State Consumer Disputes Redressal Commission
L & T General Insurance Co. Ltd. vs Shadi Lal Kapoor on 6 October, 2020
IN THE STATE COMMISSION: DELHI (Constituted under section 9 of the Consumer Protection Act, 1986) Date of Hearing:30.09.2020 Date of Decision06.10.2020 FIRST APPEAL No.226/2016 IN THE MATTER OF L&T GENERAL INSURANCE CO. LTD. .....APPELLANT VERSUS SH. SHADI LAL KAPOOR ....RESPONDENT HON'BLE DR. JUSTICE SANGITA DHINGRA SEHGAL (PRESIDENT) HON'BLE SH. ANIL SRIVASTAVA, (MEMBER) Present: Mr. Anuj Chauhan, Counsel for the Appellant Mr. Aarushi Sherawat, Counsel for the Respondent PER: Hon'ble Dr. Justice Sangita Dhingra Sehgal, President JUDGMENT
[Via Video Conferencing]
1. The present appeal has been filed under section 15 of the Consumer Protection Act, 1986 by L&T General Insurance Co. Ltd. (hereinafter "appellant") against the order dated (FA-226/2016) PAGE 1 OF 15 30.11.2015 passed by the Consumer Disputes Redressal Forum VI (Dist. New Delhi), wherein the district forum admitted the consumer complaint and held that the act of the appellant to repudiate the insurance claim of the respondent was not bona fide and therefore held the appellant liable for wrongful repudiation of claim resulting in deficiency of service under Section 2(1)(g)of the Consumer Protection Act, 1986.
2. The appellant in his appeal before this commission has made the following prayers:
a. Set aside the Judgment & the order dated 30.11.2015 passed by the Ld. Forum, in CC No. 533 of 2013 and titled as Sh. Shadi Lal Kapoor v. M/s L&T Insurance Co. Ltd.
b. Stay the execution proceedings, if any, in respect of Order dated 30.11.2015 passed by the Hon'ble forum in CC No. 533 of 2013
3. The facts necessary for the adjudication of the present appeal are that the respondent purchased an insurance policy for his vehicle of the make Toyota Corolla bearing registration no. DL 03 CBM 2488 from the appellant. The appellant company issued the policy on receipt of premium amount of Rs. 10,472/- from the respondent and the policy bearing no. 91510100033840000 was valid from 07.09.2011 to 06.09.2012. The vehicle was insured upto an amount of Rs. 6,75,000/-. During the subsistence of the insurance policy, the vehicle met with an accident and was substantially damaged. The appellant was intimated about the accident/loss and thereafter the appellant company got the vehicle inspected. Subsequently, the insurance company vide communication dated 21.01.2013 repudiated the claim stating that the respondent had wrongly claimed a "No claim (FA-226/2016) PAGE 2 OF 15 bonus" whereas the respondent had made an insurance claim for his vehicle from his previous insurer. It is the case of the appellant, that the respondent had not disclosed true and correct facts at the time of availing the insurance policy and was therefore in breach of the insurance contract which makes the repudiation of the insurance claim lawful.
4. During the course of the arguments, learned counsel for the appellant vehemently argued that the wrongful declaration about No claim Bonus in the insurance policy is a sufficient ground for repudiating the claim. To support his argument he has placed reliance on General Regulation 28 (GR 28) of the All India Motor Tariff which provides that in case of wrongful declaration of No Claim Bonus all the benefits under Insurance Policy stand forfeited. He submitted that the district forum failed to take into account that an insurance contract is uberrimae fidei. He further submitted that parties to an insurance contract have to abide by the definitions given in the policy and expressions within the policy should be interpreted with reference to the terms of the policy and not with the definitions given in other laws. To substantiate the same, he has placed reliance on the Judgment of the Apex Court in United India Insurance Co. Ltd. v. Harishchand Rai Chandan Lal in Civil Appeal No. 6277 of 2004.
5. Per contra, learned counsel for the respondent has submitted that the Hon'ble District forum has judiciously relied upon the judgment of Meena Kumar v. National Insurance Company reported in IV (2015) CPJ 10 BCN wherein it was held that the insurance company after issuing the insurance policy is under an obligation to write (FA-226/2016) PAGE 3 OF 15 to the previous insurance company and confirm the entitlement of no claim bonus within a mandatory period of 21 days of granting the cover letter.
6. We have heard the arguments made by both the parties. The question for adjudication before us is whether the repudiation of insurance claim of respondent by the appellant amounts to deficiency of service.
