National Consumer Disputes Redressal
Smt. Kolla Vijaya Laxmi vs Life Insurance Corporation Of India on 11 December, 2009
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI FIRST APPEAL NO. 241 OF 2009 (Against the order dated 08.05.09 in Complaint case No. 50/2007 of the Andhra Pradesh State Consumer Disputes Redressal Commission, Hyderabad) SMT. KOLLA VIJAYA LAXMI w/o Late Kolla Gangadhara Rao r/o H.No.1549, C/o Chokole Dajipet, Near Balaji Mandir Sholapur District, Maharashtra ........ Appellant(s) Vs. 1. Life Insurance Corporation of India Rep. by its Divisional Manager Machilipatnam, Krishna District Andhra Pradesh 2. The Branch Manager Guntur II Branch (699) Life Insurance Corporation of India Kothpeta, Guntur Andhra Pradesh . ....... Respondent(s) BEFORE: HONBLE MR. JUSTICE R.C. JAIN, PRESIDING MEMBER HONBLE MR. ANUPAM DASGUPTA, MEMBER For the Appellant : Mr. V.R. Anumolu and Mr. Prabhakar, Advocates For the Respondents : Mr. B.A. Ranganathan, Advocate Pronounced on : 11.12.2009 ORDER
PER JUSTICE R.C.JAIN, PRESIDING MEMBER Aggrieved by the dismissal of her complaint by A.P.State Consumer Disputes Redressal Commission, Hyderabad ( in short, the State Commission) vide an order dated 08.05.2009 passed in C.C. No.50/07, Smt. Kolla Vijaya Laxmi, wife and legal heir of the deceased insured Kolla Gangadhara Rao has filed the present appeal.
2. The facts which led to the filing of the complaint before the State Commission and then the present appeal before this Commission are that one Kolla Gangadhara Rao, husband of the complainant, had obtained New Jeevan Sree Policy from LIC by paying an annual premium of Rs.91,016/-. As per the terms of the policy in the event of the death of the policy holder / insured before the date of maturity, a sum of Rs.10,00,000/- was payable to the nominee of the insured. However, in case of accidental death, the amount payable was to be doubled, i.e,.Rs.20 lakh. The proposal for insurance was submitted on 22.03.2003.
A sum of Rs.71,000/- was paid on 22.03.2003 and another sum of Rs.21,025/- was paid on 24.03.2003 towards the first premium. Medical reports and special reports were also submitted on 22.03.2003 and the proposal for insurance was accepted (internally, in the office of the LIC) on 27.06.2003. Insured Kolla Gangadhara Rao, however, died on the night intervening 27/28.03.2003. It would appear that the policy was under-written on 01.04.2003 and was sent to the insured by speed post on 16.04.2003. After the death of Kolla Gangadhara Rao, the complainant lodged her claim with the Branch Manager of LIC Guntur, who by letter dated 04.10.2003, asked the complainant to submit the death certificate of her husband and vide subsequent communication dated 28.10.03 asked to furnish the details of premium paid and final police report about her husbands death. Since the LIC failed to settle the claim under the insurance policy, the complaint was filed seeking payment of the amount under the insurance policy. The complaint was resisted by the LIC primarily on the ground that though the proposal form for obtaining insurance policy of the above description was submitted and the premium amount as claimed was also deposited, still no concluded contract of insurance had come into existence before the death of Kolla Gangadhara Rao and, therefore, the complainant was not entitled to any amount, much less any accidental benefit under the said policy. The State Commission, going by the respective pleas and contentions raised on behalf of the parties as also the evidence and material brought on record, mostly the documents like the proposal form, deposit receipt, copy of the insurance policy, death certificate, etc., came to the conclusion that there was no concluded contract between the husband of the complainant and the opposite party on the basis of which the complainant could make an insurance claim. Despite this, the LIC came forward with an offer to pay / refund the amount of Rs.91,016/- deposited by the deceased as premium.
Accordingly, the State Commission partly allowed the complaint and directed the LIC to pay the sum of Rs.91,016/- to the complainant with interest @ 9% per annum w.e.f. 24.03.03 till date of payment besides awarding cost of Rs.2000/-.
3. We have heard Mr. V.R.Anumolu, Advocate, learned counsel for the appellant and Mr. B.A.Ranganathan, Advocate, learned counsel representing the respondent -LIC and have given our thoughtful consideration to their respective contentions.
