F.A.No.993 OF 2011 AGAINST C.C.NO.10  OF 2011 DISTRICT FORUM-II TIRUPATHI

Between:

Moodukulam Devibai
W/o late M.Thirupal Nayak
22-6-332, Mangalam
Sri Venkateswara Colony

Tirupati, Chittoor District

                                                                Appellant/complainant

          A N D

1.     SBI Life Insurance Company Ltd.,
        Central Processing Centre
        rep. by its authorized Signatory
        Kapas Bhavan, Plot No.3A,
        Sector No.10, CBD Belapur
        Navi Mumbai-614

2.     SBI Life Insurance Company Limited
        20-1-171, CYVS Tower, Korlagunta Junction
        Tirupati

                                                                          Respondents/opposite parties

Counsel for the Appellant                     Sri M.Hari Babu

Counsel for the Respondents                Sri G.Anand Kumar

QUORUM:   HON’BLE SRI JUSTICE D.APPA RAO, PRESIDENT

                                                AND

SRI R.LAKSHMINARASIMHA RAO, HON’BLE MEMBER

WEDNESDAY THE TWENTY EIGTH DAY OF DECEMBER

                                TWO THOUSAND ELEVEN

Oral Order (As per Sri R.Lakshminarasimha Rao, Hon’ble Member)

                                             ***

1.         The unsuccessful complainant is the appellant.  The appellant’s husband during his life time obtained SBI Life Insurance Policy bearing no.1011229806 for a period of 20 years commencing from 26.3.2008 and concluding on 26.3.2028.  The sum assured is `2 lakh and the premium payable quarterly on 26/3, 26/6, 26/9 and 26/12 of every year.  The appellant’s husband paid the premium upto 26.12.2009 totaling to `31,132/-  The next premium due date was 26.3.2010.  On 26.4.2010 the respondent insurance company intimated that the policy was lapsed and it can be revived on payment premium of `3,827/- payable by 26.5.2010, `7,335/- by 26.6.2010, `7,370/- by 26.7.2010, `7475/- by 26.8.2010 and `11,118/- by 26.9.2010.  The appellant’s husband died on 5.5.2010.  After the death of her husband the appellant informed the respondent insurance company and lodged claim which had gone unresponded compelling her get issued notice through her advocate on 24.9.2010 for which the respondent insurance company replied on 11.10.2010. 

2.     The version of the appellant is that her husband paid the premiums regularly upto 26.12.2009 and the respondent insurance company issued renewal premium intimation for the quarterly premium due on 26.3.2010 as also the intimation dated 26.4.2010 about the policy “moved into lapsed status” .

3.     The respondent insurance company resisted the claim on the premise that the advance payment of premium under the insurance policy is contractual and legal mandate for continued assumption of risk under the insurance policy. The appellant’s husband did not pay the premium due on       26-03-2010 and as such the insurance cover under the policy was in lapsed status as on the date of death of the insured. Under Schedule III, Terms and Conditions clause number 2, a grace period of 30 days is allowed for payment of the quarterly premium and if the premium is not paid before the expiry of the grace period, the policy will automatically lapse. As the policy was in lapsed condition, nothing is payable to the appellant under the insurance policy.

4.     The appellant has filed her affidavit and the documents, ExA1 to A12   .On behalf of the respondent insurance company, S.Srinivas, Head-Legal filed his affidavit and the documents, ExB1 to B11.5

5.     The District Forum dismissed the complaint on the premise that the policy holder died after the grace period and by the date of his death the insurance policy was in lapsed condition.

6.     Aggrieved by the order of the District Forum, the complainant filed the appeal contending that the respondent insurance company has contended time to her husband to pay the premium till 26-05-2010 and unfortunately he died on 5-05-2010 and as such the respondent insurance company is liable to pay the sum assured under the insurance policy. It is contended that the appellant’s husband paid excess amount of `3,473/- which was not adjusted towards the premium due on 26-03-2010 and the appellant’s husband acquired bonus of `6,000/- as on 26-03-2010 which should have been adjusted towards the premium due. Even if it is presumed that the policy was in lapsed condition as on the date of death of the insured, the respondent insurance company is liable to pay the paid up value to the appellant.

