ORDER

BY SRI.H.R.SRINIVAS, PRESIDENT.

1.     The complainant has filed this complaint under Section 35 of the Consumer Protection Act, 2019 alleging deficiency in service in repudiating the insurance claim in respect of her husband who died due to COVID infection and for payment of Rs.40,00,000/- in respect of the insurance claim and Rs.5,00,000/- for the inconvenience caused and for the mental agony suffered and further a sum of Rs.50,000/- towards litigation expenses and for other reliefs as the commission deems fit under the circumstances of the case

2.     The brief facts of the complaint are: that the complainant and her husband late B.R. Ramesh Reddy borrowed Rs.40,00,000/- from OP No.2 in order to construct a new house in place of the existing old house No.1/1, Gramadevata temple street, Ambedkar Bhavan, Adugodi, Bangalore agreeing to pay interest at 12.5% per annum to be repayable in 180 EMIs.  They also mortgaged the property by depositing the title deeds.  Since OP No.2 insisted to have insurance to cover the said loan and to ensure the safety of the house “Uni-Home Care Insurance Policy” was obtained from OP No.1 through the agent of OP No.2 one Mr. Ramakrishna. N.  The insurance obtained by her husband covers in respect of the newly constructed house and secondly on the person of her husband for Rs.40,00,000/- each.  OP No.1 has collected Rs.29,028/- being the premium for said insurance.  The said insurance policy was obtained on 14.01.2019 to have the force till 13.01.2034. 

3.     On 02.05.2021, the husband of the complainant B.R Rameshreddy fell sick and as per the Government protocol COVID test was conducted at St.Johns Hospital, Sarjappur road, Bangalore and COVID Antigen test was also conduced which resulted in positive for COVID.  Immediately on 03.05.2021, he was admitted to Mujumdar Sha Medical Center, a unit of Narayana Hrudyalaya for further treatment for COVID-2019, pneumonia, acute respiratory distress syndrome, septic shock and multi-organ dis-function.  In spite of providing him the best medical facilities, he died on 10.05.2021.  After his death, a claim was made with the OP 1 who did not processed the claim in spite of repeated requests.  Hence, she had to issue legal notice on 30.07.2021 to intimate the claim procedure process as she is a legal representative.  On 06.08.2021, OP-1 repudiated her claim on the ground that, the claim will not fall within the purview of the terms and conditions of the policy and further rejected the claim by saying that, the policy covers only the accidental death of the insurer, and not death due to infections, multi-organ dis-function and pandemic infection deaths.

4.     It is contended by the complaint that, IRDAI has issued a circular on 4^th March 2020 for the claims relating to Carona virus.  It also directed the health insurance companies to include medical cover for COVID 2019 irrespective of the nature of the policy held by the consumers.  The world health organization has also given directions and declared that COVID 2019 has a global pandemic.

5.     The repudiation of the genuine claim of the complainant by OP-1 has put herself and her two children in great financial crisis.  Her daughter R.Lahari 15 years, and son R.Shashanka Reddy are aged 15 and 9 years and are school going children and that she has to maintain the family and also to pay the loan to OP-2.  OP-2 insisted for repayment of the loan amount, whereas, OP-1 has refused to honour the claim. Hence, there is deficiency in service on the part of OP 1 in denying the genuine claim and it also amounts to unfair trade practice for having received the premium and hence, prayed the forum to allow the complaint.

