Tamil Nadu

StateCommission

FA/130/2018

The Branch Manager, LIC of India - Complainant(s)

Versus

Mrs. B. Rajamani , W/o. R. Balakrishnan - Opp.Party(s)

M.B. Gopalan & Asso.

20 Apr 2022

ORDER

 

IN THE TAMIL NADU STATE CONSUMER DISPUTES REDRESSAL COMMISSION, CHENNAI.

 

Present: Hon’ble Thiru Justice R.SUBBIAH                                                                    ... PRESIDENT

                  Thiru.R.VENKATESAPERUMAL                                                                … MEMBER

 

F.A. No.130 of 2018

(Against the Order, dated 12.01.2017, passed in CC No.127/2005,

on the file of  the DCDRF, Chennai-South)

                                                    

                                                                                                                Orders pronounced on:     20.04.2022

            

The Branch Manager,

LIC of India,

CPO 29, South India Coop. Building,

No.38, Anna Salai,

Chennai 600 002.                                                                                                                    … Appellant / Opp. Party

 

vs.

 

Mrs.B.Rajamani,

W/o.R.Balakrishnan,

Near Peria Pavadi,

No.12/144,

Athanur Post,

Namakkal District 636 301.                                                                                                   … Respondent/Complainant

 

             Counsel for Appellant :M/s.M.B.Gopalan Associates

             Counsel for Respondent: Mr.K.Ganesan

 

          This First Appeal came up for final hearing on 15.02.2022 and, after hearing the arguments of both sides and perusing the materials on record and having stood over for consideration till this date, this Commission passes the following:-

 

O R D E R

 

R.Subbiah, J. – President.

 

 

               This Appeal has been filed against the Order, dated 12.01.2017, passed in C.C. No.127 of 2005 by the DCDRF, Chennai-South, whereby, the District Forum partly allowed the complaint filed by the respondent herein by holding that the Insurance Company/appellant herein has committed deficiency in service, and consequently directed them to pay the policy amount with interest to the complainant.

 

             2. For the sake of convenience, the parties are referred to in the course of this order as per their respective rankings before the District Forum.

 

          3. In brief, the case of the complainant, as given in the complaint filed before the District Forum, is thus:-

        On 12.08.1999, the son of the complainant/B.Sivakumar had taken Policy No.712575459 with the OP/Life Insurance Corporation of India (in short LIC) for Rs.5 Lakh and he made the complainant his nominee under the said policy.  Initially, although the premium payable was in quarterly instalments  for a sum of Rs.6,369/-, later, it was converted into half yearly instalment and the due for August, 2000, for a sum of Rs.12,535, was paid under the receipt, dated 30.08.2000, wherein, the next instalment due was mentioned as February, 2001. In the meanwhile, the Policy-holder, being a qualified software engineer, got employment in U.S. and, while he was working there from March, 2000, he suffered cardio-respiratory arrest and died on 07.07.2001.

        The OP is allowing the policy-holders to make payment of the yearly, half yearly and quarterly instalments till one month after the due date without charging interest and thereafter, they charge interest on the instalment amount upto six months.  After six months only, the policy lapses for non-payment of premium.  As such, the insured had time till August, 2001 to pay the instalment with interest, but unfortunately, he died during July, 2001, thus, it cannot be said that the policy lapsed due to non-payment of premium. The OP could have deducted the premium due for the last of the instalments and paid the balance of the policy amount to the nominee, as the OP has been doing in all other cases.  The complainant’s husband also lodged a complaint with the Office of the OP on 17.07.2001, but, by letter dated 23.08.2001, they informed him that the policy amount cannot be paid because the premium was not paid regularly.  But, the fact remains, all the instalments have been duly paid except the last instalment, for which also, there was time till August, 2001, within which, the death of the insured had occurred.  Therefore, the OP cannot deny payment on deceptive reasons.  The OP is bound to pay to the complainant the policy amount of Rs.5 Lakh after deducting the last instalment amount of Rs.12,355/-, with a sum of Rs.50,000/- towards causing mental agony besides the costs of the legal action.  Hence, she filed the complaint seeking the District Forum to direct the LIC/OP to pay her Rs.4,87,645/- with interest @ 18% p.a. from the date of the insured’s death till realization of the sum.   

