms and conditions of the policy.
19.1 As per the brief note at page 187, the opponent has varied at Rs. 6,71,296.296/-.
The formula for the mode (a) of the clause 14 of the terms and conditions is as under.
(Total Number of premiums paid) * (Original Sum Insured) (total number of premiums required) M. B. Desai CC-14-10 Page 17 of 22 18 29*50,00,000 = Rs. 6,71,296.296/-
21619.2 Here in this case there is no dispute that the total 29 premiums were paid. There is no dispute about the sum insured i.e. Rs. 50,00,000/-. The complainant has considered 187 total number of premiums required, but it is false.
The birth date of the complainant is 26.1.1958. The duration of coverage is up to age of 100 years. The effective date of coverage is 25.1.2005. At the time of commencement of the coverage the consumer was of 47 years old. He will be 100 years of old after 53 years from the effective date of coverage, therefore, he has to pay premium for 53 years. The premiums are required to be paid quarterly therefore, the total number of premiums required are 212. Thus, complainant is entitled for Rs. 6,83,962.26/- under the calculation mode (a) of the clause 14 of the terms and conditions of the policy. It is calculated as under:
(Total Number of premiums paid) * (Original Sum Insured) (total number of premiums required) 29*50,00,000 = 6,83,963/-212
20. The complainant has calculated the amount of Rs. 13,35,201.93 under the calculation mode (b) of the clause 14 of the terms and conditions of the policy. He has relied upon the annual statement for the period of 25.1.2011 to 25.1.2012 which is produced at page 70 on record.
20.1 The opponent has calculated the final surrender value by applying different formulas at page 181 and it is explained at page 187-191.
Sr. Particulars Amount (Rs.)
a. Guaranteed Surrender Value 6,18,765.90/-
b. Base cash value as on NFO conversion date 4,25,150/-
c. Base reduced paid up CVS 4,82,540.47/-
M. B. Desai CC-14-10 Page 18 of 22
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d. Proportionate sum insured 6,71,296.30/-
e. Paid up insurance 8,80,477.38/-
f. Reduced paid up sum assured 8,80,477.38/-
g. PUA cash value 6,17,502.22/-
h. Loan including interest 6,21,531.67
i. CSV 11,00,042.69/-
j. Final surrender value 4,76,860.60/-
k. Recovery of service tax tolerance 1650.42
Finally the opponent has considered Rs. 11,00,042.69/- as final cash surrender value. The above calculation and formula are not given in the terms and conditions. Therefore, it is not a part of contract.
Thus, it is not binding to the complainant.
20.2 The calculation of mode (b) is that the amount of paid up insurance which can be purchased by the cash surrender value. The cash surrender value is defining under the Clause 12 of the policy. The clause 12 is a qualifying clause. If the insured satisfied the requirement then he is entitled for refund of premium. The condition are (i) Minimum 3 years premium should be paid. Herein this case the complainant has paid premium for more than 7 years. (ii) Cash surrender value will not be less than 30% of the premiums excluding first year premium. It may be more than 30% of the premiums. The opponent had considered only 30% of the premium at a minimum level.
20.3 Here in this case initially the amount of premium was Rs. 82,502.12/-. The claimant has produced the receipts of the premiums at page 37, 42 to 62 wherein, the amount of premium is varied from 82,502.12 to 83,351.89/-. The claimant has not produced all the receipt of the premiums paid. The amount of Rs. 82,502.12 was the premium from 25.1.2005 to 29.5.2008 (at page 37, 42 to 51). Thereafter the premium amount of Rs. 83,351.89/- is shown in the receipt dated 5.9.2010 at page 52-62. Therefore, the amount of Rs.
M. B. Desai CC-14-10 Page 19 of 22 2082,927/- is the average premium amount. Complainant has paid 29 premium therefore, it is required to be multiplied by 82,927/-. 82,927* 29 = Rs. 24,04,883.14/-. The refund amount should not be less than 30% of the premiums.
