The National Consumer Disputes Redressal Commission, presided by Mr. Subhash Chandra and Dr. Sadhna Shanker, dismissed an appeal against National Insurance Company and held that insurance contract terms must be strictly interpreted, with precise adherence to their explicit wording and no alterations made.
Brief Facts of the Case
The complainant obtained a home loan of Rs. 22 lakh for a property and the bank purchased a 'Home Loan Suraksha Bima' policy for Rs. 30 lakh through National Insurance Company/insurer, with a premium paid of Rs. 15,716. The policy was valid for 15 years, but the complainant did not have access to the original policy terms. It was stated that the house would be rented for Rs. 18,000 per month, a fact disclosed to the bank. After the house was damaged by fire, the complainant notified the insurer and filed a claim for Rs. 21,14,000, which was repudiated on the grounds that the policy did not cover non-residential use. The complainant argued that the insurance company wrongfully denied the claim as the purpose of the house was never properly communicated to them. Aggrieved, the complainant filed a complaint before the State Commission of Uttar Pradesh, which rejected the complaint. Consequently, the complainant appealed before the National Commission.
Contentions of the Insurer
The insurer contended that the complainants secured a home loan to purchase the house solely for residential purposes and that the insurance policy specifically covers residential properties, excluding any commercial use. According to the policy's terms, it does not cover losses to non-residential properties. The insurer cited several judgments indicating that if a home loan is taken for residential purposes but the property is used commercially, the insurer is not liable, as this constitutes a breach of the insurance contract.
Observations by the National Commission
The National Commission observed that the key issue is whether there was a deficiency in service by the insurer. The evidence indicated that the complainant obtained a 'Home Loan Suraksha Policy' through the bank, which acted as the insurer's agent, making communications to the bank binding on the insurer as per Section 229 of the Indian Contract Act. The loan was sanctioned explicitly for residential purposes, as stated in the bank's sanction letter, which clarified that any commercial use would incur a commercial interest rate. The complainant did not disclose any intent to use the house for commercial purposes, which constituted a breach of the loan's conditions. The terms of the policy are critical, as emphasized by the Supreme Court in Suraj Mal Ram Niwas Oil Mills Pvt. Ltd. v. United India Insurance Co. Ltd. and Canara Bank v. United India Insurance Co. Ltd., highlighting the importance of strictly interpreting insurance contracts. Consequently, the complainant's use of the property for commercial purposes without notifying the insurer justified the insurer's repudiation of the claim, ruling out any deficiency in service.
The National Commission dismissed the appeal and upheld the State Commission's order.
Case Title: Anand Kumar Vs. Divisional Manager, National Insurance Company Ltd.
Case Number: F.A. No. 355/2023