Holding the Life Insurance Corporation of India (LIC) responsible for the delay in sending monthly premium mandated through the electronic clearing system (ECS) and calculating the grace period from the premium due date, the national consumer disputes redressal commission (NCDRC) directed LIC to pay the Rs8 lakh death insurance claim to the nominee of the deceased life assured (DLA).
In
an order last month , the NCDRC bench of justice AP Sahi (president) and Dr Inder Jit Singh (member) says, "In this case there are concurrent findings of both the fora below against the insurance company. After careful consideration of the clauses of the insurance policy referred to above, we are of the considered view that both the fora below have correctly interpreted the policy clauses to hold that the grace period in the present case would start from 21 January 2015 and end on 6 February 2015 and not on 24 January 2015 as contended by the insurance company."
The case is related to the death insurance claim filed by Satwinder Kaur, mother of Tarandeep Singh, the DLA. Mr Singh had bought a money-back policy for the term of 20 years from LIC. Under the policy, the sum assured on death was Rs8 lakh. Mr Singh had made his mother the nominee for the insurance policy. On 1 February 2015, he died due to a heart attack. His mother, Ms Kaur, filed the death insurance claim but did not receive any response from LIC.
She then filed a complaint before the Chandigarh district consumer disputes redressal forum-I. In an order on 4 April 2019, while partly allowing the appeal, the district forum directed LIC to pay the death insurance claim money to Ms Kaur.
In its order, the district forum observed that as the ECS bounced or dishonoured on 21 January 2015, having a harmonious construction to the terms and conditions (T&C) of the insurance policy, the grace period would commence from 21 January 2015 and expire on 6 February 2015. "Hence, on the death of the insured (Mr Singh) on 1 February 2015, the insurance policy was in operation, subsisting, existing and had not lapsed, hence, there was a deficiency in service on the part of the insurance company."
LIC challenged the order before the Chandigarh (Union Territory) state consumer disputes redressal commission. While upholding the district forum's order, the state commission dismissed the appeal on 6 December 2021.
In its order, the state commission observed that against the due date, i.e., 9 January 2015, the invoice for the collection was generated late on 15 January 2015 and further ECS was put on 21 January 2015, on which date it dishonoured due to insufficient funds. "Therefore, in our view, the fault lay with LIC, who put the ECS very late and not on the due date, which was 9 January 2015. In such an eventuality, we do not find any fault with the view expressed by the district commission that the grace period of 15 days would start from 21 January 2015, which lasted up to 6 February 2015."
Aggrieved by the dismissal, LIC filed a revision petition before NCDRC. It contended that both the fora below failed to consider that the premium due on 9 January 2015 was not paid, the ECS had dishonoured due to insufficient funds and with 15 days of grace period, the premium was not paid as the policy lapsed on 24 January 2015. "Therefore, on the date of death of the policyholder (Mr Singh) on 1 February 2015 the policy being in lapsed condition, nothing was payable by the insurer."
NCDRC observed that the short point for consideration in the case is whether, on the date of death of the insured, the policy in question has lapsed or not and whether it was revivable within the grace period. It is not in dispute that although the insured had given standing instructions for the payment of premium through ECS to his bank, in the past, most of the time the ECS was getting dishonoured and subsequently, the insured used to pay the premium in cash which used to be accepted by the insurance company. Payment of the premium up to December 2014 is not in dispute, the bench noted.
The counsel for Ms Kaur argued that LIC relied upon clause 2, payment of premium, where it has been vaguely written that a grace period of 15 days will be allowed for payment of monthly premiums; however, the clause does not specify that the grace period of 15 days would be counted from the due date, irrespective of the date of dishonour of the ECS.
He also contended that even for making a payment towards dishonoured cheques, there is a grace period of 15 days from the date when the drawer of the cheque receives the notice from the payee informing about the dishonour of the cheque and such grace period does not start from the date of presentation of the cheque or ECS nor does it start from the date when the liability to pay occurs. "In the absence of any clear definition of the term 'grace period' in the policy document, the provisions of the Payment and Settlement Systems Act, 2007 and that of Negotiable Instruments Act, 1981, apply to the dishonour of electronic fund transfer," he added.
The counsel for LIC relied on clauses 2 and 3 of the insurance policy. He contended Mr Singh paid a premium of Rs4,283 on the 9th of every month and opted for ECS. Between January 2014 and January 2015, the DLA dishonoured the ECS mandate five times and deposited the premium in cash.
"For the premium, which was due on 9 January 2015, the ECS was sent on 15 January 2015 and it was dishonored due to insufficient funds as such, the policy lapsed and even within the grace period of 15 days i.e. up to 24 January 2015 the premium amount was not paid therefore the policy was in lapsed condition w.e.f. 24 January 2015. Mr Singh expired on 1 February 2015 and on the date of his death, the policy was in lapsed condition," LIC contended.
After going through the orders of the state commission, district commission and other relevant records and rival contentions of the parties, NCDRC, while dismissing the revision petition of LIC, says it finds no reason to interfere with the orders of fora below.
(Revision Petition No95 of 2022 Date: 26 November 2024)