 

          4. The OP/LIC resisted the same by filing a written version, wherein, among other things, it is stated thus:-

        The basic sum assured of the Policy taken by the insured is Rs.5 lakh.  The Policy is taken under Jeevanshree Plan, under which, a special benefit in the name of guaranteed additions of Rs.75 per thousand sum assured will be added to it at the end of each policy anniversary.  At the end of the first year itself, the policy has accrued an additional value of Rs.37,500/-.  This addition is part and parcel of the policy and this value cannot be restricted or escalated by the nominee.  Conveniently, the complainant did not mention about another Policy vide No.712576510 on the life of her son, on which also, the claim was rejected by the OP.  The deceased/life assured defaulted in payment of premium which fell due on 15^th February, 2001, and such factum is also admitted by the complainant.  Due to non-payment of premium amount, the policies got lapsed and the father of the deceased was so informed by letter dated 23.08.2001.  As per condition No.2, grace period of one month but not less than 30 days will be allowed for payment of yearly, half-yearly or quarterly premiums.  If death occurs within this period and before the payment of the premium due, the policy will still be valid and the sum assured will be paid after deduction of the said premium as also unpaid premiums falling due before the next anniversary of the policy.  If the premium is not paid before the expiry of the days of grace, the policy lapses.  In the present instance, the life assured had paid premium only till August, 2000, but, he had not paid the due for February, 2001, either on the due date or during the grace period of 30 days.  Hence, the Policy lapsed and the OP rightly rejected the claim. Thus, there is no deficiency in service; hence, they sought for dismissal of the complaint.

       

              5. Before the District Forum, both sides filed their respective proof affidavits and while, on the side of the complainant, 10 documents were marked as Exs.A1 to A10, the OP marked 4 documents as Exs.B1 to B4.  By the impugned order, dated 12.01.2005, the District Forum allowed the complaint in part by directing the OP to pay Rs.4,87,645/- towards the policy amount with interest @ 12 p.a. from the date of the complaint till the date of the order, and also Rs.15,000/- as compensation for the mental agony/deficiency in service, besides a sum of Rs.10,000/- towards costs. Aggrieved thereby, the OP/LIC has come up with the present First Appeal.

 

             6. Learned counsel for the LIC/OP would point out that, initially, the Policy-holder was paying the premium on quarterly basis ie., Rs.6,369/- and from August, 2000, it was converted to half yearly premium of Rs.12,535/-.  While so, during February, 2001, there was a default in paying the premium and the policy got lapsed after expiry of 30 days grace period on 31.03.2001.  After so pointing out, learned counsel would submit that, when the grace period of 30 days is available, if anything happens to the policy holder within the said grace period, the Insurance Company is liable to settle the claim and if it is after the grace period, there would be no liability on the Insurance Company. When there is no grace period beyond 30 days, the presumption of the complainant that they had time till August, 2001, to pay the premium amount with interest is absolutely baseless.  With regard to the grievance of the complainant that the LIC failed to send a reminder/notice as mandated under Section 50 of the Insurance Act, 1938, learned counsel would submit that the said Provision itself is very specific that such reminder or notice whatsoever is absolutely not required if the Policy itself contains the terms regarding the options available to the insured in the event of lapse of the policy, since it says ‘unless these are set forth in the Policy”.  According to him, since the Policy itself contains the options, when the premium is admittedly not paid within the grace period, no obligation arose for the LIC to send a notice under Section 50 of the Act.  He added that the purpose behind Section 50 is only to communicate the options of revival when not stated in the policy and, in the instant case, condition No.3 of the Policy contains the options for revival available to the policyholder to revive the policy and also the terms of revival, hence, such necessity never arose.  While so, without even properly scrutinizing the facts, the District Forum rushed to allow the complaint on extraneous reasons, thus, the impugned order warrants interference by this Commission and the appeal may have to be allowed, he pleaded. 

 

             7. Per contra, learned counsel for the complainant submits that the basis of insurance coverage under a life insurance policy is on a year-to-year basis and the modes of premium payment viz., monthly, quarterly, half yearly and annual, have been devised only for the convenience of the life assured and the premium unpaid and pending for the particular year at the time of the death of the life assured shall be deducted from the death benefit payable to the nominee and, in this case also, the second half-yearly premium of Rs.12,535/- payable during the year of death shall be deducted from the claim amount payable and adjusted towards the unpaid half-yearly premium that fell due on 15.02.2001.  That being so, the  LIC overlooked this provision of the policy contract and repudiated the claim preferred by the complainant.  Even otherwise, it is the bounden duty of the LIC to send a notice to the life assured as mandated under Section 50 of the Insurance Act, 1938, but they miserably failed to adhere to the said legal provision and thereby, caused deficiency of service, for which reason, the LIC is bound to allow the claim filed by the complainant in respect of the sum assured to be paid under the Policy in question.  Non-issuance of such notice by the LIC virtually vitiated the ultimate repudiation and as such, they cannot succeed in the present Appeal also, he argued.

