State Consumer Disputes Redressal Commission
Lic Of India Ltd., vs Sunil Jain, on 22 May, 2008
IN THE STATE COMMISSION : DELHI IN THE STATE COMMISSION : DELHI (Constituted under Section 9 clause (b) of the Consumer Protection Act, 1986 ) Date of Decision: 22-05-2008 Appeal No. FA-1227/2006 (Arising from the order dated 27-10-2006 passed by District Forum (North), Tis Hazari Court, Delhi in complaint case No. 242/2006) The Branch Manager, -Appellant LIC of India Ltd., Through Vardhman Trade Centre, Mr. Rohit Jain, 9, Nehru Place, Advocate. New Delhi-110019. Versus 1. Sunil Jain, -Respondent No.1 412, Gali No.1 Ganesh Nagar II, Shakarpur, Delohi-110092. 1. Shri Ramesh Kumar Sharma, -Respondent No.2 2078, Katra gokul Shah, Bazar Sita Ram, Delhi-110006. CORAM: Mr. Justice J.D.Kapoor President Ms Rumnita Mittal Member
1. Whether reporters of local newspapers be allowed to see the judgment?
2. To be referred to the Reporter or not?
JUSTICE J.D. KAPOOR, PRESIDENT (ORAL) Vide impugned order dated 27th October 2006 passed by the District Forum the appellant-Company has been directed to pay the balance amount of Rs. 72,088/- and Rs. 10,000/- as compensation and Rs. 2,000/- as cost of litigation.
2. Feeling aggrieved, the appellant has preferred this appeal.
3. Admittedly respondent purchased a policy for his daughter Mona Jain vide No. 113227303 dated 28-03-02 for Rs. 1,00,000/-, Rs. 6978/- as premium was paid by him to its agent. Under the said scheme he was required to pay the premium upto 28th March 2016 and the maturity date were 28-03-2005 or the death of the insured person. The respondent has been paying premium regularly upto March 2005.
Unfortunately Moja Jain died on 24-11-2005. The claim of the respondent was repudiated in view of special provision No. 2 of the policy providing that the policy shall stand cancelled in case life assured died before the date of commencement of risk and in the instant case commence of risk started from 28-03-2006 whereas the assured died on 24-11-2005. Consequently the appellant paid Rs. 27,912/- being the premium received by it on 11-03-2006.
4. Aforesaid special provision No. 2 prescribes as under:-
2. This policy shall stand cancelled in case the Life Assured shall die before the date of commencement of risk and in such event, provided the policy is then in full force, a sum of money equal to all the premiums paid without any deduction whatsoever, shall become payable to the person entitled to the policy money.
5. The perusal of the impugned order shows that the District Forum did not discuss the aforesaid provision and allowed the complaint on the premise that the respondent had been regularly paying premium whenever it was due and during the period of continuation of policy baby Mona Jain died and since the policy did not run upto 28th March 2006 i.e. the date of commencement of risk, the respondent was not entitled for the entire amount.
6. The plea raised by the respondent that the agent while issuing the policy did not apprise him of the aforesaid special provisions of the policy and as a layman he was under the impression that the risk started from the date of commencement of the policy.
7. The cover note i.e. the first receipt with regard to issuance of the policy does not spell out this clause. The endorsement made in this document which is Annexure B is as under:-
Your proposal for Assurance as per particulars noted in the schedule has been accepted by the corporation as proposed at Ordinary Rates/with AB & EDB.
We have also received the3 amount noted in the schedule being the First premium on the policy assurance for the plan and amount indicated therein. The acceptance of the payment places the Corporation on risk with effect from the date of this Acceptance-Cum-First Premium Receipt or if the Proposal is under the Children Deferred Assurance Plan from the deferred date on terms & conditions of the policy of assurance which will be sent shortly. The issue of this receipt is also subject to the realization of the amount in Cash and the terms and conditions of acceptance printed overleaf.
8. We have taken a view that whenever cover note is issued in the aforesaid form the cover should contain at least the exclusion clause or that clause which disentitles the assured the claim amount in certain eventuality. What is mentioned here in this first premium receipt is that the acceptance of the payment places the Corporation on risk with effect from the date of this Acceptance-Cum-First Premium Receipt or if the proposal is under the Children Deferred Assurance Plan from the deferred date of terms & Conditions which will be sent shortly. The policy of assurance runs into several pages and printed in micro print and ordinarily a layman would take cover note as the policy covering the risk. In this cover there is no mention as to the date of commencement of risk of the Children deferred Assurance Plan.
9. To expect a layman or assured to go through the entire bunch of paper containing policy of assurance, large number of terms and conditions of the policy without having been explained and having obtained signatures of the assured thereof after obtaining endorsement that these terms and conditions have been explained and are correct, the Insurance Company cannot invoke exclusion clause, which provide the date of commencement of risk. Date of commencement of the risk under the Children Deferred Assurance Plan should have been specifically mentioned in the cover note.
10. In this regard observations of Supreme Court in Modern Insulators Ltd. Vs. Oriental Insurance Co. Ltd. (2000) SCC 734 are quote-worthy and are as under:-
In view of the above settled position of law we are of the opinion that the view expressed by the National Commission is not correct. As the above terms and conditions of the standard policy wherein the exclusion clause was included, where neither a part of the contract of insurance nor disclosed to the appellant, the respondent cannot claim the benefit of the said exclusion clause. Therefore, the finding of the National Commission is untenable in law.
11. It is well established principle of law that contract of insurance has concluded the moment the cover note is issued or the insurance policy is issued. Regulation 3 of I.R.D. Act defines cover note as under:-
Regulation 2(1)(c): Cover means an insurance contract whether in the form of a policy or a cover note or a Certificate of Insurance or any other form prevalent in the industry to evidence the existence of an insurance contract.
12. The most significant sentence in the aforesaid cover note which gives impression to a man of ordinary prudence is as under:-
Acceptance of the payment places the Corporation on risk w.e.f. the date of this Acceptance-cum-First Premium Receipt.
13. Every beneficiary contract has to be provided and receive beneficial interpretation. If a layman on reading cover note gets the impression that risk is covered from the date of acceptance-cum-first premium receipt of insurance, then the interpretation should be provided to the effect that the risk did not commence after four years from the date of issue of the policy or cover note.
14. To issue cover note in stereo type in every kind of policy is misleading and misrepresentation. If the policy is being issued subsequently the exclusion clause should be made known to the person who is obtaining the policy at the time of cover-note which itself is a concluded contract.
15. This was not an ordinary policy. It was a proposal under the Children Deferred Assurance Plan and therefore it was incumbent upon the Insurance Company to specifically mention on the cover-note as to the date of commencement of risk.
Policy was issued in the year 2002 and to expect a layman to believe that the commencement of the risk covered will start after four years is too much This is not the way to enter into a contract and that too a contract of insurance which is beneficial contract for the assured. Sending the policy of assurance after a month or two is just an official formality and the insured does not know what is mentioned in it and what are the terms thereof. What is significant and most important is the Acceptance-cum-First Receipt which should determine the grant or refusal of the insurance amount.
16. For the foregoing reasons we dismiss the appeal but for different additional reasons than the reasons provided by the District Forum.
17. Impugned order shall be complied with, within one month from the date of receipt of this order.
18. FDR/Bank Guarantee, if any, furnished by the appellant be returned to the appellant forthwith after completion of due formalities.
19. A copy of the order as per the statutory requirements be forwarded to the parties free of charge and also to the concerned District Forum and thereafter the file be consigned to Record Room.
20. Announced on 22nd May, 2008.
(Justice J.D. Kapoor) President (Rumnita Mittal) Member jj