Chandigarh

StateCommission

A/200/2024

GURPREET KAUR DAUGHTER - Complainant(s)

Versus

PUNJAB NATIONAL BANK - Opp.Party(s)

SAVINDER SINGH GILL

18 Dec 2024

ORDER

STATE CONSUMER DISPUTES REDRESSAL COMMISSION,

U.T., CHANDIGARH

 

Appeal No.	:	200 of 2024
Date of Institution	:	17.05.2024
Date of Decision	:	18.12.2024

 

 

 

 

 

Gurpreet Kaur, Daughter & Nominee of Late Smt. Ranjit Kaur R/o #142, Phase-1, Ramdarbar, Chandigarh.

 ….Appellant/Complainant.

Versus

1.      Punjab National Bank, SCO No.1-3, Sector 28-C, Chandigarh through its Branch Manager/Authorized Signatory.

2.      PNB MetLife India Insurance Company India Ltd., SCO No.68-69, Sector 17B, Chandigarh through its Branch Manager/Authorized Signatory.

...Respondents/Opposite Parties.

 

BEFORE:    JUSTICE RAJ SHEKHAR ATTRI, PRESIDENT

                  MR. RAJESH K. ARYA, MEMBER

 

ARGUED BY :-    

Sh. Amit Jay Singh, Advocate alongwith Sh. Hoshiar Chand, Advocate proxy for Sh. Savinder Singh Gill, Advocate for the appellant.

Respondent No.1 – PNB ex-parte vide order dated 04.07.2024.

Sh. Manpreet Kanda, Advocate for Respondent No.2 – PNB Metlife India Insurance Co. Ltd. – on VC.

 

PER  RAJESH  K. ARYA,  MEMBER

                   The instant appeal has been filed by the complainant (appellant herein) against order dated 07.02.2024 vide which her consumer complaint No.63 of 2021 has been dismissed by District Consumer Disputes Redressal Commission-II, U.T., Chandigarh (in short ‘District Commission).

2]             The facts as narrated in the impugned order passed by the District Commission, reads thus:-

“The complainant has filed the present complaint pleading that the mother of the complainant was widow, getting family pension of her late husband and maintaining pension account with OP No.1 (Ann.C-1). It is stated that the mother of the complainant availed a personal loan of Rs.2,10,000/- from OP on 10.12.2019 and in order to secure said loan, the OP No.1 got the life of the loanee/her mother insured from OP No.2 on making due premium payment and accordingly Policy No.23123758 was issued by OP No.2. Unfortunately. the mother of the complainant expired on 27.6.2020 (Ann.C-2), as such, the complainant being nominee lodged claim with OP NO.2 under the policy her mother for closing the loan by adjusting the insurance amount but the same was repudiated by Op No.2 vide letter dated 30.8.2020 on the ground that the mother of the complainant was suffering from hypertension, diabetes and chronic kidney disease and she provided false information regarding her health (Ann.C-4). It is stated that the complainant was threatened with penal action by OP No.1, so to avoid any penal action, she deposited an amount of Rs.85,000/- in cash on 05.10.2020 with OP Bank and as on 07.11.2020 an amount of Rs.1,09,141/- stands outstanding (Ann.C-5) in said loan. Alleging the said act & conduct of the OPs as well as repudiation of claim as deficiency in service and unfair trade practice, hence this complaint has been filed with a prayer to direct the OPs to pay claim amount of Rs.2,10,000/- to the complainant after adjusting the current balance outstanding loan amount along with interest from the date of repudiation i.e. 30.8.2020 till the actual payment as well as to pay compensation and litigation expenses.

2]      After service of notice, the OP NO.1 put in appearance but despite availing opportunities, failed to file written version within the stipulated period, hence the defence of OP No.1 was struck off vide order dated 04.05.2022.

          The OP NO.2 has filed written version and while admitting the issuance of the policy in question in the name of complainant's mother, stated that she/insured was expired on 27.6.2020 and claim was raised on 29.7.2020. It is stated that the claim was rightly rejected by the answering OP on 30.8.2020 qua the mother of the complainant as she had concealed the material information of her health about her suffering from Hypertension, Diabetes and Chronic Kidney Disease and she provided a wrong/false information regarding her health. It is submitted that the insured/mother of the complainant was regularly visiting for checkups relating to Kidney disease since 15.3.2018 and she was undergoing for the Hemodialysis 2-3 times per week at PGI, Chandigarh as per her OPD Card dated 08.01.2019 (Ann.3). It is submitted that it was found that the insured (now deceased) was suffering from Chronic Kidney Disease, Hypertension and Diabetes at the time of issuance of the policy as mentioned in her OPD Card of PGI, Chandigarh dated 08.01.2019 which is issued before the issuance of the policy in question. It is also pleaded that the complainant be put to the proof that why not correct information was provided to the OP NO.2 regarding the health of the policyholder/now deceased. Denying all other allegations, lastly it is prayed that the complaint be dismissed with cost.”

