Reserved
State Consumer Disputes Redressal Commission
U.P. Lucknow.
Appeal No. 456 of 2018
The Oriental Insurance Co. Ltd., through its
Divisional Manager, Division Office, 1st B-8,
RDC, Rajnagar, Ghaziabad. …Appellant.
Versus
Deepak Goel adult s/o Gopichand,
R/o House no.60, Maliwada Basant Road,
Ghaziabad. ... Respondent.
Present:-
1- Hon’ble Sri Rajendra Singh, Member.
2- Hon’ble Sri Vikas Saxena, Member.
Sri Waqar Hashim, Advocate for appellant.
Sri H. K. Srivastava, Advocate for respondent.
Argument Heard : 23.01.2024
Judgment Delivered : 30.01.2024
JUDGMENT
Per Sri Rajendra Singh, Member:- This appeal has been filed under section 15 of the Consumer Protection Act, 1986 against the judgment/order dated 19.01.2018 passed by the Learned District Consumer Forum, Ghaziabad in complaint case no.417/2015, Deepak Goel Vs Oriental insurance Co. Ltd.
The brief facts of the appeal are that, that the complainant bought a Happy Family Floater Mediclaim Policy for the first time on 07.12.2011 for some insured ₹ 2 lakhs. The complainant filed a claim for the treatment of his father’s medical bills. The treatment dates were from 03.11.2012 to 05.11.2012 onwards. Admittedly The Oriental Insurance Co. paid ₹1,62,000/– to the complainant against the first claim of the complainant. The Happy Family Floater Mediclaim insurance policy was renewed on 07.12.2012 and the total sum insured was ₹ 5 lakhs. The father of the complainant as alleged was admitted in the hospital on 05.10.2013 for the treatment of coronary artery disease with triple vessel disease with hypertension with Acute Coronary Syndrome. The cause of illness was major complications of hypertension.
As per terms and condition of the insurance policy hypertension and its any complications have two years waiting period and the policy was of second-year hence the claim was repudiated on the ground that the disease of hypertension is not covered in two years of the insurance policy. Since the insured was admitted in the hospital for treatment of hypertension and as per policy conditions any treatment for hypertension and its complication is excluded from the scope of the insurance policy hence the claim has been repudiated under policy exclusion clause 4.3. As per admitted case of the complainant earlier the insured i.e, Mr Gopichand father of the component was hospitalised for treatment of heart problem during the period of 03.11.2012 to 05.11.2012 and since the hypertension was not reported as the Oriental insurance Co paid ₹ 162,000/– against the treatment of Mr. Gopichand. The happy family floater medical insurance policy was renewed on 07.12.2012. As per admitted case of the complainant the insured, father of the complainant was diagnosed for hypertension and was treated in the Medanta Hospital and there is no justification in passing the impugned order against the appellant. The learned Forum while misreading the evidence and law has held that there is deficiency in service on the part of the Oriental insurance Co, but considering the law of the land the Oriental insurance Co made no mistake while repudiating the claim of the complainant. The impugned order is illegal and arbitrary that suffers from gross illegality and will not stand before the scrutiny of this Hon’ble court.
The learned Forum erred in law as well as in fact while ignoring the fact that as per admitted case of the complainant, the complainant’s father was diagnosed for hypertension which was not covered within two years of insurance policy in question. The learned Forum erred in law as well as in fact while ignoring the fact that the cause of treatment and illness was hypertension and under exclusion clause 4.3 hypertension is not covered for two years from the date of the insurance policy. The complainant failed to prove that his case is covered under the insurance policy in question. The learned Forum erred in law while ignoring expert report of the ‘MD India’ healthcare services which is available on record which clearly shows that the claim of the complainant is not payable. The learned Forum has ignored the documentary evidence available on record. The case of the complainant was based on the hearsay and there is no direct evidence to prove the case of the complainant. The claim of the complainant was based on concealment of facts and is liable to be rejected. Therefore it is most humbly prayed that this Hon’ble state commission may kindly be pleased to quash the impugned judgement and order dated 19.01.2018 passed by the Learned Consumer Forum Ghaziabad in complaint case no 417/2015 , Deepak Goel Vs Oriental Insurance Company Ltd and this appeal may be allowed by setting aside the impugned judgment and order.
We have heard the learned counsel for the appellant Mr. Waqar Hashim and learned counsel for the respondent Mr. H. K. Srivastava. We have perused the pleading evidences and documents on record.
