Date of Filing : 17-03-2006 Date of Order : 18-08-2009 IN THE CONSUMER DISPUTES REDRESSAL FORUM, KASARAGOD C.C.No.33/06 Dated this, the 18th day of August 2009. PRESENT SRI.K.T.SIDHIQ : PRESIDENT SMT.P.RAMADEVI : MEMBER SMT.P.P.SHYMALADEVI : MEMBER Rajeshwari Ballal, W/o.Late. Jagadish Ballal, R/at ‘Sree Vishnu’ Mulleria, } Complainant Po.Mulleria, Kasaragod.Dtistrict. (Adv. M.Narayana Bhat, Kasaragod) 1. The Senior Divisional Manager, Life Insurance Corporation of India, Divisional office, Jeevan Prtakash, P.B.No.177, } Opposite parties Kozhikode. 2. The Zonal Manager, Life Insurance Corporation of India, LIC Building, 102, Annasalai, P.B.No.2420, Chennai. 600 002. 3. The Branch Manager, L.I.C. Of India, M.G.Road, Kasaragod. (Adv. P.V.Jayarajan, Kasaragod) O R D E R SRI.K.T.SIDHIQ, PRESIDENT Anmol Jeevan is the name of policy involved in this case. That means ‘Precious Life’. The peculiarity of this policy is that unlike in the other policies the insurer need not pay any surrender value or paid up value on maturity of this policy to the assured. But during the currency of policy if the death of the assured occurs then the LIC has to pay the basic sum assured to the nominees or to the legal representatives of the assured. So when one who proposes under this scheme may have deep concern about his family and it may be in his mind that his family shall not be put in agony and dire straits due to financial insecurity in the event of his death. So also Sri. Jagadish Ballal may have thought in the same way and therefore proposed for Jeevan Anmol policy for a sum of Rs. 10,00,000/- as the Sum Assured. He submitted his proposal as early on 21-10-2003 and the medical records were submitted on 21-11-2003. But the L.I.C had withdrawn the said Jeevan Anmol plan 153 and therefore after presentation of the proposal & medical records to the medical referee the L.I.C had made a counter offer to the proposer to change the plan 153 to Jeevan Anmol 164. Since the mode of payment of premium under this plan was half yearly basis an additional amount of Rs.1525/- was required under this plan towards the first premium. The above requirements were called for vide letter dated 26-04-2004. Meanwhile the validity of the proposal and medical examination report expired and fresh proposal with medical report were called for vide letter dated 25-05-04. The above requirements as per letter dated 28-06-04 were submitted in the Kasaragod Branch office (OP3) on 6-7-04. These papers were sent to the first opposite party on 8-7-04. This proposal was accepted under plan 164 for a term of 20 years subject to certain conditions. Unfortunately Sri.Jagdesh Ballal lost his precious life in a Road Traffic Accident on 8-7-04. The policy documents evidencing contract was arrived at and issued by 3rd opposite party on 24-07-04. However, the date of commencement of policy was 28-06-04 and that of the risk was 21-7-04. The complainant lodged a claim before 2nd opposite party for the sum assured as per the policy. But it was rejected by the competent authority of opposite parties on the ground that the contract of insurance was not concluded on the date of death of the husband of the complainant. Against the rejection of her claim she preferred a petition before the Insurance Ombudsman on 19-12-05. The Ombudsman considering the petition as a complaint falls under Rule 12(1)(b) with Rule 13 of the Redressal of Public Grievances Rules 1998 held that there is no concluded contract between the deceased and opposite parties and therefore the complainant is not entitled for the sum assured i.e. Rs.10,00,000/- as per the Jeevan Anmol Policy. However considering the extenuating circumstances in the case that the complainant is a very young widow with a child of 5 years to look after and she is educated only up to Pre-Degree and unemployed Insurance Ombudsman took a compassionate view of her pitiable personal circumstances and was kind enough to grant an exgratia award of Rs.50,000/- to the complainant under Rule 18 of Redressal of Public Grievance Rules 1998. The Award was passed on 02-02-06. But the complainant without accepting the said amount filed this instant complaint. 2 The opposite parties reiterated their contention that there was no concluded contract on the date of death of Sri. Jagdish Ballal, and therefore the claim of the complainant was rejected. It is also stated that Sri.Jagdish Ballal has got 4 other policies on his life and the opposite parties accepted and honoured the claim under the said policies but they could not release the payment due to Garneshee order of the Munsiff Court. 3 Complainant filed affidavit and was cross examined by the counsel for the opposite party. Exts X1(a) to X1(c) and X2 to X5 marked. On the side of opposite parties Exts B1 to B9 marked. Counsel for the complainant filed notes of argument and the learned counsel for opposite parties Sri.P.V.Jayaraj was heard at length. Apart from the contention that there was no concluded contract on the date of death of Sri. Jagdish Ballal, the learned counsel for opposite parties advanced another defense that the complaint is not maintainable in view of the Award of the Insurance Ombudsman constituted under the Redressal of Public Grievance Rules 1998. 