Balancing Breaches: Upholding A Non-Standard Basis For Insurance Claims

Introduction:

The present Revision Petition has been filed by the Petitioner/OP under Section 21(b) of the Consumer Protection Act, 1986 (“the Act”) against the impugned order dated 18.01.2019, passed by the learned Punjab State Consumer Disputes Redressal Commission, Chandigarh (‘the State Commission’) in First Appeal No.364/2018.

Facts of the case:

The brief facts of the case, as per the Complainants, are that Sukhwinder Singh, the husband of Complainant No. 1, insured his vehicle with the OP for the period 24.08.2013 to 23.08.2014. The vehicle was financed by Indusind Bank for Rs.10,75,000/-. Sukhwinder Singh died on 12.02.2014, and before his death, the loan was repaid to Indusind Bank. After his death, Complainant No. 1 attempted to transfer the insurance policy to the legal heirs’ names. The OP required the death certificate, RC showing ownership transfer, and the original policy for effecting the transfer.

However, due to hypothecation by Indusind Bank, the RC transfer was hindered without a NOC from the Bank. Despite repaying the loan, Indusind Bank delayed and eventually refused to issue the NOC, forcing Complainant No. 1 to file a complaint against the Bank on 03.04.2014. The Consumer Court ruled in favor of the Complainant on 22.01.2015, directing Indusind Bank to issue the NOC upon submission of No Objection by other legal heirs. The NOC issued by Indusind Bank on 20.02.2015 was dated incorrectly as 03.02.2014. Despite requesting a correction, the Complainant accepted the NOC with the incorrect date.

About the case:

The policy period was from 24.08.2013 to 23.08.2014. Sukhwinder Singh’s death was intimated to the OP, but due to the RC transfer issue, the policy was not transferred. The Complainant renewed the policy in the deceased’s name for the period 24.08.2014 to 23.08.2015 as advised by the OP, pending RC transfer. On 28.01.2015, the vehicle met with an accident resulting in total loss. The OP’s surveyor inspected the vehicle, but the claim was repudiated on 13.03.2015, citing that the policy was not transferred within three months of the insured’s death. The Complainant alleged the rightful claim was wrongfully denied. Being aggrieved, they filed a Consumer Complaint before the District Forum.

In reply, the Respondent averred that no legal heir certificate was submitted, nor was the policy transferred to the Complainants’ names, justifying the repudiation of the claim on 13.03.2015. They contended that the Complainants never approached them for policy transfer and disputed the occurrence of the claimed incident. The OP denied the allegations and sought the dismissal of the complaint with costs. The District Forum, vide Order dated 02.02.2018, allowed the complaint with specific directions for compensation and interest.

Being aggrieved, the Respondent filed an Appeal before the State Commission. The learned State Commission, vide order dated 18.01.2019, modified the order of the District Forum, directing the OP to pay 75% of the insured declared value on a non-standard basis with interest from the date of filing the complaint until actual payment. The State Commission acknowledged that both the OP and Complainants committed minor contractual violations, and thus the non-standard settlement was deemed appropriate.

Dissatisfied with the Impugned Order dated 18.01.2019 passed by the State Commission, the Petitioners/Complainants filed the instant Revision Petition No. 925 of 2019. In their arguments, the Petitioners reiterated the facts stated in the Complaint and sought to set aside the impugned order, upholding the order passed by the District Forum in toto. On the other hand, the learned Counsel for the Respondent/OP admitted the policy was issued in the name of deceased Sukhwinder Singh and argued that the claim should have been rejected entirely due to non-disclosure of the insured’s death before policy renewal.

Observations of the court:

After examining the pleadings, documents, and arguments, it was noted that the Respondent/OP had not challenged the State Commission’s order, making it final with respect to the OP. The primary dispute was whether the State Commission rightly modified the District Forum’s order. It was acknowledged that the insurance policy was renewed after Sukhwinder Singh’s death, and the OP knew this fact at the time of renewal. Given the circumstances, the State Commission’s decision to apply a non-standard basis was deemed just and fair.

The National Consumer Disputes Redressal Commission, presided by AVM J. Rajendra, upheld the State Commission’s decision to settle an insurance claim on a non-standard basis due to breaches from both parties involved. The insurer had rejected the claim, citing the absence of a legal heir certificate and the lack of policy transfer to the complainant’s name. The insurer also argued that the complainants had not initiated the policy transfer process and denied the allegations, seeking dismissal of the complaint with costs.

The National Commission examined whether the State Commission’s directive for the insurer to pay 75% of the insured declared value with interest was justified. It was noted that the insurance policy had been renewed after the death of the complainant’s husband, with the insurer aware of this fact. Despite the complainant paying all dues to the bank, they lacked the No Objection Certificate, resulting in the policy’s renewal in the deceased person’s name. Recognizing minor contractual breaches on both sides, the Commission deemed the State Commission’s decision to apply the non-standard basis as fair and lawful. Consequently, the Revision Petition was dismissed, upholding the State Commission’s order as legally sound and equitable.