While upholding an order passed by the Rajasthan state consumer disputes redressal commission, the national consumer disputes redressal commission (NCDRC) directed SBI Life Insurance Co Ltd to pay Rs15.40 lakh along with interest at 9% to the wife of the deceased insured. It also directed the State Bank of India (SBI) to refund the equated monthly instalments (EMIs) deposited for a home loan after the death of the insured with corresponding interest, once SBI Life deposits the money.
In an order last week, justice Sudip Ahluwalia (presiding member) of NCDRC says, "...such non-adherence to the specified procedure regarding the explanation of the terms and conditions of insurance to the proposer, in the manner as specified in the relevant clause no11 (of the proposal form), the concerned agent, who was admittedly an employee or corporate agent of the opposite parties, could not have been presumed to have become the agent of the insured or proposer. The state commission was, therefore, eminently justified in allowing the appeal filed on behalf of the complainant by specifically taking note of these minute factors, which had been ignored by the district forum, in dismissing the complaint."
In this case, the agent was Manju Saharan, an employee of SBI.
NCDRC observed that the declaration required to be given by Ms Saharan, along with the signature of the proposer or life assured, shows that the latter had put his signature by the name of Hanuman Singh, in Hindi or Devanagari script. "But the certificate which was required to be issued and signed by the agent in this regard did not specify the language in which the relevant contents were explained to the proposer and, in fact, had left the relevant space reserved for specifying the language concerned as entirely blank, in the certificate."
"To make matters worse, the date of issuance of the certificate by Ms Saharan happens to be 9 December 2014. On the other hand, perusal of the proposal form actually signed by Mr Singh and accepted by the insurance company goes to show that it is dated 22 December 2014, which was, therefore, 13 days after the agent had allegedly explained the contents to the proposer in the unspecified language. This is chronologically just not possible, since the relevant certificate is required to be issued after the contents of the proposal form have been allegedly explained and thereafter accepted by the proposer or life assured (Mr Singh)," the bench noted.
In December 2014, Bikaner-based Mr Singh obtained an Rs16 lakh home loan from SBI. For the home loan, he also obtained insurance from SBI Life for a premium of Rs30,958. However, on 30 June 2016, Mr Singh expired. His nominee for the insurance policy and wife, Geeta Kunwar, filed the claim with SBI Life. However, SBI Life rejected the claim and refunded the premium of Rs55,104 by cheque. Meanwhile, she claimed, SBI was pressuring her to repay the home loan else it would auction her house worth Rs60 lakh. She then filed a case before the Bikaner district consumer dispute redressal forum.
Appearing before the district forum, SBI Life contended that the deceased life assured-DLA (Mr Singh) had committed a breach of the principle of utmost good faith by suppressing the material fact that he was suffering from liver disease and hydronephrosis before the date of submission of the proposal form.
In an order, the district forum noted the insurer's contentions and stated that Mr Singh obtained the home loan and that his legal heirs' duty to repay the amount to SBI and SBI Life has nothing to do with it.
Ms Kunwar then filed an appeal before the Bikaner circuit bench of the state commission. The state commission observed that as far as the decision of the district forum is concerned, it is prima facie evident that pre-existing diseases of the liver and other diseases were not mentioned while filling up the proposal form.
"But as per citations submitted by the appellant, the principle of utmost good faith is equally applicable on both the parties i.e. the insured and the insurer. It is not mentioned in point 8 that in which language the life proposed was informed about the terms and the conditions. Apart from that there is difference of date in filing the proposal form. Part 8 and 9 were filled on 9 December 2014 and part 6 and 7 were filled on 22 December 2014. Hence, it is clear that the agent, Ms Saharan, has just completed the formalities and the regulations have not been followed in letter and spirit. Hence, the insurer has not acted with utmost good faith," the state commission says.
In its order, the state commission stated, "...it can't be accepted that the husband of the appellant (Ms Kunwar) has violated the condition of disclosure of material fact. (The) Agent has not explained the conditions in Hindi to the proposer. Proposer has signed as per instruction given to him. Hence, the order dated 23 September 2019 passed by the district forum cannot be upheld. Hence, Ms Kunwar is entitled for Rs15,40,454 along with 9% interest from the date of death of her husband till payment. Once SBI Life deposits the balance amount due to SBI, then SBI shall refund the amount of EMI deposited after death of the husband of Ms Kunwar with corresponding interest. Ms Kunwar is also entitled to compensation of Rs50,000 and litigation cost of Rs15,000 from SBI Life."
Aggrieved by the order, SBI Life filed an appeal before NCDRC. The insurer also cited a judgement from the Supreme Court in Reliance life Insurance Co Ltd vs Rekhaben Nareshbhai Rathod (civil appeal no4261 of 2019) case. In that case, the apex court had ruled that the respondent's argument that the assured's signatures on the form were taken without explaining the details cannot be accepted. "If an agent nevertheless does that, he becomes merely the amanuensis of the insured, and his knowledge of the untruth or inaccuracy of any statement contained in the form of the proposal does not become the knowledge of the insurer."
Justice Ahluwalia from NCDRC observed that the ratio of the SC decision would undoubtedly appear to impeach the version of Ms Kunwar's side in the present case that the signature of Mr Singh, her deceased husband, on the proposal form had been obtained by the agent of the insurance company without explaining the contents or ramifications thereof to him.
"However, when scrutinised a little more carefully, it transpires that there were certain glaring infirmities in the manner of explaining the relevant contents to the proposer or life assured, which were in direct contravention of the procedure for that purpose, specifically prescribed in the proposal form itself," he noted.
Clause 11 of the proposal form says: "In case this form contains the signature of the member in a language other than English or thumb impression of the member, the 'additional declaration' portion (please refer to Section of this form) must be duly completed, in order for this form to be valid. If this is not done, no insurance can be provided by SBI Life if any money has been paid towards procuring such insurance."
Refusing to interfere with the well-reasoned order from the state commission, justice Ahluwalia dismissed the revision petition filed by SBI Life.
(Revision Petition No786 of 2021 Date: 16 May 2023)