4. So the points for determination in this complaint are: 1) Whether there is any deficiency in service on the part of opposite parties in rejecting the claim of the complainant ? 2) Whether there is any concluded contract? 3) Whether the Forum has got jurisdiction to entertain the complaint in view of the award of the Insurance Ombudsman constituted under the Redressal of Public Grievance Rules 1998? 5. Point No.1: It is highly deplorable that the Life Insurance Corporation of India established as a social welfare institution has taken undue advantage of the ignorance of the customers as revealed in this case. The Exts X2, X3, circulars and X4, X5 extract of policy servicing manuals produced by the opposite parties in compliance with the order of the Forum deal with the settlement of claims on ex-gratia basis under unconcluded contracts. 5(a). Ext.X2 circular No.1027/4 dtd.13 Dec.1973 reads as under: “Where the life to be insured dies before the contract of insurance has been completed and claim is preferred by the legal heirs of the deceased, the corporation may be prepared to make an ex-gratia payment in settlement of claim, provided the following conditions are fulfilled collectively. (1)The Proposer must have complied with all requirements necessary for taking a decision on the acceptance of the proposal. (2) The proposal should be such as would have been accepted as proposed and the first premium amount as required by us is already in deposit; and (3) The death must have occurred by an accident or where death has occurred due to a disease, the onset of such disease should be after at least a week from the date on which the proposed has complied with all our requirements for consideration of the proposal. (This ensures that the assured was in good health during the normal period which our Office would take to process the proposal and complete the contract) On receipt of intimation of death, if it is found that all the above conditions are collectively satisfied, it should be clearly intimated to the claimant that the Corporation had not accepted the proposal, that there is no concluded contract of insurance and that there is nothing payable, except the refund of deposit. But simultaneously, Claim Forms should be issued, without prejudice, and if, on a thorough investigation, it is found that there is no suppression of any information material to the risk and the amount involved is within the Financial Authority of the Senior Divisional Manager/Divisional Manager ex-gratia payment of the claim may be sanctioned. Where, however, the amount is not within the powers of the competent authority at the Division, the deserving cases should be referred to the Central office with complete investigation reports and recommendations. It may be emphasized, once again, that were the claim is decided to be paid on ex-gratia basis, only the basic sum proposed will be paid and neither the Accident Benefits, nor the income benefits under Multi Purpose Policies will be paid”. 5(b). In Ext.X3 circular No.209/23 dated 16 March 1984 the above conditions are repeated and in addition to that it has further gone to extent that even the accident benefits on ex-gratia basis can also be allowed depending upon the merits of each case. 5{c} The Exts. X4 and X5 are the relevant extracts of the Policy Servicing Manual of claims. These Manuals also describes the conditions for the settlement of claims in respect of Unconcluded contracts. The terms and conditions for the settlement are the same as described in Exts.X2 and X3 circulars. 6. It appears that the Life Insurance Corporation has suppressed this regulations even before the Hon’ble Insurance Ombudsman to take undue advantage and contended vehemently that the policy is an unconcluded one and therefore nothing is payable to the claimant under any circumstances. There are absolutely no reasons put forth by the opposite parties for not applying the above circulars in the matter of the complainant to settle the claim on ex-gratia basis even if the contract is considered as an unconcluded one. 7. The fact that the deceased had 4 other policies for Rs.1,00,000/- Rs.40,000/- Rs.30,000/- and Rs.25,000/- and all of them are honored (but the amount is not paid due to the garnishee order of the Munsiff Court, Kasaragod) is not a ground at all not to apply this circular to pay the amount. 8. The deficiency reaches at its peak in giving a different date as date of commencement of risk other than the date of commencement of policy. The date of commencement of policy is 28-06-04 as per the policy. But strangely without any basis the date of commencement of risk is shown in the policy as 21-7-04. None of the documents produced show that how the date of commencement of risk happened to be on 21-07-04 and the criteria for adopting a different date as the date of commencement of risk. Whereas Ext. X1 file relating to the policy shows that according to LIC the date of commencement of risk was 28-06-04. 