The 30% of Rs. 24,04,883.14/- is Rs. 7,21,464.94. As per clause 12 the minimum surrender value will not be less than 30% of premiums that means he can get not less than Rs. 7,21,464.94/-.
20.4 Opponent has calculated cash surrender value of Rs. 11,00,042.69/- considering the formula i.e. Cash surrender value * base cash value + PUA cash value. But this formula is not incorporated in the terms and conditions of the policy. Therefore, we have to consider the figure of Rs. 13,35,201.93/- paid up additions given in the annual statement for the period of 25.1.2011 to 25.1.2012 at page 70.
20.5 As discussed above, the complainant is entitled for Rs. 6,83,963.26/- under calculation mode (a) of the clause 14 of the terms and conditions of the policy and Rs. 13,35,201.93/- under the calculation mode (b) of the clause 14 and paid up additions shown in the annual statement provided at page 70.
As per clause 14 the higher amount is required to be considered. We come to the conclusion that complainant is entitled the amount of Rs. 13,35,201.93/- under clause 14 Non-forfeiture option on non-payment of premium.
20.6 It is an admitted fact that the complainant has borrowed the loan. The outstanding loan amount of Rs. 3,31,970.54/- is shown in the annual statement produced at page 70. The amount of Rs. 3,31,970.54 is required to be deducted under clause 12 read with clause 14 of the terms and conditions of the policy as outstanding indebtedness. Thus, the claimant is entitled Rs. 10,03,231.39/- (Rs. 13,35,201.93- Rs. 3,31,970.54/-) as return of premiums after deducting the outstanding indebtedness/borrowed loan with interest.
M. B. Desai CC-14-10 Page 20 of 22 2120.7 Further it is not in dispute that the amount of Rs. 4,76,860.63/- is remitted to the bank account of the complainant by the opponent insurance company the statement is produced at page 158. This amount credited in the account of the complainant on 23.3.2018. Therefore, the said amount is required to be deduced from the above figure. Thus, the complainant is entitled Rs. 5,26,360.76/- (10,03,231.39 - 4,76,860.63) after the so called settlement payment or part payment made during the proceedings.
21. Interest The complainant is entitled the amount of interest on Rs. 5,26,360.76/- at a rate of 9% from the date of institution of the complaint (23.1.2014) till the realization of the amount. The complainant is entitled the amount of only interest on Rs. 4,76,860.63/- at the rate of 9% from the date of institution (23.1.2014) till the date of amount remitted in his account (23.3.2018).
22. We considered the facts stated in the complaint, averments made in the written statement, documentary evidence on record, arguments advanced by the ld. Advocate for the parties, ratio laid down in the above referred judgments and facts and circumstances of the case. In view of the above calculation made in the forgoing para we are come to the conclusion that the complainant is entitled for the amount of Rs. 5,26,360.76/- with applicable 9% interest. The complainant is also entitled the amount of interest on remitted amount. Therefore, complaint is require to be partly allowed. Hence, following final order is passed.
ORDER
(i) The complaint No. 10 of 2014 is partly allowed.
(ii) The Opponent is directed and ordered to pay Rs.5,26,360/-
(Rupees Five Lakhs Twenty Six Thousand Three hundred Sixty only) with interest at the rate of 9% from the date of filing of the M. B. Desai CC-14-10 Page 21 of 22 22 complaint till its realization to the complainant as compensation.
(iii) The opponent is directed and ordered to pay only interest at the rate of 9% from the date of filing of complaint (23.1.2014) till the date of amount remitted in his account (23.3.2018) on the amount of Rs. 4,76,860/- paid by opponent as settlement amount/part payment.
(iv) Opponent is directed and ordered to pay Rs. 25,000/- (Rupees Twenty Five Thousand Only) as mental harassment and Rs. 15,000/- (Rupees Fifteen Thousand Only) as litigation costs of this complaint to the complainant and shall bear its own costs, if any.
(v) Copy of the judgment and order be provided to the parties free of costs.
Pronounced in the open Court today on 18th October, 2021.
[Smt. U. P. Jani] [Mr. V. P. Patel]
Member President
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