7. The District forum in its judgment dated 30.11.2015 while holding the appellant deficient in service has held as follows:
"Even assuming that NCB was taken by the Complainant, OPs should have confirmed that the factum of NCB from previous owner concerning any claim on the vehicle. The position has been elucidated in 'Meena Kumar v. National Insurance Company' IV (2015) CPJ 10 BCN. Insurance Company after issuing policy had not written to previous insurer and confirmed entitlement of "No claim bonus" while it was obligatory for issuance of company to write to previous insurer within 21 days of granting the cover and previous insurer was obliged to furnish information within 30 days of receipt of the letter- provision under GR 27 binds Insurance company Tested on the anvil of the aforesaid yardstick, OP cannot substantiate it stand of repudiation of bona fide claim on the grounds of no claim bonus. Consequent, we hold OP guilty of wrongful repudiation of claim and direct to pay IDV of Rs. 6,75,000/- with 9% interest from date of claim till realization. We also award Rs. 20,000/-. We also award Rs. 50,000/- as compensation for harassment and agony inclusive of litigation expenses."
8. In order to determine whether the appellant had rightfully repudiated the claim of the respondent, we need to peruse through the terms and condition of the policy as well as the communication which took place between appellant and the (FA-226/2016) PAGE 4 OF 15 respondent. The declaration section of the policy has been produced below:
"DECLARATION I/We agree that the policy shall become voidable at the option of the company, in the event of any untrue or incorrect statement, misrepresentation, non-description or non- disclosure of any material fact* in the proposal form/personal statement, declaration and connected documents, or any material information has been withheld by me or anyone on my/Our behalf to obtain any benefit under this policy. I understand and agree that this proposal and other information and documentation I have given or will give, relating in myself or any other person to be insured, will be the basis of the insurance contract between me/us and L&T General insurance Company Limited, and I also understand the consequences of any default. *A material fact is one that is likely to influence the company's acceptance or assessment of the proposal. You should consult your insurance advisor if you are in doubt as to what constitutes material fact.....
DECLARATION OF NCB I/We hereby declare that the rate of 25% NCB claimed by me/us is correct and that no claim has arisen in the expiring policy period (copy of policy enclosed). I/we further undertake that if this declaration is found incorrect, benefits under the policy in respect of section 1 of the policy will stand forfeited."
9. The appellant on receiving the claim of the respondent has relied upon the aforesaid clause of the insurance contract to repudiate the claim of the respondent. The letter written to the insured-respondent by the appellant stating the repudiation of policy has been reproduced below:
"Dear Sir, (FA-226/2016) PAGE 5 OF 15 we refer to the subject claim reported by you on 30.08.2012 for damages During scrutiny of the policy documents, it was observed that while obtaining the policy from us you have duly authenticated that there was no previous claim under the expiring policy and as such 25% no claim bonus (NCB) has been granted by us based on the declaration as stated here under:
"I/We hereby declare that the rate of 25% NCB claimed by me/us is correct and that no claim has arisen in the expiring policy period (copy of policy enclosed). I/we further undertake that if this declaration is found incorrect, benefits under the policy in respect of section 1 of the policy will stand forfeited."
We have, however, received a confirmation from your previous insurance company that you had in fact, lodged two claims in your previous policy from ICICI Lombard General insurance Co. Limited. Therefore, you are not entitled for any bonus.
We would like to draw your attention towards policy Condition No.8, which is mentioned hereunder:
"The due observance and fulfilment of the terms, conditions and endorsements of this policy in so far as they relate to anything to be done or complied with by the insured and the truth of the statements and answers in the said proposal shall be conditions precedent to any liability of the company to make any payment under this policy"
(FA-226/2016) PAGE 6 OF 15 Hence we regret to inform you that we are unable to entertain the said claim under the terms and conditions of the policy.
For L&T General insurance Co. Ltd."
10. The respondent in his reply to the repudiation letter sent by the appellant has stated the following:
Claim No, 93510100008066 Dear Sir, Received your letter dated 21/1/2013 informing us about your inability to entertain the above mentioned claim.
In this regard I once again submit humbly, that at the time of renewal, I clearly declared that I had taken a claim from the previous insurer. Your agent calculated the premium and we issued the cheque accordingly. Further if there was any wrong declaration from our side, it should have been confirmed from the previous insurer within 21 days of the receipt of my proposal/policy issuance. The policy issued by your company had been in continuation throughout the period of insurance. Therefore I cannot be held guilty of wrong declaration of NCB.