8(a). The Hon’ble Supreme Court in New India Assurance Co.Ltd V. Randayel & Others reported in (1990) 2SCC 680 observed that when a policy is taken on a particular date, the effectiveness is from the commencement of that date. Therefore the effectiveness of the policy in this case is 28-06-04 and there is absolutely no reason for putting a different date as the date commencement of risk. The counsel for the complainant placed reliance on judgment reported in 1986 KLT 347 in the case of LIC OF INDIA v. KAMALAMMA in support of his contention that risk commences from the date of policy 9. Apart from that it is seen that the opposite parties had committed inordinate delay in the matter of processing the proposal submitted by the assured. The insured had submitted proposal from Anmol Jeevan as 21-10-03. But LIC of India decided to accept the policy under a different plan only on 17-04-2004. Though the first premium towards Jeevan Anmol (Table 153) has paid as early on 31-10-03. In this regard it is pertinent to note that in exercise of the powers conferred by clause (zc) of sub section(2) of Sec. 114 A of the Insurance Act 1938 read with Sec. 14 and 26 of the Insurance Regulatory and Development Authority Act 1999, the Authority has framed Insurance Regulatory and Development authority (Protection of Policy Holders Interest) Regulations 2002. The Regulation 4(6) is as under. ‘Proposals shall be processed by the insurer with speed and efficiency and all decisions there of shall be communicated by it in writing within a reasonable period not exceeding 15 days from receipt of proposals by the insurer’. Evidently this time limit has flagrantly violated by LIC in the matter of processing the proposal of the deceased proving their deficiency in service once again. 10. From the above reasons it is clear that the LIC committed deficiencies in their service on multifarious grounds. 11. Point No.2. Whether the contract is a concluded one? The contention of the opposite parties is that it cannot be held that the contract between the parties was concluded as the proposal submitted by the deceased accepted only after the death of the proposer. The learned counsel for opposite parties Sri.P.V.Jayaraj relied on the decision of the Hon’ble Supreme court in the case of LIC of India V. Raja Vassireddy Komalavalli Kumba & Ors reported in AIR 1984 SC 1014 to support his contentions. 11 (a). As against this learned counsel Shri.M. Narayana Bhat in his argument notes submitted that the insured submitted the proposal on 21-10-2003 itself. The medical report on Lab report dated 13-04-2004 reached the competent authority on 17-04-2004, the competent authority decided to accept the proposal under different plan subject to the consent of the proposer. Further the LIC asked the insured to pay an additional premium amount of Rs.1525/- and it is a counter offer to the proposer. The said counter offer accepted by the original proposer and became a binding contract. Therefore there is no question of again accepting the proposal. In this case initially the insured make the proposal. The LIC made a conditional acceptance by giving a counter offer. The original proposer (insured) accepted it. Thus there is a concluded contract of Insurance. But the LIC had proceeded under a wrong notion that in contract of insurance, the LIC is always the acceptor and insured is the proposer. This argument appears to be attractive and we find some force in the argument. The counter offer is accepted by the insured and what is remaining was only the procedural formality by the LIC. Therefore the contract can be considered as a concluded one. 12. We may consider the matter from another angle. In this case the date of commencement of policy is 28-06-04 and the death of assured occurred on 8-7-04. The counsel for opposite party contended that unaware about the death the policy number was allotted only after the decision to accept the proposal which was taken on 17-7-2004 and hence there is no concluded contract. Evidently, the policy is commenced with retrospective date i.e. 28-06-04 that means the contract is finalized from that date. The assured has completed all his formalities as on the said date and he was not required to do anything after the acceptance of contract. Acceptance of the agreement was unconditional and was in favour of deceased. Hence after acceptance of the proposal the contract would relate back to the date from which the insurance coverage was granted, when a policy is taken in a particular date, its effectiveness is from the commencement of that date. Therefore the contention of opposite party that on the date of final acceptance i.e. on 17-7-04 the other party had died and the acceptance of the proposal was innocently and without the knowledge that the contingency i.e death of the proposer had already taken place and is thus vitiated by the non-existence of the proposer at the time of acceptance and no contract can come in to existence with a person who is no more alive has no force. 13. The Hon’ble National Consumer Disputes Redressal Commission had an occasion to consider a case, that facts and circumstances of the said case are squarely applicable to this case. LIC OF INDIA v. Rakshna Devi IV (2005) CPJ 214 (NC). The paragraphs 18,19,20 the said order is reproduced below. 