Failure of insurer to intimate rejection or cancellation of the policy : Insurer hel liable

NCDRC Holds Insurer Liable for Deficiency in Service, Orders Rs. 17.37 Lakh Payout to Widow. National Commission rules insurer must honor claim after failing to communicate policy cancellation despite retaining premium for 10 months.

In a significant ruling, the National Consumer Disputes Redressal Commission (NCDRC) in New Delhi has held India First Life Insurance Co. Ltd. accountable for a deficiency in service, ordering the insurer to pay Rs. 17,37,887.80 to Smt. Suman Soni. The judgment comes in response to the insurer's failure to communicate the cancellation of an insurance policy, despite retaining the premium for over 10 months, in a case involving a housing loan insurance claim following the death of Smt. Soni's husband, Late Shri Dilip Kumar Soni.

The case revolves around a group credit life insurance policy linked to a housing loan availed by Late Shri Dilip Kumar Soni from Andhra Bank (now Union Bank of India) in October 2013. The policy, under Master Policy No. G0000286, was intended to cover the loan amount of Rs. 21,00,000 with a single premium of Rs. 1,56,431.10. However, following Shri Soni's death in January 2017, the insurer denied the claim, citing an incomplete membership form and absence of a valid policy due to non-compliance with mandatory requirements.

The NCDRC, presided over by AVM J. Rajendra and Justice Anoop Kumar Mendiratta, found that the insurer failed to communicate any deficiencies or policy cancellation to Shri Soni, despite retaining the premium. The Commission ruled that such retention of premium without timely communication constituted acceptance of the insurance contract by conduct, thus obligating the insurer to honor the claim.

The NCDRC's order comes after the Chhattisgarh State Consumer Disputes Redressal Commission's earlier decision, which partially allowed Smt. Soni's complaint. The national body has directed the insurer to pay the outstanding amount, deducting the previously refunded premium, with interest calculated from the date of claim rejection. Additionally, the insurer has been ordered to cover litigation costs.

This judgment underscores the importance of timely communication by insurers regarding policy statuses and the consequences of failing to meet these obligations, reaffirming consumer rights under the Consumer Protection Act, 1986.

Bottom Line:

An insurance contract is deemed concluded upon the insurer's receipt and retention of premium without any timely communication of rejection, cancellation, or additional requirements to the insured party. Failure to notify the insured about deficiencies in the membership form or to intimate rejection or cancellation of the policy constitutes deficiency in service.

Statutory provision(s):  Consumer Protection Act, 1986 Section 19

India First Life Insurance Co. Ltd. v. Smt. Suman Soni, (NCDRC)(New Delhi) : Law Finder Doc Id # 2784235