BEFORE THE A.P STATE CONSUMER DISPUTES REDRESSAL COMMISSION AT HYDERABAD.
CC 63 of 2011
Between:
D. Srinivas,
S/o. Late D. Venkaiah
Age: 65 years, Agriculture
R/o. 3-3-23, Ramanthapur
Hyderabad. *** Complainant
And
1) The Asst. General Manager
State Bank of Hyderabad
RACPC, Moula Ali,
Secunderabad.
2) The Manager
State Bank of Hyderabad
Ramanthapur Branch
Hyderabad.
3) SBI Life Insurance Company Ltd.
Ground Floor, Parishram Bhavan
Basheerbagh, Hyderabad
Rep. by its General Manager. *** Opposite Parties
Counsel for the Complainant: M/s. P. Shiv Kumar
Counsel for the Opposite Parties: M/s. CH. Siva Reddy (Ops 1 & 2)
M/s. G. Anand Kumar (Op3)
CORAM:
HON’BLE SRI JUSTICE D. APPA RAO, PRESIDENT
SMT. M. SHREESHA, MEMBER
&
SRI S. BHUJANGA RAO, MEMBER
MONDAY, THE SIXTEENTH DAY OF JULY TWO THOUSAND TWELVE
ORAL ORDER: (Per Hon’ble Sri Justice D. Appa Rao, President)
***
1) This is a complaint filed u/s 17 of the Consumer Protection Act directing the opposite parties 1 & 2 to settle the outstanding dues for the housing loan of his deceased son in terms of insurance coverage together with compensation of Rs. 3 lakhs and costs.
2) The case of the complainant in brief is that he along with his wife and son late D. Venugopal obtained housing loan for Rs. 30 lakhs from Ops 1 & 2 State Bank of Hyderabad in the month of September, 2008 for construction of a house. The bank had deducted Rs. 78,150/- from their loan account on 29.9.2008 for insurance coverage with Op3 SBI Life Insurance covering the life of late D. Venugopal who was one of the joint loanees. Thus D. Venugopal was insured for the entire loan amount of Rs. 30 lakhs or outstanding dues in case of eventuality. While so, his son Venugopal died on 17.12.2009 due to cardiac arrest. When the complainant claimed the amount covered under the policy and to discharge the outstanding housing loan amount by submitting death certificate etc., they did not settle. Contrarily Ops 1 & 2 pressurizing to clear the outstanding loan, despite the fact that the entire loan amount should be discharged in terms of insurance policy on the death of his son. They also sent a letter dt. 18.1.2011 informing that Op3 had called for medical examination for coverage of life insurance of the deceased, and therefore the policy could not be completed pending medical examination, and that the proposal was returned, and that the amount was returned by way of cheque. It is clear that they had conspired together to deprive the insurance coverage. His son was never called for medical examination. They never received any cheque. On that he got issued legal notice to settle the claim for which they gave reply with false averments. Alleging that non-settlement of claim amounts to deficiency in service filed the complaint directing Op3 to settle the outstanding loan with Ops 1 & 2 in terms of the policy and compensation of Rs. 3 lakhs and costs.
3) Op2 filed written version adopted by Op1 denying the facts mentioned in the complaint. They denied each and every averment made in the complaint however, admitted that the complainant, his wife and his son availed housing loan of Rs. 30 lakhs. As an agent of Op3, they have informed about the insurance coverage under housing loan. They agreed to take insurance policy in the name of D. Venugopal. They had collected Rs. 78,150/- towards premium from their loan account and paid it to Op3 along with application for issuance of policy. As an agent of Op3 it had attended the work as required. Later they learnt that Op3 had advised D. Venugopal to appear for medical examination. He failed to appear, and the policy could not be completed. They were not aware of the developments and ultimate refusal of the policy. On receipt of death intimation they have forwarded the same to Op3 which in turn informed that they could not provide insurance coverage as the medical examination was pending, and further they had refunded the premium amount. When they did not receive the cheque they wrote back to Op3 about it and then Op3 had sent duplicate cheque dt. 23.2.2011. This fact was intimated to the complainant. Since there was no coverage of insurance, the question of deficiency in service will not arise, and therefore prayed for dismissal of the complaint with costs.