In view of the above mentioned facts, hereby request and plead to The Grievance Cell, L&T Insurance Co. Ltd. that my claim be settled favourably Your immediate action on the same is solicited
11. From the perusal of the abovementioned communication as well as the disclosures made by the respondent in the policy, it is clear that the respondent had availed the policy with a No claim bonus of 25 percent. However, the record establishes that the respondent had made a claim under the previous policy and was not entitled to any no claim bonus.
(FA-226/2016) PAGE 7 OF 15 The underlying question therefore becomes whether a wrongful declaration made in the insurance policy regarding the no claim bonus entitles the appellant - insurance company to repudiate the claim of the respondent.
12. At this stage, we may refer to the decision of Hon'ble National Commission in United India Insurance Co. Ltd. v. M/s. Jindal Poly Buttons Ltd. in Revision Petition No. 2920 of 2015, wherein the insurer had repudiated the claim of the insured on the ground that a wrongful representation was made by the insured to the insurer with regard to the no claim bonus. The National Commission in this case made the below mentioned observations:
"4. In the matter of Inderpal Rana Vs. National Insurance Co. Ltd. (supra), Tata AIG General Insurance Co. Ltd. Vs. Gulzari Singhe (supra) and National Insurance Co. Ltd. Vs. Harpreet Singh (supra), the Coordinate Benches of this Commission have taken a view that if the insurer has taken an insurance policy with the advantage of No Claim Bonus by fraud/concealment of facts, it would render the insurance contract voidable and repudiation of insurance claim by the concerned insurance company would be justified. However, in the matter of Harpreet Singh (supra), the Division Bench of this Commission relying upon Motor Tariff Rule GR 27 took the view that failure of the insurer to seek confirmation about the genuineness of information furnished by the insured regarding No Claim Bonus from the previous insurer within 21 days constitute the breach of tariff and would disentitle the insurer to take shelter of plea of misrepresentation of fact by the petitioner. Thus, in the said case, the Division Bench directed reimbursement of insurance claim proportionate to the extent of less premium paid by claim the No Claim Bonus.
(FA-226/2016) PAGE 8 OF 15
5. Learned Shri Ravi Bakshi and Shri Yogesh Malhotra, Advocates for the petitioner Insurance Companies have argued on the same lines. They have taken us through the judgments of Hon'ble Supreme Court in the matters of P.C. Chacko & Anr. Vs. Chairman, LIC of India (2008) 1 SCC 321, Satwant Kaur Sandhu Vs. New India Assurance Company (2009) 8 SCC 316 and submitted that in the said judgments, it has been categorically held that if the insured has obtained the insurance policy by misrepresentation/concealment of material fact, the insurance contract would be voidable at the instance of insurer and the insurance company would be justified in repudiating the claims. It is contended by respective counsel for the insurance policies that undisputedly in the above noted revision petitions, complainant/insured had taken benefit of No Claim Bonus by misrepresentation/concealment of facts and therefore, repudiation of claim is justified.
6. Learned Shri Sanjeev Goel and Shri Sandeep Sharma, Advocates on the contrary has contended that GR 27 of Indian Motor Tariff casts an obligation on the insurer to verify the genuineness of claim pertaining to entitlement of claim of No Claim Bonus within 21 days from the date of issue of insurance cover. Had the insurance company followed the mandate of GR 27, it would have come to know that No Claim Bonus has been claimed wrongly and insurance company could have either cancelled the insurance policy or call upon the insured to make good the insurance premium.
7. In order to find answer to the question under reference, it would be useful to have a look on Section 18 & 19 of Indian Contract Act, 1872.
8. Section 18 of Indian Contract Act defines Misrepresentation as under:
(FA-226/2016) PAGE 9 OF 15 "18. Misrepresentation" defined.--
"Misrepresentation" means and includes (1) the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true;
(2) any breach of duty which, without an intent to deceive, gains an advantage of the person committing it, or any one claiming under him, by misleading another to his prejudice, or to the prejudice of any one claiming under him;
(3) causing, however innocently, a party to an agreement, to make a mistake as to the substance of the thing which is the subject of the agreement."
9. Section 19 of Indian Contract Act provides that if the consent to an agreement is caused by coercion, fraud or misrepresentation, such agreement is voidable at the instance of the parties whose consent was so caused. The relevant section reads as under:
"19. Voidability of agreements without free consent.--When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.
A party to contract, whose consent was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be (FA-226/2016) PAGE 10 OF 15 performed, and that he shall be put in the position in which he would have been if the representations made had been true.
Exception--If such consent was caused by misrepresentation or by silence, fraudulent within the meaning of section 17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence.
Explanation.--A fraud or misrepresentation which did not cause the consent to a contract of the party on whom such fraud was practised, or to whom such misrepresentation was made, does not render a contract voidable."