18. Further it was sought to be contended that LIC accepted the proposal under the mistake as it was not knowing the fact that the assured had expired on 1st March, 1998. In our view, for making a contract void on the ground of mistake of fact, Section 20 of the Contract Act makes the position clear. It provides that where makes both the parties to an agreement are under mistake as to matter of fact essential to agreement, the agreement is void. In the present case, it cannot be said that both the parties to the agreement were under a mistake as to a matter of fact essential to the agreement, hence, it cannot be said that agreement or issuance of the insurance policy was void. This is also made clear in Section 22 of the Contract Act, which provides that: “A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact. 19. The Apex Court in Tarsem Sing v. Sukhminder Sing,III (1998)SLT383=AIR 1998 SC 1400, after quoting the relevant sections of the Contract Act, held that Section 20 provides that an agreement would be void if both the parties to the agreement were under a mistake as to a matter of fact essential to the agreement. The mistake has to be mutual and in order that the agreement be treated as void, both the parties must be shown to be suffering from mistake of fact. Unilateral mistake is outside the scope of this section. Admittedly, in the present case, so called mistake is unilateral and hence, the contract is not voidable at the instance of the Insurance Company which committed so called mistake. 20. The next question is applicability of Section 36 upon which reliance is placed by the learned Counsel for the petitioner. It deals with agreement contingent on impossible events. It provides that, “Contingent agreements to do or not to do anything, if an impossible event happens, are void, whether the impossibility of the event is known or not to the parties to the agreement at the time when it is made”. There is no question of impossible event happening in the present case. For human being death may be natural or accidental and it may happen at any point of time. Therefore, it is not a case of agreement contingent on impossible event and Section 36 would have no bearing to the present case, because, this was not a case of agreement contingent on impossible event. Applying the principles enunciated in the above order it can be concluded that the contract is not vitiated due to the happening of the contingency i.e the death of the proposer and therefore it can be considered that there was a concluded contract at the time of the death of the proposer. 14 Point No.3. Whether the Forum can adjudicate the matter in view of the award of the Insurance Omubsman? Though not contended in the version the learned counsel for the LIC Shri. Jayaraj urged with all vehemence that the complaint is not maintainable before the Forum in view of the Award passed by the Insurance Ombudsman constituted under the Redressal of Public Grievance Rules 1998. The said defence is also not sustainable in view of the decision of the Hon’ble National Consumer Disputes Redressal Commission in the case of Kamaleshwari Prased Singh V National Insurance Co.Ltd reported in I (2005)CPJ 107 (NC). In the said decision the Hon’ble National Commission has considered in detail about the Redressal of Public Grievance Rules 1998 and the powers of Ombudsman and held that the decision of the Ombudsman is not binding on the complainant since Ombudsman is not discharging judicial or quasi judicial functions. The role of Ombudsman is altogether different and therefore decision of the Insurance company to repudiate the claim can be subjected to adjudication by the Fora constituted under the Consumer Protection Act. In this case the complainant has not accepted the award of the Ombudsman. Hence the forum has got jurisdiction to adjudicate this matter. Hence the point is answered accordingly. 15. In the result all the points are answered against the opposite parties and therefore the complainant is entitled for the reliefs claimed in the complaint. Hence the complaint is allowed and the opposite parties are directed to pay Rs. 10,000,00/-(Rupees ten lakhs only) to the complainant with a cost of Rs.10,000/- . Time for compliance is limited to 30 days from the date of copy of the order if there are no other legal impediments preventing the opposite parties from making the payment. Failing which the said amount of Rs.10,000,00/- will carry interest @ 6% per annum for the principal amount from the date of complaint till payment. Sd/- Sd/- Sd/- MEMBER MEMBER PRESIDENT Exts. X1. Entire file relating to Policy No.794017833 in the Name of Jagadeesh Ballal. X1(a)15-9-04 Investigation of claim by death policyNo.794017833. X1(b) Status report of policyNo. 794017833 X1©26-4-04 letter sent by LIC Kozhikode Division to Jagadeesh Ballal. .X2. 13-12-1973 Photocopy of the circular No.1027/4 X3. 16-03-1984 Photocopy of the Circular No. 209/03 X4. Photocopy of the page Nos 80&81 of Policy Servicing Manual. X5. Photocopy of page No.97 of Policy Clamis manual. B1. Copy of Policy No.794017833. B2. 8-5-05 Copy of lawyer notice. B3. 2-2-06Copy of order passed by the Insurance Ombudsman Kochi. B4.25-05-05 reply notice. B5.Photocopy of Medical Examiner’s Confidential report B6.copy of Agent’s confidential cum Moral Hazard report B7. Copy of Chairman’s relaxations (Definition) B8.Copy of Applicability of Chairman’s relaxation. B9. Copy of chart showing applicability of Chairman’s relaxation(Group wise) PW1. Rajeshwari Ballal DW1.V.P.Gopalan, Sd/- Sd/- Sd/- MEMBER MEMBER PRESIDENT Pj/ Forwarded by Order SENIOR SUPERINTENDENT
......................K.T.Sidhiq
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