Deficiency In Service : NCDRC Orders Royal Sundaram Insurance To Pay Claim, Compensation And Cost

The NCDRC ordered the Insurance Company to pay the complainant the insurance claim amount of Rs. 10 Lakhs, along with Rs. 1 Lakh as compensation and Rs. 5,000 as Litigation cost. Additionally, the NCDRC directed the Insurance Company to pay interest at a rate of 9% on the delayed payment, calculated from the date of filing the complaint.

Brief Facts:

The Complainant's husband (deceased) had taken an Accident Shield Policy from the Insurance Company for a year, with coverage for Rs.10 Lakhs. The premium paid for the policy was Rs.1,935/-. Unfortunately, the Complainant's husband passed away due to a road accident within the policy period. The Complainant informed the Insurance Company and claimed the death benefits of Rs.10 Lakhs under the policy. However, the Insurance Company responded by stating that the policy had been cancelled at the request of the deceased and refunded only Rs.968/- after some deductions.

The Complainant disputed the Insurance Company's claim, asserting that they dishonestly stated the policy's cancellation to avoid paying the death benefits. According to the policy terms and conditions, the Insured person could cancel the Insurance Certificate by giving a 14-day written notice sent via registered post acknowledgment due. The Complainant argued that no such notice of cancellation was given by her husband. The Complainant also sent a Legal Notice demanding death benefits, but the Insurance Company did not fulfill its obligations.

The Complaint was filed with the District Forum, alleging deficiency in services and unfair trade practices by the Insurance Company for not paying the claim amount and causing mental distress to the Complainant. The Insurance Company denied the allegations and contended that the policy was cancelled based on the deceased insured's request to SBI Cards and Payment Services, as the policy was taken through SBI Cards. The Insurance Company claimed to have refunded the premium amount as per the policy terms and reflected the refund in the Credit Card Statement.

The District Commission decided the case in favor of the Complainant, stating that the Insurance Company cancelled the policy without adhering to the policy's terms and conditions, which was deemed a unilateral and arbitrary action constituting unfair trade practices. The District Commission ordered the Insurance Company to pay the Complainant Rs.10 Lakhs, along with Rs.1 Lakh as compensation and Rs.5,000/- as litigation costs.

The Complainant appealed the decision to the State Consumer Disputes Redressal Commission, Puducherry, seeking interest on the awarded amount and an increase in litigation costs to Rs.25,000/-. The State Commission allowed the appeal and directed the Insurance Company to pay the Complainant Rs.10 Lakhs along with 9% per annum interest.

Observations of the Commission:

The NCDRC observed that the burden of proving the cancellation of the Insurance policy is on the Insurance Company which had to substantiate the claim of cancellation, as per the terms mentioned in the Policy. As there was no concrete evidence of cancellation provided by the Insurance Company, the Commission dismissed their Revision Petition.

It pointed out that the Complainant’s husband had an Accident Shield Policy, and after his accidental death, the insurance company denied the Complainant's claim, stating that the insured had canceled the policy during his lifetime. However, the Complainant contested that no written communication regarding cancellation was ever received from the insured. The alleged cancellation request was made to "SBI Cards and Payments Services," which was the platform through which the premium for the policy had been paid.

The NCDRC highlighted that as per the terms of the policy, a 14-day written notice for cancellation should have been given by the party seeking cancellation and such notice was required to be sent via Registered Post Acknowledgment Due. However, the insurance company failed to provide any registered communication indicating a cancellation request from the insured. Moreover, the platform through which the premium had been paid was not the agent of either the insured person or the insurer, and it had no authority to process cancellation requests.

In conclusion, the NCDRC upheld the decision of the District Forum to allow the insurance claim and found no grounds to interfere with the awarded interest rate of 9% per annum by the State Commission on the basis of the case of Guranna Etc. and Another v. Jitendra and Another.

Case Title: Royal Sundaram General Insurance vs Latha

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