7.     The point for consideration is whether the respondent insurance company is liable to pay the sum assured /paid up value under the insurance policy?

8.     The appellant’s husband, Thirupal Nayak during his life time obtained SBI Life Insurance Policy for a sum assured of `2,00,000/- with the commencement of the policy from 26-03-2008 extending over a period of twenty years on payment of quarterly premium @ `3,827/-. The premium is payable on 26/3,26/6.26/9 and 26/12 of every year. The appellant’s husband paid the premium up to 26-12-2009 totaling to `31,132/-. The next premium due date was 26-03-2010. The appellant’s husband died after the due date for payment of the premium as also after the expiry of the grace period. Therefore, the policy was moved into lapsed status as on the date of death of the appellant’s husband.

9.     Clause 2 of Schedule III of the terms and conditions of the insurance policy gives the details of the mode of the payment of the premium and the effect of nonpayment of the premium within the stipulated time. The clause reads as under:

“A grace period of 30 days will be allowed for payment of quarterly/half yearly premiums and a grace period of 15 days will be allowed if the premiums are paid monthly. Where premiums are paid monthly, three months’ premium will be payable as a lumpsum, in advance, at inception of the Policy. If the premium is not paid before the expiry of the days of grace, the Poicy will automatically lapse…..”. The appellant’s husband failed to make the payment of the premium within the grace period and the policy got lapsed.

10.    The National Commission in  R.P.No.211 of 2009 in “Reliance Life Insurance Company Ltd vs Madhavacharya” decided on 2-02-2010 placed reliance upon the decision of the Hon’ble Supreme Court in “General Assurance Limited vs Chandumall Jain and another” (1996)3 SCR 500 wherein the Apex Court held that in interpreting the terms of the insurance policy, the words in which contract is expressed  by the parties are to be interpreted and a new contract cannot be made by interpreting the words which do express the intention of the parties. The policy was lapsed as per the terms and conditions which prescribe it to move into lapsed status in the event the premium is not paid within the stipulated period.

11.    Premium is the sole consideration of the insurance contract. As the premium was not paid, the insurance policy moved into lapsed status. If the  death of the insured occurs during the grace period, the respondent insurance company is liable to pay the sum assured under the insurance policy after deducting the unpaid premium. The appellant’s husband died after the grace period was expired.

12.    As per the Clause no.3 of the Schedule III of the Terms and Conditions of the Policy, the lapsed policy can be revived during the time it is in force and within five years from the due date of first unpaid premium on submission of evidence of health of the insured as also on payment of the arrears of the premium with interest. The revival of the insurance policy would be effective after the respondent insurance company communicates in writing to the insured. The appellant’s husband died without making payment of the premium due. The question of revival of the policy does not arise.

13.    The option for the payment of paid up value is governed by the terms and conditions mentioned at page no.4 of the policy which read as follows:

“(a) The policy will acquire a paid up value on completion of three policy years from the date of commencement of risk, provided all premiums due during the first 36 months have been paid in full, Paid up Value is available only for the basic plan and for not riders.

(b) The paid up value depends on the option selected, number of years premium has been paid and the Basic Sum Assured”.

14.    The   paid up value will be paid on payment of the premium for three years by the appellant’s husband. The appellant’s husband paid the premium for two years and thus no paid up amount can be directed to be paid to the appellant. In the circumstances, it is difficult to find the appellant entitled to any relief.  In the circumstances, the appeal does not warrant any interference with the findings recorded by the District Forum.

15     In the result the appeal is dismissed confirming the order of the District Forum.  There shall be no order as to costs.

                                                                                PRESIDENT

                                                                                  MEMBER

                                                                            Dt.28.12.2011

KMK*