Ernakulam District Commission Holds United India Insurance Co. Liable For Wrongful Repudiation Of Valid Claim

Brief Facts:

The Complainant initially had a motor vehicle package policy from New India Insurance Company. During this period, the vehicle was involved in an accident, and a personal claim was made. Upon the policy's expiration, an agent of United India Insurance Company (“Insurance Company”) canvassed for its renewal. The complainant entrusted the policy document to her and paid a premium of Rs. 26,306/-. A new policy was generated with an Insured Declared Value (IDV) of Rs. 6,00,000/-.

On December 14, 2017, the vehicle met with another accident which caused significant damage. The vehicle was taken to M/s MGF Motors Ltd., an authorized workshop, which estimated the repair costs to be Rs. 5,09,117/-. However, the insurance company rejected the claim stating reasons such as the complainant's failure to sign the declaration form, non-disclosure of the previous accident claim, and alleged suppression of material facts. The surveyor assessed the damage at Rs. 2,29,787/- only.

The Complainant contended that there was no suppression of material facts and that the insurance company had all necessary information. The policy was valid at the time of the accident, and the rejection of the claim was due to negligence on the part of the insurance company in not obtaining the declaration form or verifying facts before issuing the policy. After the claim rejection, the Complainant filed a grievance which was also rejected by the insurance company without proper consideration. Due to the rejection, the complainant could not afford the full repair costs and took a loan of Rs. 2,75,000/-. Feeling aggrieved, the Complainant filed a consumer complaint in the District Consumer Disputes Redressal Commission, Ernakulam, Kerala (“District Commission”).

The insurance company stated that the Complainant did not submit the signed proposal form and NCB form, which are mandatory for completing the insurance contract. As a result, the original policy was not issued to the Complainant, who only had a downloaded copy of the policy after the accident. It argued that the rejection was based on several reasons, including the absence of a signed declaration form, non-disclosure of previous accidents, and an FIR report indicating that the accident was caused by the complainant's driver due to careless and rash driving.

Observations by the District Commission:

The District Commission noted that the Complainant endured considerable inconvenience, mental distress, hardships, and financial losses as a result of the negligence of the insurance company. It held that the failure of the insurance company to obtain a signed declaration form or verify facts before issuing the policy constituted a clear deficiency in service. Further, it held that the rejection of the insurance claim based on alleged non-disclosure of a previous accident and suppression of material facts, without substantial proof, highlighted the unfair trade practices.

Therefore, the District Commission directed the insurance company to pay the Complainant the insurance amount of ₹ 2,50,000/-. Additionally, the insurance company was directed to pay the Complainant compensation of ₹ 25,000/- for mental agony, deficiency in service, and unfair trade practices. Further, the insurance company was directed to pay the complainant ₹ 10,000/- towards the cost of the proceedings.

Case Number: CC/20/416

Date of Order: 24th June 2024