BEFORE THE A.P. STATE CONSUMER DISPUTES REDRESSAL COMMISSION

AT HYDERABAD.

F.A. 1143/2008 against C.C.  99/2005, Dist. Forum, Nellore

Between:

R. Venkatramaiah,  S/o. Ramachandraiah       

R/o. 24/308/2 AB, Military Colony,    

Nellore-4                                                      ***                         Appellant/

                                                                                                Complainant

                                                                   And

1)  The Senior Branch Manager

LIC Of India, Branch Office-I

Brindavanam, Nellore

2)  The Divisional Manager

LIC of India, Divisional Office

Dargamitta, Nellore.                                    ***                         Respondent/

                                                                                                O.Ps. 

Counsel for the Appellant:                          M/s.  V.G. S. Rao

Counsel for the Resps:                                M/s. N. Mohan Krishna 

CORAM:

                         HON’BLE SRI JUSTICE D. APPA RAO, PRESIDENT     

&

                                        SMT. M. SHREESHA, MEMBER

MONDAY, THIS THE FIRST DAY OF NOVEMBER TWO THOUSAND TEN

Oral Order: (Per Hon’ble Justice D. Appa Rao, President)

                                                          *****

1)                Appellant is unsuccessful complainant.

2)                The case of the complainant in brief is that the respondent insurance company issued a policy for Rs. 50 lakhs initially covering a period of 15 years from 11.10.2000  by collecting annual premium of Rs. 5,48,427 after satisfying with his health condition on his furnishing various medical reports pertaining to his health.  He revealed  that he underwent angiogram during April, 1986 for coronary artery disease class-II angina atypical with hyperlipidaemia.    In the year 2002 he could not pay the premium due to his unexpected financial difficulties and when his financial condition had improved in March, 2005 he sought for revival of the policy.     The insurance company sought for medical examination as a pre-condition.    He submitted medical reports wherein there was no variation.    R2 had agreed to revive the policy subject to payment of penalty of Rs. 2, 37,111/- apart from regular annual premium with arrears.  On that he expressed his willingness to pay.   However, Senior Branch Manager without any reason declined to revive the policy.    Since the revival was not made without any justification he sought for revival of the policy or refund Rs. 10, 96,854/- paid by him towards premium together with interest, compensation and costs.

3)                 The insurance company resisted the case.    When the complainant  expressed his desire for  taking insurance policies,   and after  considering his health condition   this coverage period was curtailed  to 12 years as against 15 years on payment of extra premium  at  7.5% over and above regular premium since potential  health risk  transparently surfaced  from the medical reports   and the policy was issued   on 11.10.2000 on the above said basis.    Since admittedly the policy has been lapsed,  revival could be  made, within a period of five years from the date of first unpaid premium and before the date of maturity subject to satisfaction of the Corporation.    It has every right either to accept or reject revival.    Condition No. 4 stipulates that  “ if after at least three full years premium have been paid in respect of the policy, any subsequent  premium be not duly paid, the policy shall not be wholly void, but the sum assured  by it shall be reduced to such  a sum as shall  bear the same ratio  to the full sum assured.”    Since the complainant did not pay for full three years premium he was not entitled for revival of the policy or surrender value.    The expert committee considered the case of the complainant and found that the policy of the complainant could not be revived in view of his medical health record.    The Medical Officer at Central Underwriting Section at Mumbai confirmed the abnormality observed in the assured’s stress test and opined disinclination to accept  risk resulting  rejection of the revival.    The revival of the lapsed policy can only be subject to certain limitations in satisfaction of the corporation as per the conditions of the contract of insurance and therefore the complainant was not entitled to any amount.    Therefore it prayed for dismissal of the complaint with costs. 

4)                 The complainant in proof of his case filed his affidavit evidence and got Exs. A1 to A7 marked while the insurance company filed Exs. B1 to B18. 

5)                 The Dist. Forum after considering the evidence placed on record opined that by virtue of Condition No.  4 & 5 the complainant was not entitled for refund of premiums paid by him nor could establish deficiency in service on the part of insurance company and therefore dismissed the complaint. 

6)                 Aggrieved by the said decision, the complainant preferred the appeal contending that the Dist. Forum did not appreciate either facts or law in correct perspective.  It ought to have seen that  the respondent insurance company declined to revive the policy under condition No. 3 arbitrarily.   It ought to have seen that the complainant had satisfied the insurance company by undergoing necessary medical tests and expressed his wiliness to pay the arrears with penalty for revival of policy.   It ought to have directed the insurance company either to revive the policy or refund premium of Rs. 10, 96,854/- paid by him. 

7)                 The point that arises for consideration is whether the order of the Dist. Forum is vitiated by mis-appreciation of fact or law?

