Bihar State Commission Holds New India Assurance Co Liable For Wrongfully Repudiating Genuine Death Claim

Brief Facts:

The Deceased had obtained a Kisan Credit Card (KCC) loan of Rs. 2,00,000/- from Madhya Bihar Gramin Bank (“Bank”). This loan was insured under the Personal Accident Life Insurance Scheme (PAIS) by New India Assurance Company Ltd. (“Insurance Company”). The Bank deducted the insurance premium from the loan account of the deceased, and the deceased's wife was named as the nominee under the insurance policy.

During the subsistence of the policy, the deceased was killed. The incident was promptly reported to the Bank and the Insurance Company. The deceased's wife and son (“Complainants”) submitted a claim to the Bank to avail of the benefits under the PAIS scheme. Despite their efforts, the loan account was not closed due to the non-payment of the assured sum by the Insurance Company.

The Bank informed the Complainants that the sum assured under PAIS had not been received from the Insurance Company. Multiple reminders were sent, but the claim remained unsettled. Consequently, the Complainants issued a legal notice to the Bank and the Insurance Company, which went unanswered. Feeling aggrieved, the Complainants filed a consumer complaint in the District Consumer Disputes Redressal Commission, Rohtas, Bihar (“District Commission”).

In response, the Bank contended that it duly forwarded the Complainants' claim to the Insurance Company for settlement. It had no role in processing the claim beyond providing required information and documents to the Insurance Company. The Insurance Company contended that the Complainants were not its consumers. Further, they had not submitted any policy documents to get the relief.

The District Commission allowed the complaint and directed the Insurance Company to disburse Rs. 2,00,000/- to the Complainants. Aggrieved by the decision, the Insurance Company filed an appeal before the State Consumer Disputes Redressal Commission, Bihar (“State Commission”).

Observations by the State Commission:

The State Commission observed that the Insurance Company did not deny receiving the premium amount for the deceased's insurance. The deduction was shown in the Bank's statement of account. The Insurance Company also did not deny the insurance of other KCC loanees, as the Bank made a specific statement that all KCC loanees were insured after the premium was paid from their loan accounts. It was held that if the Insurance Company did not issue a policy even after receiving the premium, the Complainant should not suffer due to the company's fault.

The State Commission noted that the Complainants should not suffer due to any lapses or delays by the Bank or the Insurance Company. The Bank fully supported the Complainants' claim and admitted that the Deceased was sanctioned a loan under the KCC account. The premium for insurance was deducted from his loan account and remitted to the Insurance Company. Therefore, it was held that the Insurance Company could not deny the Complainants' claim. Since the deceased died during the insurance period, the Insurance Company was held liable to pay the insurance claim amount into the KCC loan account of the Deceased.

The State Commission found no error or infirmity in the judgment and order passed by the District Commission. The appeal was deemed devoid of merit and was accordingly dismissed.

Case Title: The New India Assurance Company Limited and Others vs Janardan Pandey and Others

Case No.: Appeal No. 114 of 2015

Advocate for the Insurance Company: Mr Durgesh Kumar Singh

Advocate for the Original Complainants/Respondents: None

Date of Pronouncement: 19.06.2024