Pointing out three mischiefs played out by Life Insurance Corporation of India (LIC) with policy documents, circular and proposal form, the national consumer disputes redressal commission (NCDRC) directed LIC to pay Rs21.75 lakh with an interest of 6%pa (per annum) to the nominee of the deceased life assured (DLA). In this case, the insurance ombudsman has rejected the claim, holding that the commencement of risk, as mentioned in the first premium receipt, does not imply the death cover as construed by the complainant.
In an
order earlier this month, the NCDRC bench of Dr Inder Jit Singh (presiding member) says, "It is unthinkable that such a large public sector undertaking like LIC could not get the forms printed for a newly introduced scheme for almost one year from the date it conveyed its introduction to its field officers. Obviously, the new schemes were finalised and approved prior to this date and proposal forms under these schemes were supposed to be part of new scheme. Hence, the insurance company itself has to be blamed for not using the appropriate applicable proposal form in the present case. Hence, we are of the considered view that at this stage LIC cannot be allowed to treat the policy in question as only an annuity plan without term rider benefit."
The case is related to an insurance policy obtained by Dishant Tyagi in January 2003 by paying Rs10,000 premium. However, he died in a road accident. His father, Dr Brijendra Kumar Tyagi, submitted a claim to LIC. The claim was rejected and, on 29 November 2003, LIC returned the premium amount with an interest of Rs125 by cheque to Dr Tyagi.
When Dr Tyagi approached the insurance ombudsman, his claim was rejected. The insurance ombudsman stated that it found no grounds for the inference with the decision of the senior divisional manager of LIC.
Dr Tyagi then approached the Uttar Pradesh state consumer disputes redressal commission. In an order on 1 October 2021, the state commission, while accepting the complaint, directed LIC to pay Rs21,75,351 to the nominee of the deceased Dishant Tyagi along with interest at 6%pa from the date of filing of the complaint till its realisation. It also asked LIC to pay Rs10,000 as the cost of litigation within three months.
LIC challenged the order before NCDRC. It mainly contended that the time spent by Dr Tyagi in pursuing the complaint before the insurance ombudsman could not have been grounds for extending the limitation period to file a consumer complaint under the Consumer Protection Act.
"The state commission has not considered the fact that the subject policy is primarily an annuity plan and the term rider benefit is available as an add-on benefit subject to charging of extra premium. In the absence of any specific request or proposal by the policyholder and also of the payment of appropriate premium, there was no contract between the insurer and the policyholder regarding granting of insurance coverage for death benefit," the counsel for LIC stated.
LIC also vehemently refuted issuing a circular or pamphlet and grievance about the non-receipt of the policy documents by the Tyagis. It argued that "The grievance of the complainant (Dr Tyagi) that he never received the policy documents until the death of the policyholder (Dishant Tyagi) is highly misconceived and concocted since such a grievance could only have been made by the proposer (Dishant Tyagi) himself and not by the complainant (Dr Tyagi)."
The bench observed three mischiefs played out by LIC when the insurance claim was submitted. The counsel for Dr Tyagi pointed out that LIC did not file the correct copy of the first premium receipt.
After careful examination, Dr Singh from NCDRC observed that the first premium receipt dated 25 January 2003, filed by LIC contains certain columns containing handwritten text, while the copy of the same document produced by Dr Tyagi is a fully typed or computer-generated copy and bears no handwritten text or corrections.
"The above distortions, even if done unintentionally or without any malafide intentions, in our considered opinion, are of serious nature, which can make any reader believe that no risk was covered as' date of risk' has been changed to 'date of commencement', especially when it is one of the important contention of the insurance company that death risk was not covered under the policy and date of risk mentioned in this document implies date of commencement only and they took such a stand before the insurance ombudsman," NCDRC says.
In its order, the insurance ombudsman had held that "It is a general practice in insurance parlance that the word 'commencement of risk' qualifies the commencement of the contract and does not signify any type of particular coverage..."
Secondly, LIC contended that the state commission had erroneously relied on a purported pamphlet or circular of new life insurance list 147 and denied that the circular was official. It stated that the circular or pamphlet purports to have been issued in June 2003, six months after the policy and after the death of the policyholder. This was also held by the insurance ombudsman, while rejecting Dr Tyagi's complaint.
NCDRC, however, observed that the circular or pamphlet was issued by LIC's Lucknow mandal stating that "For resolution of any doubt or special information, Mr SGP Tripathi (production development manager), service development department, mandal office, Phone No. 2294122, can be contacted."
"No doubt this circular at bottom show 'Tanveer 10,000 folder 6/03, but this possibly could be the printing month June 2003 and does not mean that it was issued for the first time in June 2003. Moreover, a copy of this circular has been officially given by LIC, Lucknow mandal, to the Tyagis vide registered letter dated 30 July 2007. Hence, the contention of the insurance company that it is not their official circular or pamphlet cannot be accepted. Hence, Dr Tyagi and the state commission is justified in placing reliance on this document," the NCDRC bench says.
It also observed that while the policy issued was under table 147, but the requisite proposal form applicable to table 147 was not filled and instead, the proposal form used was the one applicable to table 122.
"Had the appropriate proposal form been used, possibly the situation of ambiguity whether the deceased insured opted for an annuity plan without term rider benefit could not have arisen. The insurance company admits that using the proposal form for Table 122 for issuing a policy under Table 147 was not the correct thing...If the insurance company has made such a mistake, why should the deceased insured or his legal heirs or nominees suffer the consequences of that," NCDRC says.
The bench of Dr Singh says, "We have carefully gone through the order of the state commission and are in agreement with its findings, including on issues of limitation and Respondent not being a consumer. It is admitted fact that the deceased insured or his legal heirs or nominees did not get the policy documents in time."
While dismissing LIC's appeal, NCDRC upheld the order issued by the UP state commission directing the insurer to pay Rs21.75 lakh with 6% interest and Rs10,000 litigation cost to Dr Tyagi, father and nominee of the DLA.
(First Appeal No888 of 2021 Date: 3 April 2024)