4. In the present case, it is not in dispute that Kolla Gangadhara Rao died between 27/28.03.2003, i.e., within 4-5 days of submitting the proposal for obtaining the insurance policy in the sum of Rs.10,00,000/- with the stipulation of double benefit, i.e., amount of Rs.20,00,000/- in case of accidental death and that the first premium amounting to Rs.91,016/- was also paid and accepted by the LIC before his death. It is also not in dispute that the policy was under-written on 01.04.2003 and was despatched to the address of Kolla Gangadhara Rao on 16.04.2003, i.e., after the latters death. In this background of the case, the only question which arises for consideration is whether a concluded contract of insurance had came into existence before the death of the deceased. The State Commission, going by several decisions rendered by the Supreme Court and by this Commission, took the view that no concluded contract had come into existence. Learned counsel for the appellant seeks to assail the said finding of the State Commission as erroneous on the ground that facts of the case in hand are distinguishable from the facts of the cases in which the above-cited decisions have been rendered. He emphatically argued that in the case in hand, concluded contract should be inferred because not only had the proposal of Kolla Gangadhara Rao been accepted in the LIC office but the premium was also credited to the account of the LIC and most important, policy number was allotted and, therefore, no further action was required on the part of the LIC to conclude the contract. According to him, the under writing of the policy document and its dispatch subsequent to the death of the deceased are inconsequential and could not alter the position in regard to the concluded contract. Per contra, the counsel for the LIC urged that it was the communication of the acceptance of the proposal by under-writing the policy and communicating the latter which alone will amount to conclusion of insurance contract. In his submissions he relied upon the Supreme Court decision in the case of LIC of India Vs. Raja Vasi Redy Komalavalli Kamba and others AIR 1984 SC 1014. In the said case, the Supreme Court more fully dealt with the question as to when a concluded contract of life insurance could be said to have come into existence. In the above-cited case, the facts noted and law laid down are as under:
One Late Raja Vasireddi Chandra Dhara Prasad died intestate on 12th January, 1961. He had filled a proposal for insurance for Rs.50,000 on 27th December 1960. There was medical examination by the doctor on the life of the deceased on 27th, December, 1960. The deceased issued two cheques being the consideration towards the first premium for Rs 300 and Rs. 220 respectively which were encashed by the appellant on 29th December 1960 and 11th January 1961. On 16th January 1961, the widow of the deceased wrote to the appellant intimating the death of the deceased and demanded payment of Rs. 50,000. The Divisional Manager, Masulipatam Branch denied liability on behalf of the appellant on 28th January, 1961. Thereafter there was correspondence between the parties between Ist February 1961 and 23rd December 1963. On 10th January 1964, the respondents filed a suit in the Court of Subordinate Judge, Masulipatam. The trial court dismissed the suit holding, inter alia, that there was no concluded contract, that the proposal was not accepted by the Divisional Manager for some reason or the other by the time the deceased had died, that neither the encashment of the two cheques created a contract of insurance. In appeal, the High Court after ordering certain other additional documents set aside the Trial Court Judgment.
Hence the appeal by the Corporation after obtaining the special leave.
Allowing the appeal, the Court held :
1. Having regard to the clear position in law about acceptance of insurance proposal and the evidence of record in this case, it is clear that the, High Court was in error in coming to the conclusion that there was a concluded contract of insurance between the deceased and the Life Insurance Corporation.
2. Though in certain human relationship silence to a proposal might convey acceptance but in the case of insurance proposal, silence does not denote consent and no binding contract arises until the person to whom an offer is made says or does something to signify his acceptance. Mere delay in giving an answer cannot be construed as an acceptance, as, prima facie, acceptance must be communicated to the offer or The general rule is that the contract of insurance will be concluded only when the party to whom an offer has been made accepts it unconditionally and communicates his acceptance to the person making the offer. Whether the final acceptance is that of the assured or insurers, however, depend simply on the way in which negotiations for an insurance have progressed.
3. When an insurance policy becomes effective is well-settled by the authorities but it is clear that the expression "underwrite" signifies accept liability under that. The dictionary meaning also indicates that. It is true that normally the expression "underwrite" is used in Marine insurance but the expression used in Chapter III of the Financial Powers of the Standing order in this case specifically used the expression 'funderwriting and revivals" of policies in case of Life Insurance Corporation and stated that it was the Divisional Manager who was competent to underwrite policy for Rs, 50,000 and above.
4. The mere receipt and retention of premium until after the death of the applicant or the mere preparation of the policy document is not acceptance. Acceptance must be signified by some acts or acts agreed on by the parties or from which the law raised a presumption of acceptance.
5. In the instant case, the High Court was in error in coming to the following conclusions; (i) that there was not sufficient pleading that there was no concluded contract, and non acceptance of the proposal was not sufficient averment that the Divisional Manager was the only competent authority to accept the proposal; (ii) in its view about the powers of the different authorities under Chapter III of the Standing order 1960, dealing with the financial powers; (iii) about the view that the Assistant Divisional Manager having accepted the proposal and (iv) about the assurance given by the Field officers that the acceptance of the first premium would automatically create a concluded contract of insurance' The Court however directed half the amount of the insurance amount of Rs. 85,000 paid to the Respondents to be refunded to the Corporation.
5. The facts and circumstances of the case in hand are no different from those in the the above cited case because here also the LIC had under-written the policy document after the death of the proposer, without the knowledge that he had already died. Acceptance of the proposal was never communicated during the proposers lifetime and perhaps could not be communicated to the (deceased) proposer.
We have, therefore, no hesitation in holding that there was no concluded contract of insurance in this case and the view taken by the State Commission is in consonance with the settled legal position.
6. Learned counsel for the appellant has then argued that this Commission should give an interpretation which is beneficial to the policy holder rather than to allow the LIC to reject the claim on technical grounds. He also argued that LIC is created for welfare of the people at large in the eventuality of certain contingencies like death, etc., and, therefore they should not grudge the payment of the insurance amount, at least the single benefit insurance amount if not the accidental benefit, to which the appellant was entitled. We are not impressed with the argument once we have found that no concluded contract of insurance had come into existence between the deceased proposer and the LIC.
7. We, therefore, found no ground to interfere with the finding and order of the State Commission which are otherwise quite just and reasonable in the facts and circumstances of the case.
8. In the result, appeal fails and is, hereby dismissed. Parties to bear their own costs throughout.
Sd/-
(R.C. JAIN, J) ( PRESIDING MEMBER) Sd/-
(ANUPAM DASGUPTA) MEMBER