6.     Upon the service of notice, OP No.1 appeared before the commission and filed the version contending that, there is no deficiency of service or unfair trade practice on its behalf.  Complainant husband Ramesh Reddy purchased the insurance policy for the sum assured of Rs.40,00,000/- and the insurance cover given to him is “Uni-Home Care Insurance Policy” for the period 14.01.2019 to 13.01.2034.  The policy was purchased by OP No.2 on behalf of husband of the complainant to cover the loan granted.  Hospitalization of the husband of the complainant is not known to OP No.1.  It has admitted that it repudiated the claim of the complainant as per the terms and conditions of the insurance policy given to the deceased Ramesh Reddy, which  only covers accidental death.  As per Section-2 of the insurance policy issued, if any time during the currency of the policy, the insured/borrower sustains bodily injury, resulting death solely and directly from accident caused by external, violent, and visible means then, the company shall pay to the insured or the borrowers legal representative to pay the insurance claim.  In this case, the complainant husband purchased the accident al insurance which do not cover death due to infection multi-organ dis-function during COVID 19 pandemic. The same was intimated to the Advocate of the complainant on 06.08.2021.  Hence, there is no deficiency or unfair trade practice on their part, and the claim of the complainant is not admissible under the terms and conditions of the policy and hence, prayed to dismiss the complaint. 

7.     OP-2 also appeared before the commission through its Advocate and filed the version stating that, late Ramesh Reddy was its member and obtained housing loan of Rs.40,00,000/- by mortgaging the said property agreeing to repay the same with interest at 12.5% per annum within a period of 180 months.  A sum of Rs.30,00,000/- was released in the first installment and the remaining Rs.10,00,000/- as second installment on 08.05.2019.  He was regular in paying the EMIs and as on the date of death of the borrower principal of Rs.36,22,549/- was due and subsequently complainant has paid Rs.2,99,920/- which was adjusted towards the interest and penal interest due from 09.09.2020.  As on the date of filing of the version, the complainant was due Rs.39.98,659/-. They have not at all pressurized or visited the house of the complainant to demand the payment of the loan, whereas if the loan is not paid, they are empowered to initiate action under Section 70 of the Karnataka Co-operative Societies Act, 1959 to recover the loan amount and prayed the Forum to dismiss the complaint against it.

8.     In order to prove the case, both parties filed their affidavit evidence and produced documents. Arguments Heard. The following points arise for our consideration:-

1)Whether the complainant has proved deficiency in service on the part of the Opposite Parties?

2) Whether the complainant is entitled to the relief prayed for in the complaint?

9.     Our answers to the above points are:-

POINT NO.1:In the Affirmative

POINT NO.2:Partly in the Affirmative

                            For the following.

REASONS

POINT No.1:-

10.           Perused the complaint, version, affidavit evidence and the documents produced by respective parties.  It is not in dispute that the husband of the complainant borrowed a loan of Rs.40,00,000/- from OP-2 and at the time of releasing the loan amount, the insurance was issued to the name of the husband of the complainant to cover the loan as perEx P4 and Ex R1 which are the insurance policy issued by OP-1 at the instance of OP-2, wherein the policy has been assigned to OP-2 which means the said insurance is only issued in order to cover the loan liability obtained by the husband of the complainant from OP-2. Even the premium for the said policy has been paid by OP-2 on behalf of the husband of the complainant.

11.   The said policy is issued as per Section 1 on building Rs.40,00,000/-, as per Section 2 on person Rs.40,00,000/-. It is also described as the sum assured for fire accident is Rs.40,00,000/- and sum assured for personal accident is Rs.40,00,000/- and the assignee is OP-2  and the basic premium collected Rs.24,600/- and further Rs.2,214/- is collected towards CGST and another Rs.2,214 towards at SGST. 

12.   It is not in dispute that, as per the death report the husband of the complainant, he was detected positive for COVID and that he died on 10.05.2021 at 07.45 am due to COVID-19, Pneumonia C-ARDS, C-Septic Shock, C-MULTIORGAN dysfunction this is as per Ex P5. Ex P6 is the death certificate issued by the registrar of births and death. Ex P7 is the copy of the legal notice wherein the complainant demanded OP-1 to pay the claim amount of the insurance, for which her husband was insured. Ex P8 is the repudiation letter wherein it is contended that:

“If at any time during the currency of this policy the insured’s borrower shall sustain bodily injury resulting solely and directly from accident caused by external violent and visible means, then the company shall pay to the insured or the borrower’s legal personal representative(s) as the case may be, the sum herein after set forth, that is to say. If such injury shall within Twelve (12) calendar months of its occurrence be the sole and direct cause of the death of the insured’s borrower, the Capital sum insured stated in the schedule hereto.”

