Beneficiaries Of Insurance Policy Are 'Consumers' Even If They Are Not Parties To Contract Of Insurance: SC [Read Judgment]

The Supreme Court has observed that the beneficiaries of the policy taken out by the insured are also 'consumers' under the Consumer Protection Act, even if they are not parties to the contract of insurance.

In this case, the farmers had stored their agricultural produce in a cold store run by a partnership firm under the name and style of Sreedevi Cold Storage. This Cold Storage firm was insured with the United India Insurance Company Limited. The State and National Consumer Forum had granted relief in the complaints filed by Farmers against repudiation of the claim of the cold store by the insurance company. In the appeal filed by the insurance company, the contention taken was that there was no privity of contract between the farmers and the insurance company because the policy was taken by the cold store and not by the farmers and therefore they cannot be called 'consumers'.

Referring to the definition of 'consumer' under Section 2(d) of the Act, the bench of Justices S. Abdul Nazeer and Deepak Gupta noted that the definition of consumer under the Act is very wide and it not only includes the person who hires or avails of the services for consideration but also includes the beneficiary of such services who may be a person other than the person who hires or avails of services. It said:

"The definition of consumer under Section 2(d) quoted hereinabove is in 2 parts. Sub­clause (i) of Section 2(1)(d) deals with a person who buys any goods and includes any user of such goods other than the person who buys such goods as long as the use is made with the approval of such person. Therefore, the definition of consumer even in the 1st part not only includes the person who has purchased but includes any user of the goods so long as such user is made with the approval of the person who has purchased the goods. As far as the definition of the consumer in relation to hiring or availing of services is concerned, the definition, in our view, is much wider. In this part of the section, consumer includes not only the person who has hired or availed of the services but also includes any beneficiary of such services. Therefore, an insured could be a person who hires or avails of the services of the insurance company but there could be many other persons who could be the beneficiaries of the services. It is not necessary that those beneficiaries should be parties to the contract of insurance. They are the consumers not because they are parties to the contract of insurance but because they are the beneficiaries of the policy taken out by the insured"

Observing thus, the bench held that the definition of 'consumer' includes beneficiaries who can take benefit of the insurance availed by the insured. Consumer Protection Act clearly provides that a beneficiary of the services, other than the insured is a consumer under the Act, it added.

Dismissing the appeal filed by Insurance company, the Court held that tthe insurance company under the insurance policy is liable to indemnify the cold store with regard to the value of goods and since the farmers are the beneficiaries, they are entitled to get the amount payable under the policy. 

Case name: CANARA BANK vs. UNITED INDIA INSURANCE CO. LTD
Case no.: CIVIL APPEAL NO. 1042 OF 2020
Coram: Justices S. Abdul Nazeer and Deepak Gupta
Counsel for appellant: Senior Advocate P.P. Malhotra for Appellant
Counsel for respondent: Senior Advocates Dr. Rajeev Dhavan, Gopal Shankaranarayanan, Sajan Poovayya & Dhruv Mehta

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