First we have perused the Happy Family Floater Policy Schedule. This policy has been issued for a period from 07.12.2011 two midnight of 06.12.2012. The condition in this policy is as follows:
“the policy shall pay for hospitalisation expenses for medical/surgical treatment at any nursing home/hospitals in India as an in patient in the policy.”
“In the event of a claim under the policy exceeding ₹ 1 lakh or a claim for refund of premium exceeding ₹ 1 lakh, the insured will comply with the provisions of the AML policy of the company. The AML policy is available in all our operating offices as well as companies website.”
“We at Oriental cat that continuously strive to ensure that you get the best possible treatment from our network hospitals. Please contact your TPA or any of the Oriental offices for our preferred hospitals in your area before going for a treatment. This will help us serve you in the best possible manner.”
Now we do not see any exclusion clause in this policy which was given to the insured person. There is no declaration on the part of the insurance company regarding the exclusion clause. In the policy condition only it has been written that the policy shall pay for hospitalisation expenses for medical/surgical treatment at any nursing home/hospitals in India. So there is no such differentiation of the disease in the opening paras of this policy. If anything is hidden in any condition and terms of the company’s policy, the insured is not liable for that because whatever shown to him was this policy and the condition mentioned there in. The policy is for hospitalisation and medical/surgical treatment. The treatment of hypertension is a medical treatment so the company cannot escape from its library in the garb of any hidden act clause. In the insurance policy it has been written that the insured will comply with the provisions of the AML policy but nowhere the aim of policy has been described. Same it has been written in the policy that contact your TPA or any of the rental offices for our preferred hospitals. Why the names of the preferred hospital not given the policy? These are the shortcomings of the policy which is in English language and there is no declaration that the insured English very well and can understand English. In this regard we have to see the English law on the subject.
In the present age the dimensions of the problems are increasing and this is due to standard form contracts. For example Life Insurance Corporation entered into thousands of contracts per day and so the condition is of Railway Department. For such a big corporate or business organisation, it is not possible to enter into contract/agreement with each and every person, therefore they got the contract printed containing so many conditions in very small words which is hardly to read. These conditions restrict their liability or limit their responsibilities. With such a big corporate, no one can bargain therefore the only option for them is to accept it whether good or not. Hon’ble Lord Denning held in the case of Sharn B Vs Shoe Lane Parking Ltd (1971) 1 All ER 686 CA – “not only a single consumer from the thousands ever read such conditions . If he would have sit to read it, he would have missed his train or ship.”
From this the big corporates get the opportunity to take benefit of the weakness of general public because they can impose such conditions on them which looks like personal laws. By which they get complete exemption from the liabilities arising out of such contracts. Under such conditions the courts have to accept that the persons putting their signatures on such conditions bind themselves by these conditions. This Rule is famous in the Name of L Estrange VS Graucob Ltd , 1934 All ER 16.
One woman named ‘L’ put their signature on a contract without reading it and purchased a cigarette vending machine. By the conditions of the contract exemption was taken from all the defects of the machine. the machine proved to be complete useless. The Court came to the conclusion that the vendor did not take any pain to bring such serious conditions in the knowledge of Mrs L but in spite of this, the decision taken that if signature has been put on the contract if there is no fraud or misrepresentation, the person putting his signature becomes bound by it and it is immaterial whether he has read the document or not.
Later on the court came to think about it and came to the conclusion that reasonable notice should be given to the person to whom he is entering into a contract. this principle was inaugurated in Handerson Vs. Stevenson, (18750 32 LT 709 by House of Lords. In this case a person purchased a ticket for voyage . On the top of the ticket it was printed “Dublin to white heaven”. There were some conditions on the backside of the ticket in which one is related to the luggage of the passengers which it that due to damage of the luggage is of the passengers the company will not be liable. Neither the plaintiff saw the back of the ticket nor there was any warning on the front of the ticket for going through the conditions which were printed on the back of the ticket. Due to careless attitude of the employees, the legacy of the plaintiff was destroyed. In spite of the exemption clause, the company was held liable. The House Of Lords said that plaintiff could not be held binding by such conditions which he had never seen, about which he had no knowledge and which are not related to the text printed on the front of the ticket. The result of this case would be otherwise if it would have been printed on the front of the ticket that kindly see the back of the ticket for conditions. Offer is sufficient when the general public came to know that there are some conditions on the ticket. This aspect was specifically discussed in Parker Vs South Eastern Railway Co. , (1877) 2 CPD 416 . In this case the plaintiff deposited his luggage in the cloakroom of a luggage railway company. He was given a ticket. On the front of the ticket it was printed that see the back of the ticket and there were some conditions out of which one was it that the company had no responsibility on the loss of any article having more than £ 10. The luggage of the plaintiff lost. The company to the defense of this condition. The plaintiff said that he realized that something is printed on the ticket but he did not read it. The court held that the plaintiff knew that there are some conditions so he cannot take plea that he has no knowledge of the conditions.
