NCDRC Holds United India Insurance Liable For Deficiency In Service Due To Denial Of Insurance Claim Citing Policy Ambiguity

Brief Facts of the Case

The complainant's husband applied for a loan of Rs.10.00 lacs from Syndicate Bank for house construction. The bank sanctioned the loan with a condition of monthly repayment deducted from his salary. The bank also acquired an insurance policy, 'Unihome Care Insurance Policy,' from United India Insurance/insurer for Rs.10.00 lacs, covering the husband's life. This policy ensured repayment of the loan in case of mishaps to the husband or the insured property, relieving the heirs from repayment. The husband paid installments but passed away due to a heart attack. The complaint was filed for settlement of the insured amount after his death, but it was repudiated by the Bank on the grounds that the death was not accidental. Being aggrieved, the complainant filed a complaint in the District Forum, which partly allowed the complaint. Consequently, the Bank appealed to the State Commission, but the Commission dismissed the appeal. The Bank has now filed a Revision Petition before the National Commission.

Contentions of the Opposite Party

The insurer argued that, according to Section II of the policy, the bank was obligated to indemnify the legal representatives of the deceased employee if certain conditions were met. These conditions stipulated that the company would pay the insured sum if the borrower sustained bodily injury solely and directly from an accident caused by external, violent, and visible means, resulting in death within twelve months. However, according to the death summary, the death occurred due to a severe heart attack, categorized as natural death, with a previous history of heart-related ailments. Therefore, the insurer contended that the death did not meet the criteria for coverage under the policy as it was not caused by an accident.

Observations by the Commission

The Commission observed that the policy only covers claims related to the house under Section I, with no coverage for personal accidents under Section II. The insurer did not dispute liability under Section II for accidental death, acknowledging that they could have paid the insured sum of Rs. 10 lakhs if it had been an accidental death, despite it being stated under Section I. The complainant's counsel emphasized that the bank took the insurance policy to secure the loan in the event of damage to the house or death of the loanee. Citing the Hon'ble Supreme Court's decision in Canara Bank Vs. United India Insurance Co. Ltd. & Ors., it was observed that insurance policies should be interpreted broadly to align with reasonable expectations, resolving ambiguity in favor of the insured. The commission further reiterated that its revisional jurisdiction is limited, intervening only in cases where the lower authorities have acted illegally or with material irregularity.

Finding no such grounds, the commission upheld the State Commission's well-reasoned order, dismissing the revision petition.

Case Title: United India Insurance Vs. Manjula & 2 Ors.

Case Number: R.P. No. 1943/2017