4) Op3 insurance company equally resisted the case denying the facts mentioned in the complaint. The deceased nominated his wife Smt. D. Shailaja as nominee, and that the complaint is bad for non-joinder of necessary parties. Ops 1 & 2 are separate legal entities with which, it had no concern, and is not liable for omissions and commissions on their part. Mere deposit of amount towards premium along with proposal does not automatically result into policy. It all depends on sum assured, age, specific reports etc. Till such time the deposit amount remain as it is, and cannot be deemed as acceptance of risk under the proposal. Since the proposal was pending for medical requirements, and the same was not complied with by the proposer, the proposal deposit was refunded during the life time of the deceased by way of cheque dt. 10.12.2008. The proposal was never concluded. On receipt of letter dt. 3.1.2011 from the bank a fresh cheque was issued. Since there was no concluded contract during the life time of the proposer there was no obligation on it for payment of amount. The members who satisfy the eligible criteria will only be eligible for group insurance scheme. The proposer never complied with formalities, and therefore no policy was issued. Therefore, he would not fall within the definition of consumer. A contract of insurance comes into force only on issuance of policy. Mere receipt and retention of premium amount will not amount to acceptance of risk. The requirement of medical examination was sent to him. There was no collusion between it and Ops 1 & 2. The proposer did not evince interest to get the risk covered, and therefore prayed for dismissal of the complaint with costs.
5) The complainant in proof of his case filed his affidavit evidence and got Ex. A1 to A10 marked while the bank filed the affidavit evidence of its Branch Manager and the insurance company filed the affidavit evidence of its Head (Legal) and got Exs. B1 to B7 marked.
6) The points that arise for consideration are:
i. Whether there is any deficiency in service on the part of opposite parties in processing the insurance policy?
ii. Whether the complainant is entitled to the reliefs sought for?
iii. To what relief?
7) The case of the complainant is that he along with his wife and son late D. Venugopal obtained housing loan for Rs. 30 lakhs from Ops 1 & 2 State Bank of Hyderabad in the month of September, 2008 wherein there is coverage of insurance for housing loan. The bank had agreed for such a policy in the name of D. Venugopal in terms of insurance scheme. Accordingly proposal was sent along with premium of Rs. 78,150/- on 29.9.2008. It is also not in dispute that Op3 insurance company received the premium on 13.10.2008. D. Venugopal died on 17.12.2009 evidenced under Ex. A1 death certificate.
The complainant alleges that said fact was intimated to Op1 on 3.4.2010 which was acknowledged by the bank under Ex. A2 letter. Again another notice was issued under Ex. A3 dt. 14.5.2010 requesting the bank to settle the loan account. It was acknowledged by the bank evidenced under seal as well as signature of the concerned officer. Since he did not receive any reply a notice was issued under Ex. A4 dt. 30.12.2010 along with death certificate, earlier letters, and statement of account. The bank acknowledged receipt of Ex. A4 letter vide Ex. A5 letter dt. 3.1.2011.
8) For the first time on 18.1.2011 Op1 gave a reply by stating that “SBI Life Insurance Company Ltd., vide reference No. 15365 dt. 17.10.2008 had called for medical examination for coverage of life insurance of Sri D. Venugopal in respect of your Housing Loan No. 62071944332 availed from Op2. The policy insurance could not be completed by Op3 pending medical examination and the proposal was returned. They had informed that a communication was sent to your address on 16.12.2008 regarding the refund of cheque/proposal amount (Rs. 78,150/- vide cheque No. 120772 dt. 10.12.2008).” The complainant gave reply by way of legal notice under Ex. A7 dt. 25.2.2011 mentioning that at no time any letter from the insurance was received calling for medical examination in order to cover life insurance nor did they receive the amount said to have been issued under cheque Dt. 10.12.2008. The complainant disputes that Op3 had sent Ex. B3 notice dt. 17.10.2008 directing the proposer to undergo medical examination nor receipt of cheque that said to have been sent on 10.12.2008 towards premium amount.
9) Neither the bank (Ops 1 & 2) nor the insurance company (Op3) had ever informed the proposer or the complainant about non-issuance of policy for want of medical certificate though they alleged that they have intimated the said fact by way of notice under Exs. B3 & B4 requesting for cancellation of cases, addressed by Health India a third party.
10) The complainant asserts that in order to repudiate the claim, and to cover up their latches in processing the policy they have created Ex. B3. The said letter was never received. Ex. B4 dt. 18.11.2008, Health India a third party, informed the insurance company that they got the intimation to conduct pre-policy medicals for below mentioned client.
Client Name: D. Venugopal
Ref. No. 15365
TPA Ref No. SBH/040/5150
Medicals fmr, ecg, a,b,c,d.
