Murder and Lapsed Policies: NCDRC Asks LIC To Pay Rs4.70 Lakh Death Insurance Claim
Moneylife Digital Team 21 May 2024
Holding the Life Insurance Corporation of India (LIC) responsible for not informing the employer of the insured as well as the insured regarding paying the due premium, the national consumer disputes redressal commission (NCDRC) directed LIC to pay Rs4.70 lakh with an interest of 9%pa (per annum) to the family of the deceased life assured (DLA). 
In an order last week, the NCDRC bench of justice Sudip Ahluwalia (presiding member) said, "We may state that for the fault of the employer, employee should not suffer. Equally the insurance company cannot be found fault with in view of the fact that it has informed and reminded the employer to send the premium amounts. However, the appellant (LIC) neither addressed any letters nor informed the DLA that the policy stood lapsed. In the circumstances, we hold that the employer and the appellant are equally liable to pay the benefits that were accrued under the policies."
Ramagundam, Andhra Pradesh-based Pittala Shankar, an employee of Singareni Collieries Company Ltd, had bought insurance policies worth Rs2.55 lakh from LIC under the salary savings scheme. He took voluntary retirement from the company. On 16 March 2008, he was murdered.
His wife, Pittala Pochamma, filed a death insurance claim and submitted all necessary documents. However, she did not receive any claim payment from LIC. On 13 September 2010, she sent a legal notice urging LIC to expedite the claim processing. Responding to the notice, LIC claimed not to have received any intimation and requested the submission of the original policy bonds and the death certificate. However, Ms Pochamma perceived this as a mere pretext by LIC to withhold payment.
She then filed a complaint with the Karimnagar district consumer disputes redressal commission. While allowing the complaint, on 10 June 2013, the district forum directed LIC to pay Rs2.35 lakh, the basic sum assured and the additional sum assured of Rs2.35 lakh after deducting the loan amount and unpaid premiums, with 9%pa interest. It also asked LIC to pay Rs1,000 towards litigation costs.
LIC filed an appeal before the Telangana state consumer disputes redressal commission. However, while affirming the order passed by the district commission, the state commission dismissed LIC's appeal. 
The state commission stated, "It is also not in dispute that the DLA died accidentally on account of murder. The only dispute is that the policies obtained by Mr Shankar were under the lapsed condition as on the date of his death and that the factum of his taking voluntary retirement was not informed to LIC. Though the counsel for LIC contends that they are not in receipt of premia for the above policies, they failed to whisper a single word whether the same is informed to the employer of the insured as well as the insured to pay the premia due."
"Had LIC informed the employer of Mr Shakar, Singareni Collieries Company could have responded immediately and could have remitted the premia amount? From the averments of the counter, it is evident that there are gaps in payment of premia but not as though the policy premia was not received continuously. And the gap premia pertains to the years 1999, 2000, 2002, 2004 and 2005. What the insurance company is doing all these days when there were gaps in receipt of premia for the above policies is not known. It did not take any pains in addressing a letter and informing the employer to remit the premium. Mr Shankar was under the bonafide impression that the premium amount had been settled and paid," the state commission says.
The state commission also observed that Singareni Collieries Company was not made a party in the present case. "LIC never raised any objection for the same, may be under the impression that the employer is its agent. No information is sought by LIC from Singareni Collieries Company as to what prevented the employer from not remitting the insurance premium for the gap period." 
LIC then approached NCDRC with its revision appeal. The counsel for LIC contended that where the enhanced premiums were not received following the cessation of employment of the policyholder, the insurance policies consequently lapsed on account of which the insurance corporation had no liability to satisfy the claims.
Justice Ahluwalia from NCDRC, however, noted that LIC raised the same contention before the state commission which did not accept it. " view of a decision of the Supreme Court, it had been observed that the employer of the life assured in such a situation was to be regarded as an agent of the insurer. Consequently, the life assured or employee could not be penalised for any omission on the part of his employer in the matter of either reporting about the cessation of his employment or otherwise regarding remission of the premium amounts to the insurer periodically as required." 
The bench also referred to the apex court judgement in the Chairman, LIC of India vs Rajiv Kumar Bhasker case. It says the counsel for LIC could not cite any case law to counter this judgement from the SC. "Instead, (the counsel) submitted that holding LIC responsible for any laches on the part of the employer 'would be going too far'."
In view of the Supreme Court judgement, justice Ahluwalia says that when in such a situation, the employer is to be regarded as an agent of the insurer, clearly, the interest of the life assured would need to be protected.
"This Commission finds no grounds to interfere with the well-reasoned orders of the state commission," NCDRC said while dismissing the appeal filed by LIC.
(Revision Petition Nos1058/1252 of 2017  Date: 15 May 2024)
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