            

             8. Having regard to the above rival submissions, the only question that arises for consideration is as to whether, in the given circumstances, non-intimation on the part of the LIC about lapsation of the policy & options for revival/terms of revival, prior to the due date, would amount to failure in adherence to Section 50 of the Insurance Act, 1938 or not.

       In this regard, at the first instance, it would be appropriate to quote below  Section 50 of the Insurance Act, 1938:-

       “50. Notice of options available to the assured on the lapsing of a policy.—An insurer shall, before the expiry of three months from the date on which the premiums in respect of a policy of life insurance were payable but not paid, give notice to the policy‑holder informing him of the options available to him, unless these are set forth in the policy.”

A plain reading of the above provision, in particular, the wordings employed therein to the effect ‘unless these are set forth in the policy’  would make it clear that, if the “options for revival/terms of revival” available to the policy-holder have already been incorporated/set forth in the policy, there is no need to send a prior communication/notice to the Insured with regard to expiry of the policy.  In other words, the mode available in Section 50 of the Act would come into play only when the options of revival available to the insured in the event of lapse of the policy, are not incorporated/made available in the Policy and never, it can be misconstrued to treat a lapsed policy as continuing in force when premium has not been paid by the Policy Holder to continue the risk.  The insurer cannot remain on risk and pay benefits without the premium being paid by the policy holder.  In this context, the National Commission, in Laxmi Bai vs. Bajaj Allian Life Insurance Co. (2015 SCC Online NCDRC 3364), has categorically held that, in view of availability of conditions in the Policy, Section 50 cannot be applied so as to make the Insurer liable when the premium is not paid and the policy has lapsed.  It would be apt to extract below the relevant portions from the said decision :-

            “8.      Admittedly, the OP Insurance Company did not issue any notice under the aforesaid provision.  The stand taken by the Insurance Company is that there was no need to issue such notice as the options available to the insured are already mentioned in the policy document.  In accordance with condition 12(b)(2) of the Policy, a policy-holder is entitled to get the policy revived within a revival period of 2 years from the due date of first unpaid regular premium, subject to certain conditions laid down in clause 34.  As per these conditions, a written application for revival has to be submitted and all due unpaid regular premiums have to be paid and evidence of insurability satisfactorily has to be furnished.  In the instant case, however, no such application was submitted during the life time of the deceased insured.  With the death of the insured on 06.11.2009, the policy had terminated and before that, the policy lapsed due to non-payment of premium due in July 2009 even within the prescribed grace period.

9.      Based on the discussion above, we tend to agree with the contention raised by the learned counsel for the OP Insurance Company that since the options available to the insured had been set-forth in the policy itself, there was no necessity of issuing a notice under section 50 of the Insurance Act, 1938, specifying the options available to the insured in the event of lapse of the said policy.  This view is also supported in a judgment delivered by the Assam High Court in L.I.C. of India & Ors. vs. Omprakash Agarwalla, AIR 1977 Gauhati 11, in which it was held as follows:-

‘It is found that the options that are available to the insured are incorporated in the policy itself.  Notice under Section 50 of the Act is obligatory if options available to the policy-holder are not set forth in the policy.’ “

In the instant case also, condition No.3 of the policy similarly contains the options for revival available to the Policy Holder to revive the policy and also the terms of revival, thereby, the mode under Section-50 of the Act was never attracted for intimating the policyholder with regard to revival of the policy.  However, without looking into such vital aspect, the District Forum has come to the conclusion that there was deficiency of service on the part of the LIC and erroneously allowed the complaint, which order, in our considered opinion, cannot be legally sustained.

 

             9. In the result, the First Appeal is allowed, by setting aside the impugned order, dated 12.01.2017, passed by the DCDRF, Chennai-South, in C.C. No.127 of 2005.

 

 

R.VENKATESAPERUMAL                                                                                                                   R.SUBBIAH, J.

MEMBER                                                                                                                                                  PRESIDENT.

 

 

Index     :    Yes   /  No.

 

ISM/TNSCDRC/Chennai/Orders/Mar/2022.