13.   As per the guidelines of the RBI, the lending bank or the cooperative society, cannot insist and demand the borrower to obtain insurance to cover their loan liability.  Only they can secure the loan amount by getting the property mortgaged either by deposit of title deeds or by getting it registered for the amount due. Whereas, in many cases the financial institutions or the lending institutions or the banks, have their sister concern doing business in insurance and want to augment the business transaction of the insurance company invariably demand and compel the borrowers to obtain the insurance to cover the loan amount and thereby provide extra or additional business to their sister concern . While doing so, they must be honest and sincere to provide a proper insurance rather than an unwanted or unuseful and use less insurance which do not help to the insured. 

14.   When OP-1 has issued a fire insurance to the extent of Rs.40,00,000/- and a personal accident cover for Rs.40,00,000/-  it has not placed any materials to show as to which kind of insurance the policy holder wanted by filing the proposal form.  It is not made clear by OP-1 that the complainant insisted for the fire insurance and the personal accident insurance. 

15.   It is very well laid down by RBI and as well as IRDAI that the lender shall not insist any kind of insurance from the borrower at the time of lending the loans of any kind. It can very well insist for security for the loan lent by it. In this case it is the specific case of the complainant that in order to have a relief of insurance to cover the loan borrowed OP-2 insisted for the insurance.  When the tenure of the insurance given is considered, it is from the date of borrowing of loan  till the entire tenure of the loan i.e. from 14.01.2019 to 13.01.2034 i.e. for 180 months. 

16.   When the claim was made by the complainant as stated above, OP-1 has repudiated the claim on the ground that the death is not due to personal accident.  To us it becomes clear that OP-1 and 2 have played mischief and have misrepresented and in fact have kept the original borrower and also the complainant in dark in respect of as to what kind of and what type of insurance they are selling to the borrower of the loan. This clearly shows that this is a mis-selling of the product which the complainant as well as the husband of the complainant were not at all required at that time. The type of the insurance the original borrower required at that time and was a life insurance and not an accidental death insurance or a fire insurance. 

17.   In view of the OP-1 issuing a fire insurance and accidental insurance, we have to hold that complainant and the borrower ought to have been issued a life insurance by OP-1 rather than an accidental death insurance and fire insurance. 

18.   Though time and again the HON’BLE SUPREME COURT OF INDIA AND HON’BLE NCDRC have held in various decisions that the commissions have no power to interpret the term and conditions of the insurance policy issued to the parties as it is a contract between the insurer and the insured, in this particular case the insurance policy issued is of no use at all to the complainant and her deceased husband whereas the OPs have benefited with hefty insurance premium which has not at all served the purpose of the complainant and her husband in getting the insurance policy. Under the circumstances as stated above this is a mis-sold insurance policy by misrepresenting to cheat the complainant and her husband and hence we hold that the insurance issued to the complainant and her husband shall be treated as life insurance on the original borrower for the entire period of loan and as the borrower BR Ramesh Reddy died on 10.05.2021, within a span of nearly two and half years, the entire policy amount of Rs.40,00,000/- has to be paid by OP-1 to OP-2 to absolve the complainant from the loan liability which the husband of the complainant had incurred with OP-2 Hence we hold POINT NO.1 IN THE AFFIRMATIVE, holding that the insurance policy is mis sold by misrepresenting the complainant and her husband and not informing exactly what kind of insurance that they are selling by keeping the complainant in dark and informing that they are selling the insurance to cover the loan in case of the death of the borrower which is otherwise then assured. The complainant was not at all required of sucha  insurance and hence there is deficiency in service on the apart of the OP-1, and also misrepresenting the facts and practicing unfair trade means.

