Delay In Processing Revival Of Policy After Receiving Premium Is Insurer's Fault: NCDRC

Brief Facts of the Case

The complainant's husband held an insurance policy under the IDBI Federal Loan Insurance Group Life Plan/insurer to cover their housebuilding loan of Rs. 16 lakhs from IDBI Bank Ltd and a sum assured of Rs. 16 lakhs. The policy was active for three years until September 2015. She approached the insurer for policy renewal and submitted a cheque for Rs. 22,457 drawn on the SBI Parnasree Branch, credited to the insurer's account. According to the insurer's policy, a lapsed policy could be reinstated within two years from the last unpaid premium. The complainant fulfilled other requirements for renewal and provided details in the proposal form regarding her husband's health condition, indicating his recent diagnosis of Non-Hodgkin Lymphoma affecting his right eye since April 2015, which had spread to the brain. Consequently, her husband, unable to recall the premium due date due to his condition, defaulted, leading to policy lapse and later passed away. Upon filing a death claim, the complainant received a rejection letter from the insurer, citing the lapsed policy condition. The complainant contested the rejection and approached the Insurance Ombudsman, who conducted a hearing. However, she was not permitted to have legal representation, and no legal aid was provided. An order was issued without considering her plea, directing the insurer to refund Rs. 22,457 along with 2% per annum interest. Dissatisfied with the order, the complainant filed a complaint in the District Forum which allowed the complaint. Aggrieved by this, the insurer moved to the State Commission but the petition was dismissed. The insurer then filed a revision petition in the National Commission regarding the same.

Contentions of the Opposite Party

The insurer contended that the impugned policy had lapsed due to non-payment of premium. They rejected the revival request made by the complainant's husband because of the malignancy that had spread throughout his body. Upon verification, it was confirmed that the insurer had no outstanding dues as the policy had not been revived after its lapse. After reviewing the revival form and medical documents, the insurer refused to reinstate the policy, informing the policyholder of this decision through a letter. The life assured passed away a few days after the receipt of the proposal for policy revival, indicating that the intentions of the life assured were not genuine. It is argued that the complaint filed by the complainant does not meet the definition of a consumer dispute under the Consumer Protection Act, as there is neither any unfair trade practice nor any deficiency in service on the part of the insurer.

Observations by the Commission

The Commission observed that the deceased policyholder had not received any formal letter regarding the revival of the policy from the insurer before his demise. Furthermore, it was undisputed that the deceased had not withheld any crucial medical information when applying to reinstate the policy. He had provided accurate details of his medical condition upfront. Alongside the proposal, he had also submitted a premium cheque, which the insurer accepted and encashed. This indicated the insurer's willingness to reinstate the policy. The rejection letter for policy revalidation was issued after the cheque had been encashed, leading the complainant to believe that the policy would indeed be reinstated. Therefore, any undue delay in processing the revival was the fault of the insurer. Furthermore, for the jurisdictional issue, the Commission referred to the Supreme Court's decisions in cases like Rubi (Chandra) Dutta Vs. M/s United India Insurance Co. Ltd and Sunil Kumar Maity vs. SBI & Anr. which underscore the limited scope of the commission's revisional powers.

Case Title: IDBI Federal Life Insurance Co. Ltd. Vs. Krishna Bera

Case Number: R.P. No. 2194/2019