Mere Deduction Of Premium Does Not Create Binding Insurance Contract, Uttarakhand State Commission Dismisses Appeal Against New India Assurance Co.

Brief Facts:

The Complainant's shop, named M/s Uttaranchal Haat, was insured with the New India Assurance Company (“Insurance Company”) from June 30, 2009, to June 29, 2010. The shop had an account with the State Bank of India (“SBI”) and for the aforementioned policy, SBI used to automatically deduct premiums to be transferred to the Insurance Company. For the policy renewal, SBI paid the premium to the Insurance Company on August 13, 2009. However, the Insurance Company did not issue a renewed policy for the period from June 30, 2010, to June 29, 2011. On July 19, 2010, due to heavy rain, water and mud entered the Complainant's shop, causing a loss of ₹ 2,21,639/-. The Complainant requested indemnification from the Insurance Company, but no action was taken. Feeling aggrieved, the Complainant filed a consumer complaint in the District Consumer Disputes Redressal Commission, Haridwar (“District Commission”) against the Insurance Company and SBI.

In response, the Insurance Company argued that the policy was not renewed because the premium was tendered prematurely, before the existing policy's expiration. Consequently, there was no active insurance policy on the loss date, making the complaint subject to dismissal. On the other hand, SBI did not appear before the District Commission. The District Commission dismissed the complaint.

Dissatisfied by the dismissal, the Complainant filed an appeal in the State Consumer Disputes Redressal Commission, Uttarakhand (“State Commission”). She submitted that the District Commission overlooked the automatic deduction of premiums by SBI, which should have technically resulted in the renewal of the policy. The shop suffered significant damage due to heavy rain, and the loss should have been covered under the renewed policy.

Contentions of the Complainant:

The Complainant referred to New India Assurance Co. Ltd. vs. Suresh Singh Thakur [((2016) 1 CPJ (NC) 100)], where the insurer was held liable for not renewing the policy despite receiving the premium. Additionally, the Complainant cited Pradeep Kumar Jain vs. The Citi Bank[((1995) 2 CPJ (NC) 219)], which established that a bank's failure to deliver a renewal premium cheque constitutes a deficiency in service, making the bank liable.

Contentions of the Insurance Company:

The Insurance Company contended that an insurance policy is a contract that begins with a proposal from the insured and is completed only upon unconditional acceptance by the Insurance Company. It cited the case of Chukkapalli Suresh vs. Met Life India Insurance Co. Ltd. [(III (2017) CPJ 107 (NC))], arguing that without an issued policy, no contract existed, and therefore, the Complainant had no standing to file a consumer complaint. It also referred to Life Insurance Corporation of India vs. Shubhra Bhambri [((2017) 3 CPJ 365 = (2017) 2 CPR 293)], where it was held that merely retaining the premium does not create an insurance contract.

Observations by the State Commission:

The State Commission observed that the complainant's firm had a CC Stocks (SBF) account with SBI, from which SBI deducted the premium amount for the insurance policy. The deductions occurred for the period from June 30, 2009, to June 29, 2010, and again on August 13, 2009, for the subsequent year from June 30, 2010, to June 29, 2011. It was established that the Insurance Company refunded the premium sent by the bank on August 13, 2009, for the renewal, as evidenced by the cheque dated August 5, 2010. The State Commission noted that heavy rain caused water and mud to enter the shop, damaging goods and resulting in a loss of ₹2,21,639. The Complainant had informed the Insurance Company, which appointed a surveyor to assess the loss.

The State Commission reviewed the original records and letters from the Insurance Company, revealing that the insurance policy from June 30, 2009, to June 29, 2010, had been renewed, and no new policy was issued in August 2009 because the existing policy was still in effect. The Insurance Company had refunded the premium since it could not renew the policy retroactively.

The State Commission concluded that no concluded contract existed for the subsequent year, meaning the Insurance Company was not liable for the loss on July 19, 2010. Furthermore, the complaint was filed by the Complainant, who was the proprietor of her firm, rather than the firm itself. This lacked standing since there was no privity of contract between the Complainant personally and the Insurance Company.

Thus, the State Commission dismissed the appeal, affirming the District Commission's judgment and order.

Case Title: Smt. Amita Singh vs State Bank of India and Anr.

Case No.: First Appeal No. 12/2012

Advocate for the Appellant: Shri V.K. Srivastava

Advocate for the Respondents: Shri S. Parashar (For SBI) and Smt. Savita Sethi (For New India Assurance Co.)

Date of Pronouncement: 7th June 2024