Remarks “Client missed more than 3 appointments
and at present client not contactable.
There is no proof that these letters were sent to the complainant. The so called premium amount that said to have been refunded under cheque dt. 10.12.2008 was never received by the bank Ops 1 & 2. Had it been received, the bank could have credited the same in the account of the complainant. For the first time, the said amount was sent on 23.2.2011 about two years five months after proposal was submitted, and about one year two months after the death of the proposer.
11) When the bank issued a notice that the said cheque was not received the insurance company alleges that it was sent through Professional Couriers. Op3 insurance company also alleges that said cheque was encashed on 10.8.2011. If it were to be true, there is no reason why the fact that premium was refunded by way of cheque dt. 10.12.2008 as the medical examination report was not received, was not made a mention in letter Ex. B6 dt. 3.1.2011. The complainant alleges that Ex. B2 insurance for housing loan protection proposal was submitted along with health declaration in the very proposal form furnished by the insurance company under the heading “Good Health Declaration”. Therefore the non-issuance of policy due to non-receipt of medical report could not be true.
12) At the cost of repetition, we may state the fact that insurance company had sent Ex. B3 requirement of medical examination nor Op1 had ever received a letter informing that they could not provide insurance coverage and receipt of cheque was not proved. The complainant contends that these documents Exs. B3 to B5 were created in order to evade payment of amount under the scheme. It would show deficiency in service on its part. The complainant contends that Ex. B6 by the bank addressed to the insurance company proves beyond doubt that Exs. B4 & B5 are created for the purpose of this case. Since Ex. B6 is decisive in this regard, we excerpt the said letter.
State Bank of Hyderabad
Ramamanthapur Branch
Hyderabad. F.Ins/291 Dt. 3.1.2011
The Manager
SBI Insurance Company Ltd.
Hyderabad.
Dear Sir,
Re: Non-receipt of Housing Loan Insurance Refund
Sri Deekonda Srinivas – A/c. No. 62071944332
We came to know from you, that the above borrowers’ insurance premium amount refunded by you on 10.12.2008 to our branch vide cheque No. 120772 dt. 10.12.2008 for Rs. 78,150/- . After verification of our records, we found that the above cheque was not received by us. Hence, we request you to kindly issue a duplicate cheque immediately to enable us to give credit to the borrowers account. Please treat the same as most urgent.
Yours faithfully,
Sd/-
GNBA Venkateshwarlu
Branch Manager.
When the opposite parties 1 & 2 maintaining the accounts in its natural course of business, informed the insurance company about non-receipt of cheque had it been sent, Op3 would not have sent it again. Curiously, Op3 insurance company again issued another cheque by its letter dt. 24.2.2011 in order to credit to the account of the complainant. Therefore the version of Op3 that the insurance coverage could not be issued due to non-compliance of medical requirements by the proposer D. Venugopal and that they had refunded the amount by way of cheque dt. 10.12.2008 cannot be believed. It is not known as to what were the steps that were taken by Ops 1 & 2 on receipt of letters from the complainant about the death of the deceased. There is no correspondence from Ops 1 & 2 about fact of proposal that was submitted by them nor Op3 ever give any reply to the bank that the medical requirement was not received, and as such they could not issue the policy. Had the said fact been true, they could not have failed to mention these facts in the letter dt. 3.1.2011 and 24.2.2011 equally so in Ex. B4. These facts were mentioned for the first time in their letter Ex. A10 dt. 2.5.2011.
13) Evidently, there is no correspondence from 3.1.2011 to 24.2.2011. Even otherwise the proposer was alive for a period of 15 months from the date of payment of premium i.e., 29.9.2008 and the insurance company said to have refunded the amount on 10.12.2008, about a year prior to the death of the deceased. If that were to be true a copy of the same could have been sent to the complainant while refunding the amount by way of cheque sent to Op2 bank. All this shows that after coming to know that they did not act on the proposal submitted to it, these documents were put forward without any evidence that the proposal was not accepted for want of medical tests.