The offer of a general proposal should be clear and if there is/ are any conditions, should be either printed in bold letter or in red letters or there may be a warning on the front of the page that kindly go through the condition number so and so which is very important for the contract. In the printed policy of life insurance, there are so many conditions in very little font that no one goes through these conditions and also the agent working on behalf of the life insurance company never takes pain to disclose these conditions to the policyholder. It is the duty of Life Insurance Corporation that he should tell such conditions to the policyholder at the time of entering into an agreement because the proposal should be clear so that he may accept it according to his free will.
Now we have to see the following judgement and article injection to the Hon’ble Supreme Court judgement pronounced on 9 November 2022.
M/s Texco Marketing Pvt. Ltd. Vs. TATA AIG General Insurance Company Ltd. & Ors., Civil Appeal no.8249/2022 (Judgment 09.11.2022) [Arising out of SLP (Civil) No. 25457 of 2019]
INTRODUCTION
In a recent decision in M/s Texco Marketing Pvt. Ltd. v TATA AIG General Insurance Company Ltd. & Other, the Hon’ble Supreme Court of India (SC), 2022 SCC OnLine SC 1546, whilst adjudicating a dispute in relation to an insurance claim, analyzed the validity of exclusion clauses which run contrary to the object of the main contract.
It was observed that such contracts, for instance insurance contracts, are usually one sided and in the form of adhesion contracts or standard form contracts in which the insurer being the dominant party dictates the terms and conditions leaving the insured with very little choice and/or bargaining power in which the insured can only either accept the same or leave it.
Thus, in the present judgement, the SC highlighted the duty of insurance companies to disclose all material terms of the policy to the insured, in accordance with the Insurance Regulatory and Development Authority (Protection of Policyholders’ Interests) Regulations, 2002 (Regulations) and the doctrine of ‘uberrimae fidei’ or utmost good faith.
BACKGROUND
On 28 July 2012, Texco Marketing Pvt Ltd (Appellant) obtained a standard fire and special perils policy (Policy) from TATA AIG General Insurance Company Limited (Respondent) (the Appellant and the Respondent are collectively referred to as Parties) for its shop situated in the basement of a building. The Policy was issued after due inspection of the shop by the Respondent. However, the exclusion clause of the Policy specified that it does not cover the basement. In addition to this shop, the Respondent had insured another shop of the Appellant which was similarly situated in the basement. The Appellant paid the premium on time and also gave notice of an additional construction taking place in the shop which was also inspected by the Respondent.
Subsequently, the shop met with a fire accident and the Appellant raised a claim for the same under the Policy. The Surveyor appointed by the Respondent to assess the claim realized that the Respondent was aware about the shop situated in the basement due to earlier inspections conducted by it. Placing reliance on the exclusion clause in the Policy, the Respondent denied the Appellant’s claim.
The Appellant challenged the denial of its claim. The State Consumer Disputes Redressal Commission (SCDRC) passed an order rejecting the Respondent’s contention holding that there was no adequate disclosure and as such the Respondent was deficient in service and indulged in unfair trade practice. In the appeal filed before the National Consumer Disputes Redressal Commission (NCDRC), the NCDRC, setting aside the decision rendered by the SCDRC, upheld the exclusion clause of the Policy while granting a sum of Rs. 7.5 lakhs to the Appellant for deficiency in service. Hence the present appeal before the SC.
QUESTION FOR CONSIDERATION
Whether an exclusion clause in a contract can be used by a party who knowingly entered into the contract, introduced the clause and became a beneficiary, and then avoids its liability by placing reliance on the clause?
DECISION OF THE SC
- The SC laid emphasis on wide array of judgements to hold that an exclusion clause cannot be relied upon by the Respondent when they are inconsistent with the main purpose for which the contract was entered into by the Parties. SC relied on the ‘main purpose rule’ which essentially states that regard must be given to the main purpose of the contract and clauses inconsistent with the main purpose must be read down. SC also noted that when exclusion clause “is destructive to the main contract, right at its inception, it has to be severed, being a conscious exclusion, though brought either inadvertently or consciously by the party who introduced it.” In furtherance of this, the SC also invoked the ‘Doctrine of Blue Pencil’ which examines treatment and existence of those clauses which are repugnant to the main contract and can be done away with, while retaining the other terms, as such repugnant clauses are detrimental to the execution of the main contract and defeat the very objective of the contract.