POINT NO.2

19.   In viw of answer to Point No.1 in the affirmative, OP-1 is liable to pay Rs.40,00,000/- which is covered under the said policy to OP-2 towards clearing the loan amount outstanding borrowed by BR Ramesh Reddy the husband of the complainant. Further OP-1 is also liable to pay interest at 12% per annum on Rs.40,00,000/- from the date of death of the original borrower i.e. on 10.05.2021 till the entire amount is paid to OP-2 to clear the debt. In case the said amount along with interest exceeds the amount due to OP-2, the excess amount  to be returned to the complainant. In case the same falls short of to clear the outstanding the same has to be paid by the complainant to OP-2 and afterwards OP-2 to return all the original documents to the complainant deposited with it at the time of obtaining the loan and to remove the charge created on the said property.

20.   Further the act of OP-1 in repudiating the claim of the complainant has put the complainant in to untold hardship, mental agony, financial stress, for which OP-1 is alone to be held responsible for which we direct OP-1 to pay Rs.5,00,000/- as damages to be paid to the complainant and Rs.50,000/- towards litigation expenses within 30 days failing which the said amount shall also carry 12% per annum from the date of filing of this complaint. 

21.   It is quite often seen in many cases that though it is not mandate for the borrowers to obtain insurance in respect of the loan borrowed, the financial institutions whether it is a banking institution and non-banking institution insist the borrower to obtain the insurance from their sister insurance companies with a mutual business interest irrespective of no mandate to obtain the insurance. The gullible borrowers have no alternate except to accept the illegal demand of the lenders to get the insurance for the additional security for the loan as happened in this case.

22.   There are several instances where the insurance companies conniving with the lenders have sold unwanted, unrequired, unproductive insurance policies which will not be at all helpful and do not serve the purpose for which it is purchased (to the insured/borrowers). In this regard we want to issue a direction to IRDAI to form a guideline and issue required directions to all the insurance companies to sell only the life insurance policy invariably and by default in case the said policy is to be obtained to cover the loan obtained from any of the financial institutions whether it is a bank or NBFCs or any other finance institutions and in case the insurer wanted some other kind of insurance in addition to the life insurance, the insurance companies to insist and obtain the request for such an additional insurance in writing in the own hand of the borrowers so that this kind of mis-selling and playing mischief with the life and fiancé of the insured could be avoided and so also unscrupulous, unwarranted, litigations could also be avoided. Hence office is directed to send the copy of this order to the chairman, IRDAI to issue circulars, guidelines to the insurance companies in respect of issuing the insurance policy which is obtained to cover the loan in case the banking institutions wanted the borrowers to have a insurance cover and answer POINT NO.2 PARTLY IN THE AFFIRMATIVE and pass the following:

ORDER

1.  Complaint is allowed in part with cost.

2.  OP-1 i.e. United India Insurance Company Ltd represented by its Senior Branch Manager/Authorized signatory is hereby directed to pay a sum of Rs.40,00,000/- along with interest at 12% per annum from the date of death of the original borrower i.e. on 10.05.2021 till payment of the entire amount.

3.  Further OP-1 is hereby directed to pay Rs.5,00,000/- towards damages and Rs.50,000/- towards litigation expenses within 30 days failing which the said amount shall also carry 12% per annum from the date of filing of this complaint.

4.  OP-1 is directed comply the above order within 30 days from the date of receipt of this order and submit the compliance report to this forum within 15 days thereafter.

5.  Complaint against OP-2 is hereby dismissed.

6.     Send a copy of this order to both parties free of cost.

Note:You are hereby directed to take back the extra copies of the Complaints/version, documents and records filed by you within one month from the date of receipt of this order.

(Dictated to the Stenographer over the computer, typed by him, corrected and then pronounced by us in the Open Commission on this 11^TH DAY OF OCTOBER 2022)

MEMBER                 MEMBER                 PRESIDENT

ANNEXURES

1. Witness examined on behalf of the Complainant/s by way of affidavit:

Copies of Documents produced on behalf of Complainant/s:

2. Witness examined on behalf of the Opposite party/s by way of affidavit:

Copies of Documents produced on behalf of Opposite Party/s

MEMBER                 MEMBER                PRESIDENT

RAK*