14) The learned counsel for the insurance company contends that by recoursing to Clause-4 of SBI Life General Conditions that unless the borrower signs the good health-cum-consent letter and fulfils to the satisfaction of the insurance company the medical requirements if any, he is not eligible for insurance coverage. Clause-4 reads as follows :
“In case of joint borrowers, each joint borrower is eligible to take the insurance cover for the full loan amount subject to he/she fulfilling the eligibility criteria and signing the good health-cum-consent letter separately and fulfilling the satisfaction of the company, the medical requirements, if any, as prescribed by the company, and on paying the appropriate premium. In the event of death of either or any of the joint borrowers, the company will pay the grantee the sum assured determined as per the scheme. The un-expired portion of the single premium paid by the surviving borrower (s) would be remitted after deduction of the administrative expenses through the grantees and the cover stands extinguished. ”
15) It is not as though the insurance company or the bank obtained such a letter from the proposer that insurance coverage for the full loan amount would be subject to medical requirement. In fact, the words, if any in the said clause disclose that it was not mandatory. It may be stated herein that the proposer has given good health declaration accepted by the insurance company. Obviously after finding that they did not communicate the said fact to the proposer now the insurance company is coming up with all these unsubstantiated pleas. Keeping the proposal with them for so long a period, without taking any action amounts to deficiency in service. When the complaint is filed against Op3 insurance company, it ought to have filed the entire correspondence between it and Health India, a third party who said to have communicated to the proposer for medical tests. In fact there is no proof that Health India contacted the proposer/deceased at any time, and that he was not available. This could not have been true because the deceased was alive till 17.12.2009. Ex. B4 was sent on 18.11.2008 to Vice-President of SBI Life, Hyderabad. The fact that the proposer did not respond to Health India’s pre-policy medical requirements was not made a mention in any of earlier correspondences. Equally the fact that the cheque dt. 10.12.2008 sent by Air State Courier was not even mentioned in the letter Ex. A10 dt. 2.5.2011 and letter of Op2 to Op3 dt. 3.1.2011. We are constrained to state that Ex. B4 which was not referred to in Ex. A9 & A10 must have been fabricated for the purpose of this case.
16) The insurance company for the reasons best known did not act on the proposal submitted by the proposer though it had received the premium as long back as on 29.9.2008. It could neither accept it nor repudiate it. In this context it is relevant to mention clause 4 of regulations of the Insurance Regulatory and Development Authority (Protection of Policyholders’ Interests) Regulations, 2002. For benefit we excerpt clause-4 proposal for insurance:
4. Proposal for insurance
(1) Except in cases of a marine insurance cover, where current market practices do not insist on a written proposal form, in all cases, a proposal for grant of a cover, either for life business or for general business, must be evidenced by a written document. It is the duty of an insurer to furnish to the insured free of charge, within 30 days of the acceptance of a proposal, a copy of the proposal form.
(2) Forms and documents used in the grant of cover may, depending upon the circumstances of each case, be made available in languages recognised under the Constitution of India.
(3) In filling the form of proposal, the prospect is to be guided by the provisions of Section 45 of the Act. Any proposal form seeking information for grant of life cover may prominently state therein the requirements of Section 45 of the Act.
(4) Where a proposal form is not used, the insurer shall record the information obtained orally or in writing, and confirm it within a period of 15 days thereof with the proposer and incorporate the information in its cover note or policy. The onus of proof shall rest with the insurer in respect of any information not so recorded, where the insurer claims that the proposer suppressed any material information or provided misleading or false information on any matter material to the grant of a cover.
(5) Wherever the benefit of nomination is available to the proposer, in terms of the Act or the conditions of policy, the insurer shall draw the attention of the proposer to it and encourage the prospect to avail the facility.
(6) Proposals shall be processed by the insurer with speed and efficiency and all decisions thereof shall be communicated by it in writing within a reasonable period not exceeding 15 days from receipt of proposals by the insurer.
17) Obviously to cover up their latches in not considering the proposal, the insurance company came up with the above evidence which the bank itself did not admit when the insurance company under Ex. B6 informed the bank that the premium was not accepted and the amount was refunded by cheque. The very bank repudiated it. The insurance company, despite the fact that a complaint has been filed did not substantiate the fact of non-acceptance of premium was informed to the bank, and the said bank had received back the premium sent by it. Equally the proposal that said to have been repudiated on the ground that the proposer did not attend to the medical requirements. All this has been created evident from non-reply or reference to any of the notices given by the complainant, acknowledged by the bank. It is unfortunate that the nationalised bank and the insurance company are acting against the interests of proposer and to cover up their latches they are going to an extent of creating documents. The extraordinary delay and not acting on the proposal from 30.11.2008 till 25.2.2011 shows that the delay was abnormal, unconscionable and does not sustain. Where there is negligence writ large on the face, necessarily, we have to hold that Op3 insurance company is guilty of deficiency in service. We can go to an extent stating that it is indulging in unfair trade practise. Only after coming to know that the insured is no more, they started repudiating. Equally they started creating documents and contending that since there was no policy, it was not liable to pay any amount. This case does not pertain to the claim basing on a policy. It is based on the deficiency in service in not issuing policy. Due to this act they were forced to discharge loan, which otherwise Op3 had to discharge. Therefore, we hold that Op3 insurance company was undoubtedly guilty of abnormal delay amounting to deficiency in service, though we cannot hold so in regard to Ops 1 & 2.