- The SC upheld the prime importance of principles of good faith which is found in the legal maxim ‘uberrimae fidei’ and how the same should be maintained and kept in mind by the Parties entering into an insurance contract which is a special contract intended to benefit a consumer. The SC opined that the Respondent has a duty towards disclosing material facts and furnishing a copy of the exclusion clause to the Appellant which makes the contract unenforceable on the date on which it is executed. In case a due procedure of fairness is not followed by the Respondent, the exclusion clause should be treated as non-existent. For the benefit of an insurance contract, the term ‘material fact’ was ascertained to mean any fact which has a bearing on the insurance contract and the risk covered under the same.
- The SC ruled against the decision of the NCDRC stating that they did not consider the aspect of duty to disclose which should have been followed by the Respondent. In fact, the Appellant was not made aware about the terms of the exclusion clause which were in fact taken under scrutiny by SCDRC.
- The SC considered clauses 3(2) and 3(4) of the Regulations to analyse the Respondent’s duty to disclosure of material information regarding the policy to the Appellant along with Respondent’s duty of attaching a certificate at the end of the proposal form declaring that the contents of the policy have been explained to the Appellant properly and the Appellant understands the significance of the proposed contract fully.
- The SC also highlighted clause 4 (Proposal of Insurance) of the Regulations which casts a duty on the Respondent to present a copy of the proposal form, free of cost to the Respondent within 30 days of their acceptance.
- The SC while discussing the ambit of various sections of the Indian Contract Act 1872 (ICA) held that a voidable contract (as defined under section 2(i) of ICA) i.e., a contract enforceable at the instance of one party but not at the option of others if consented to fraudulently (as defined under section 17 of ICA) or by misrepresentation (as defined under section 18 of ICA) becomes voidable at the option of the party whose consent was obtained through such means (as defined under section 19 of ICA). It was held that once it is proved in the court of law that fraud or misrepresentation existed at the time of the execution of the contract by suppressing the existence of an exclusion clause, in such scenarios, relief will be granted to the party who has been aggrieved by such fraud and/or misrepresentation.
- SC further noted that NCDRC and SCDRC under section 58 (Jurisdiction of National Commission) and section 47 (Jurisdiction of State Commission) of the Consumer Protection Act 1986 (CPA 1986) are empowered to not only identify an unfair contract but also to examine the issues regarding the terms of the contract and decide if they are unfair (under section 46 of CPA 2019) and conclude that an unfair trade practice has been adopted (under section 2(1)(r) of the CPA 1986 and under section 47 of CPA 2019) which has caused grave injustice to the consumer for which relief will be granted.
- In conclusion, the SC issued a ‘word of caution’ to all the insurance companies to comply with the Regulations which mandate fair and open disclosure of all material terms of the policy, non-compliance of the which will leave the insurer remediless when denying and/or rejecting a claim.
CONCLUSION
The judgment reiterates the importance of harmonious interpretation of inconsistent clauses in a contract with specific attention to the main purpose of the contract. In light of the said principles, the judgment decides the enforceability of exclusion clauses, which are usually for the benefit of one party and may be onerous on the other party, especially when proper notice of the presence of such exclusion clauses is not provided.
Moreover, it comes as a landmark judgement in the field of insurance law as insurance contracts which fall under the umbrella of adhesion contracts are usually one-sided, nonnegotiable and bind unwitting consumers to fine print terms, leaving the latter remediless and absolving such insurance companies from their liability to pay.
So, in the present case the insurance company is liable to pay the amount incurred on the treatment of the insured person. The insurance company cannot escape from its liability. The judgement of the learned District Forum needs no interference from this court. The present appeal is liable to dismissed with cost.
ORDER
The appeal is dismissed with costs. The judgment and order dated 19.01.2018 passed by the Learned District Consumer Forum, Ghaziabad in complaint case no.417 of 2015, Deepak Goel Vs. Oriental insurance Co. Ltd. is hereby confirmed.
If any amount is deposited by the appellant at the time of filing of this appeal under section 15 of the Consumer Protection Act, 1986, may be remitted to the ld. District Consumer Forum concerned as per rules alongwith accrued interest upto date.
The stenographer is requested to upload this order on the Website of this Commission today itself.
Certified copy of this judgment be provided to the parties as per rules.
(Vikas Saxena) (Rajendra Singh)
Member Presiding Member
Judgment dated/typed signed by us and pronounced in the open court.
Consign to record.
(Vikas Saxena) (Rajendra Singh)
Member Presiding Member
Dated 30.1.2024
JafRi, PA I/Court 2
