NCDRC Directs LIC To Pay Rs. 6 Lakhs And Bonus In Insurance Claims, Says LIC Being PSU Should Fulfill Obligations

The Revision Petition was filed by LIC against the order of the State Consumer Disputes Redressal Commission, Maharashtra, Circuit Bench wherein the District Consumer Disputes Redressal Forum, Nagpur’s decision was challenged.

Brief Facts:

The Complainant's husband (deceased) purchased a Jeevan Mitra policy with an assured sum of Rs. 2 Lakhs. On the demise of the deceased, the Complainant, as the nominee, submitted a claim to LIC for the sum. However, LIC rejected the claim, stating that the deceased had not disclosed important health information at the time of obtaining the policy. In response, she filed a Consumer Complaint before the District Commission which ruled that LIC's decision to reject the claim was unjustified and directed LIC to pay the policy amount of Rs. 2 Lakhs along with an interest rate of 6%.

Dissatisfied with the decision, LIC filed an appeal before the State Commission, however, it upheld the District Commission's order and dismissed LIC's appeal. A Revision Petition before NCDRC was filed by LIC, but it was also dismissed in 2009. Consequently, LIC paid the awarded amount along with costs as per the State Commission’s order.

However, the Complainant filed another complaint before the District Commission which was dismissed as the Commission held that as per Order-2, Rule-2 of Code of Civil Procedure, 1908, no balance can be claimed as the cause of action for the complaint was the same as the previous one, and the complainant had relinquished her claim for the balance amount (beyond Rs. 2 Lakhs) in the earlier complaint without providing any reason for doing so.

The Complainant approached the State Commission which set aside the District Commission's order and directed LIC to pay the remaining amount (minus Rs. 2,38,800/-, which the complainant had accepted under protest) to settle the claim. The amount included the sum assured under the policy scheme (Rs. 2 Lakhs) plus the bonus on the basic sum assured (Rs. 2 Lakhs), along with an interest rate of 9% per annum. Additionally, Rs. 10,000/- was awarded as compensation for mental anguish and deficiency in service, along with Rs. 10,000/- for the cost of litigation. LIC favored a Revision Petition before NCDRC against the State Commission's ruling.

Observations of NCDRC:

The NCDRC dismissed the Revision Petition and upheld the State Commission's decision, stating that LIC must pay the entire amount under the policy, regardless of the initial claim made by the complainant for a lesser sum. The NCDRC through Canara Bank Vs. United India Insurance Co. Ltd. & Ors. emphasized that insurance policies should be interpreted in a way that fulfills the reasonable expectations of all parties involved, favoring the insured when there is ambiguity.

It pointed out that LIC, being a public sector insurance company, should fulfill its obligations fully when the State Commission has ruled that the claim repudiation was unjustified, and the sum assured should be paid. The State Commission concluded that the complainant is entitled to the triple benefit amount of the sum assured policy, totaling Rs. 6 lakhs plus a bonus amount.

The Commission relying on Rubi Chandra Dutta Vs. United India Insurance Co. Ltd. and Sunil Kumar Maity Vs. State Bank of India & Ors. highlighted that its revisional jurisdiction is limited and can only be exercised if there is a prima facie jurisdictional error in the impugned order. It clarified that the revisional power can only be used in specific situations outlined in the relevant law, such as when the State Commission acted beyond its legal jurisdiction or failed to exercise its jurisdiction properly.

In conclusion, the NCDRC directed LIC to pay the full amount i.e. Rs 6 Lakhs as per the policy with a bonus amount, and rejected LIC's attempts to contest the claim on technical grounds.

Case Title: Life Insurance of India Ltd. vs Geeta Madhavrao Damahes & 2 Ors.

Counsel for Complainant: Mrs. S.K. Paunikar, Advocate

Counsel for LIC: Mr. Santosh Kumar, Advocate

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