18) The next question is the compensation that could be awarded in cases of this nature. In other words what could be the ideal order that would make the complainant to keep in position had the policy been issued. In this regard, we refer Hon’ble Supreme Court in State of Gujarat Vs. Shantilal Mangaldas reported in AIR 1969 SC 634 held:
“the compensation to mean”…..In ordinary parlance the expression compensation means anything given to make things equivalent; a thing given to or to make amends for loss recompense, remuneration or pay, it need not therefore necessarily in terms of money. The phraseology of the Constitutional provision also indicates that compensation need not necessarily be in terms of money because it expressly provides that the law may specify the principles on which, and the manner in which , compensation is to be determined and given . If it were to be in terms of money along, the expression ‘paid’ would have been more appropriate”.
The Supreme Court held that the compensation to be awarded is to be fair and reasonable. In “Charan Singh vs Healing Touch Hospital and others” 2000SAR(Civil) 935 the Apex Court stressed the need of balancing between the compensation awarded recompensing the consumer l and the change it brings in the attitude of the service provider. The Court held “While quantifying damages , consumer forums are required to make an attempt to serve ends of justice so that compensation is awarded, in an established case, which not only serves the purpose of recompensing the individual, but which also at the same time aims to bring about a qualitative change in the attitude of the service provider. Indeed calculation of damages depends on the facts and circumstances of each case. No hard and fast rule can be laid down for universal application. While awarding compensation, a Consumer Forum has to take into account all relevant factors and assess compensation on the basis of accepted legal principles, on moderation. It is for the Consumer Forum to grant compensation to the extent it finds it reasonable, fair and proper in the facts and circumstances of a given case according to established judicial standards where the claimant is able to establish his charge”.
In view of the above principle, we are of the opinion that Op3 insurance company having agreed to reimburse the entire amount in case of death during the policy period, the very same amount could be awarded so that the complainant would not suffer due to latches on the part of Op3.
19) In the result the complaint is allowed in part directing Op3 insurance company to pay the entire amount due under home loan account and discharge the debt and on such discharge, opposite parties 1 & 2 are directed to issue ‘No Due Certificate’ to the complainant. In view of latches on the part of Op3 insurance company, we direct it to pay Rs. 25,000/- towards compensation for mental agony and Rs. 10,000/- towards costs. Time for compliance four weeks.
1) _______________________________
PRESIDENT
2) ________________________________
MEMBER
3) ________________________________
MEMBER
APPENDIX OF EVIDENCE
WITNESSES EXAMINED FOR
COMPLAINANT OPPOSITE PARTIES
None None
Documents marked for complainant:
Ex A-1 Death certificate of D.Venu Gopal dt : 19.1.2010
Ex A-2 Representation dt : 3.4.2010
Ex A-3 Representation dt : 14.5.2010
Ex A-4 Representation dt : 30.12.2010
Ex A-5 Letter sent by Ops dt : 3.1.2010
Ex A-6 Letter sent by Ops dt : 18.1.2011
Ex A-7 Legal notice dt : 25.2.2011
Ex A-8 Acknowledgement cards
Ex A-9 Reply given by the Ops dt : 22.3.2011
Ex A-10 Reply notice dt : 2.5.2011
Documents marked for Opposite Parties:
Ex B-1 Copy of the Master Policy
Ex B-2 Copy of Annexure-X & Proposal form
Ex B-3 Copy of the letter dated : 17.10.2008
Ex B-4 Copy of the letter of Health India Dated : 18.11.2008
Ex B-5 Copy of the letter dated : 12.12.2008
Ex B-6 Copies of the letter dated : 3.1.2011 of State Bank of Hyderabad and letter dated : 24.2.2011
Ex B-7 Copy of the Reply to legal notice with citations
1) _______________________________
PRESIDENT
2) ________________________________
MEMBER
3) ________________________________
MEMBER
16/07/2012
*pnr
UP LOAD – O.K.