10. On reading of the Exception to Section 19, it is clear that even in the case in which consent was caused by misrepresentation or by silence fraudulently, the contract would not be voidable if the party whose consent was so caused had the means of discovering the truth with ordinary diligence.
11. The question which needs to be addressed is whether in a case of insured wrongly claiming No Claim Bonus with regard to the premium for insurance of the vehicle, the insurance company could have means of discovering truth with ordinary diligence?
15. xxxxxxxxxxxxxxxxxxxxxxx In view of the discussion above, the reference is answered as under:
a. The cases in which it is established that the insured by making wrongful declaration has (FA-226/2016) PAGE 11 OF 15 taken benefit of No Claim Bonus and the insurer had means to verify the correctness of the declaration of the insured seeking No Claim Bonus by exercising ordinary diligence of verifying the truthfulness of the claim from the insurer's own record, Exception to 19 of Indian Contract Act would come into play and the insurer would not be justified in repudiating the insurance claim on the ground of misrepresentation or concealment of fact. However, because the insured had taken benefit of No Claim Bonus and paid less premium, the insurance claim would be reduced proportionately. b. In cases of the insured taking the insurance policy of the vehicle from new insurance company and it is established that the insured by making wrongful declaration has taken benefit of No Claim Bonus and where the insurer had failed to seek confirmation regarding correctness of the declaration submitted by the insured in support of plea for No Claim Bonus within the stipulated period as provided in GR 27 of Indian Motor Tariff, the insurer would not be justified in repudiating the insurance claim. However, because the insured had taken benefit of No Claim Bonus by making false declaration his insurance claim would be reduced proportionately."
13. The above quoted judgment of the National Commission squarely applies to the present case. In the present case as well, the appellant-insurance company had the means to verify the correctness of the declaration of the insured-
respondent seeking the No Claim Bonus. The appellant (FA-226/2016) PAGE 12 OF 15 could have easily determined the truthfulness of the facts which the respondent had mentioned in the insurance form while purchasing the insurance for his vehicle. However, the appellant failed to exercise such diligence which was required from their end.
14. Moreover, as per GR 27 of Indian Motor Tariff there lies an explicit obligation on the new insurer to write to the previous insurer and confirm the entitlement of the insured with regard to the no claim bonus. The same has to be done within a span of 21 days from the date of granting cover by the new insurer to the insured. The relevant portion of GR 27 of Indian Motor Tariff is mentioned below:
"Notwithstanding the above declaration, the insurer allowing the NCB will be obliged to write to the policy issuing office of the previous insurer by recorded delivery calling for confirmation of the entitlement and rate of NCB for the particular insured and the previous insurer shall be obliged to provide the information sought within 30 days of receipt of the letter of enquiry failing which the matter will be treated as a breach of Tariff on the part of the previous insurer. Failure of the insurer granting the NCB to write to the previous insurer within 21 days after granting the cover will also constitute a breach of the Tariff"
15. Keeping in mind the facts and circumstances of the present case, it is clear that the appellant did not comply with the requirements under GR 27 of the Indian Motor Tariff, else the issue related to misrepresentation of No claim bonus would have been raised and settled earlier. In fact, the onus was on the appellant to check from the previous insurer about the status of the no claim bonus of the insured- respondent, which the appellant failed to do. Therefore, the (FA-226/2016) PAGE 13 OF 15 appellant is not justified in repudiating the claim of the respondent.
16. At the same time, since, the respondent had also misrepresented about the No claim bonus to the appellant, we are of the view that he should not be entitled to the entire claim. The respondent should not benefit from his own default.
17. We are therefore of the view that the claim of the respondent should be reduced proportionately by 25 percent of the coverage amount.
18. The appeal is therefore partly allowed, only to the extent of modification of liability of the appellant being reduced to 75 percent of the original claim amount i.e. Rs. 5,06,250/-. No modification of the impugned order with respect to the interest, compensation and costs awarded.
19. A copy of this judgment be provided to all the parties free of cost as mandated by the Consumer Protection Act, 1986. The judgment be uploaded forthwith on the website of the commission for the perusal of the parties. A copy of this order be sent to the District Consumer Dispute Redressal Forum, Central, Delhi for record and information.
20. File be consigned to record room along with a copy of this Judgment.
(DR. JUSTICE SANGITA DHINGRA SEHGAL) PRESIDENT (ANIL SRIVASTAVA) MEMBER Pronounced On:
06.10.2020 (FA-226/2016) PAGE 14 OF 15 (FA-226/2016) PAGE 15 OF 15