8)                It is an undisputed fact that the respondent insurance company has issued medical endowment assurance policy with profits for a sum of Rs. 50 lakhs covering the period from 28.9.2000 to 28.9.2012.  If the assured dies before maturity it  would pay  sum assured + vested bonus.  The policy was issued evidently after satisfying with his health condition despite the fact that he has intimated about his ailment class-II angina atypical with hyperlipidaemia.  He was directed to appear before panel doctor of LIC   on 13.6.2000 where he underwent Electrocardiogram, urine analysis, blood screening test, special bio-medical test, X-Ray of chest etc.  They revealed no abnormality.    The policy was given for 12 years instead of 15 years.    While accepting the proposal they made a mention modifying the risk coverage period from 15 years to 12 years on payment of extra premium at 7.5% over and above regular premium.  Admittedly the complainant had paid premium for 2000-2001.  For 2002 he could not pay the amount, according to him due to financial difficulties.   In the year 2005 the complainant sought for revival of the policy.  The insurance company  while agreeing to renew it sought repeat medical examination as a pre-condition for revival.    Accordingly he submitted the test reports of ECG, Treadmill test, urine analysis, chest X-Ray  Hamogram etc.  Despite the fact that  no abnormality was detected the insurance company alleges that record was forwarded to  Central Office, Mumbai where  a panel of experts  at Mumbai decided not to revive the policy.    Except alleging  the said fact in the counter the insurance company for the reasons best known,   did not file this report nor  filed the affidavit evidence of  those experts  who opined not to revive the policy.    The insurance company pleads  that to revive it or not  is in their discretion, and the complainant has no say  in that.    The said contention has no basis  in the light of the  decision of the Supreme Court  in  

Biman Kishore Bose Vs. United India Insurance Company Ltd. reported in 2001 (3) CPJ 10 SC held:   

“A renewal of an insurance policy means repetition of the original policy. When renewed, the policy is extended and the renewed policy in the identical terms from a different date of its expiration comes into force. In common parlance, by renewal, the old policy is revived and it is sort of a substitution of obligations under the old policy unless such policy provides otherwise. It may be that on renewal, a new contract comes into being, but the said contract is on the same terms and conditions as that of the original policy. Where an Insurance Company which has exclusive privilege to carry on insurance business has refused to renew the medi-claim policy of an insured on extraneous and irrelevant consideration, any disease which an insured had contacted during the period when the policy was not renewed, such disease cannot be covered under a fresh insurance policy in view of the exclusion clause. The exclusion clause provides that the pre-existing diseases would not be covered under the fresh insurance policy. If we take the view that the medi-claim policy cannot be renewed with retrospective effect, it would give handle to the Insurance Company to refuse the renewal of the policy on extraneous consideration thereby deprive the claim of insured for treatment of diseases which have appeared during the relevant time and further deprive the insured for all time to come to cover those diseases under an insurance policy by virtue of the exclusion clause. This being the disastrous effect of wrongful refusal of renewal of the insurance policy, the mischief and harm done to the insured must be remedied. We are, therefore, of the view that once it is found that the act of an Insurance Company was arbitrary in refusing to renew the policy, the policy is required to be renewed with effect from the date when it fell due for its renewal.”

9)                 Having collected  Rs. 10,96,854/- towards premium for two years,  and when the complainant sought for revival  of the policy, the insurance company having  favourably responded  by asking him to submit medical reports  and when  in  a  good faith he had responded  and submitted his medical reports disclosing that his health condition was good and had no abnormality the insurance company by  recoursing   to  condition No. 3  cannot deny  revival.”   It cannot act arbitrarily.  It has acted malafidely.     He was denied even  payment of premium  paid for a period of three  full years.   By that date,  he had  survived for  five years  from the issuance of policy.    It could have taken the premium,   by which date  he could have fulfilled payment of  the premiums, and could have got the advantage of condition No. 4.    He could have got  sum assured as contemplated under section 4  which we have  already mentioned above.

10)               At the cost of repetition, we may state that  the insurance company has  a right to accept or decline revival of  discontinued  policy  albeit on justifiable grounds.    After all condition No. 3  mandates revival of  the policy  if the policy was  lapsed, during  the life time of the assured but within a period of five years  from the date of first  unpaid premium and before the date of maturity on submission of proof of continued insurability to the satisfaction of the corporation and the payment of all arrears of premium together with  interest  at such rates as may be fixed by the corporation from time to time compounding half-yearly.    When the complainant has complied the request to send the medical reports a  pre-condition  for revival of the policy, the insurance company in its turn  declined to revive the policy  without furnishing  any substantial grounds.    Having asked the complainant to submit medical reports and when he submitted the reports  indicating his good health and if the insurance company suspects genuineness of it, could have asked submit himself before  a panel of doctors  which it had done while  taking the policy.    The very same yardstick   could  have  been  applied  for  revival of  the  policy.    

The insurance company having collected Rs. 10,96,854/- towards premium cannot appropriate the amount,  on  specious reasons and laconic reading of condition No. 4.    The contract of insurance is based on doctrine of Ubremia fides.   It does not mean  that the good faith should be   on the part of the complainant only.  It should equally apply to the insurance company.   Since the insurance is in the realm of service, literary construction of conditions of the policy may not convey true meaning.  Therefore, we hold that non-revival of the policy  was unjustified.    At least it could have considered proportionate refund of the amount  in case of its dis-inclination to revive policy by applying the very same yard stick  as was mentioned in Condition No. 4.  Therefore we hold that the complainant is entitled to refund of  amount.   However in view of the fact that the policy expired  in not paying the premium,  for whatever reason, we are not inclined to award any interest, compensation or costs.

11)               In the result the appeal is allowed  setting aside the order of the Dist. Forum.  Consequently the complaint is allowed in part directing the insurance company to pay  Rs. 10,96,854/-.  However, no costs.  Time for compliance four weeks. 

1)      _______________________________

PRESIDENT                 

2)      ________________________________

 MEMBER           

   Dt.  01.  11.   2010.

*pnr

“UP LOAD – O.K.”