3]                The order of the District Commission has been assailed by the complainant on the ground that the District Commission has erred in dismissing the complaint and has erred in not holding the respondents guilty for unfair trade practices. It has been stated that the appellant, being the nominee, approached respondent No.2 and lodged the death claim of her mother on 29.07.2020 for closing the loan by adjusting the insurance amount and the original policy bond was taken back by the respondents and a credit account statement was issued by respondent No.1 on the format provided by respondent No.2 to the appellant. It has further been stated that as on that date i.e. 29.07.2020, outstanding loan amount was Rs.2,04,336/-. It has further been stated that respondent No.1 was the agent who had sold the policy in question and was proceeded exparte before the District Commission and as such, the complaint was sought to be allowed against the said respondent, since it did not discharge its duty as to whether the policy terms and conditions were read out and described in detail to the insured deceased since the insured had signed in Hindi and the contents of the proposal form was in English. It has further been stated that respondent no. 2 has tried to subvert the issue by declining the genuine claim of the appellant on the ground that the material information was not disclosed. It has further been stated that the proposal form was in English and the insured had signed in Hindi and the deceased was not well versed with English and the proposal form has been filled by the bank officials. It has further been stated that according to Section 6(2) of Insurance Regulatory and Development Authority of India (Protection of Policyholders Interests) Regulations, 2017, the respondents were bound to explain the terms and conditions of the said policy but the same were never explained to the appellant and the proposal form was filled by the agent of the respondents. It has further been stated that the District Commission has erred in dismissing the complaint as it was mandatory to get medical examination of the insured prior to the issuance of the policy as the insured was above 45 years of age but in the present case, no medical was got conducted, which was a clear violation of rules/guidelines laid down by IRDAI. Lastly, prayer for setting aside the impugned order and allowing the consumer complaint has been made by the appellant.

4]                On the other hand, when none appeared on behalf of Respondent No.1 – Punjab National Bank despite due service through regd. Post on 07.06.2024 as well as through mail on 25.06.2024, respondent No.1 was proceeded exparte vide order dated 04.07.2024.

5]                However, on behalf of respondent No.2 – PNB MetLife India Insurance Company Ltd., Counsel appeared and filed written arguments, wherein it has been stated that the District Commission has rightly passed the impugned order dated 07.02.2024 as the fact that the insurance contracts are contracts based on "Utmost Good Faith" and that the Life Assured/Proposer being a party to the contract is bound to disclose all material facts known to him at the time of proposal. It has further been stated that the Proposer/Life Assured is always under a legal and solemnly obligation to disclose all material facts correctly, honestly and truthfully to the insurance company at the time of obtaining the policy, failing which, the contract is rendered void. It has further been stated that the contract of Insurance is based on the Doctrine of Uberrimae Fide and even if any due diligence is done by the Insurance company, it does not change the basic element of an insurance contract. To say so, reliance has been placed on the judgments i.e. Reliance Life Insurance Co. Ltd. versus Rekhaben Nareshbhai Rathore 2019 (2) CPJ 53; Life Insurance Corporation of India Versus Manish Gupta, Civil Appeal No.3944 of 2019 arising out of SLP (C) No.5001 of 2019 decided on 15.04.2019; TATA AIG Life Insurance Co. Ltd. Vs. Orissa State Co- operative Bank & anr., 2012 (IV) CPJ 310 (NC), Life Insurance corporation of India & Anr. Vs. Mandava Geetha, 2012 (III) CPJ 644 (NC), Sadanand Bag Vs. Life Insurance Corporation of India & Anr., 2012 (III) CPJ 398 (NC); LIC of India Vs. Rukma, 2012 (II) CPJ 44 (NC); Life Insurance Corporation of India VS. Francis Antony D'souza, 2012 (2) CLT 176 (NC); LIC of India Vs. Premlata Aggarwal, 2012 (2) CLT 182 (NC) and Meenaben Ashok Kumar Patel Vs Life Insurance Corporation of India, 2012 (2) CLT 415 (NC). It has further been stated that the insured is obliged to give full and correct information on all matters, which would influence the judgment of a prudent insurer in determining whether he will accept the risk and if he would, at what rate of premium and subject to what conditions. It has further been stated that the material facts, as having a bearing on the risk in the life insurance contracts, include the state of health and illness (present or past) occupation and habits, particulars of previous Insurance etc., which are only within the knowledge of the proposer/life assured. It has further been stated that the insurer, therefore, has to rely entirely on the information, which the Proposer/Life Assured gives at the time of proposal. It has further been stated that if a material fact is suppressed and the insurer will be misled about the risk covered, then the same will vitiate the contract. It has further been stated that the insure will then be well within its right to treat the contract as void as per the terms & conditions of the policy document. Lastly prayer for dismissal of the appeal has been made.

6]                It may be stated here that the appellant has moved a Miscellaneous Application No.491 of 2024 alongwith the appeal for placing on record notification dated 22.06.2017 of Insurance Regulatory and Development Authority of India (Protection of Policyholder’s interest) Regulations, 2017 as Annexure A-2 by way of additional evidence. The application has been contested by Respondent No.2 by filing reply to the same stating that the appellant has miserably failed to state any reason for not producing the proposed evidence, Annexure A-2, before the District Commission as such, the application be dismissed. In our considered view, no prejudice shall be caused to respondent No.2 in case, the said notification is taken on record, subject to just exceptions of the case. As such, the application is allowed. The notification aforesaid, Annexure A-2 is taken on record subject to just exceptions of the case. MA/491 of 2024 stands disposed of accordingly.

7]             After hearing the rival contentions of the parties and going through the material available on record, the impugned order, the written arguments, we are of the considered view that the appeal deserves acceptance and the impugned order is liable to be set aside for the reasons to be recorded hereinafter.     Perusal of credit account statement, Annexure C-3 transpires that the outstanding loan balance amount as on the date of death of the Life Assured was ₹2,04,336/-. Loan account statement dated 07.11.2020, Annexure C-5, further makes it clear that the complainant paid an amount of ₹85,000/-, in cash, on 05.10.2020 towards the outstanding loan, to avoid penal action and as on 07.11.2020, the outstanding loan amount was ₹1,09,141/-. It may be stated here that according to Regulation 15 of the Insurance Regulatory and Development Authority of India (IRDAI) (Health Insurance) Regulations, 2016, amended up to November 19, 2019, the cost of any pre-insurance medical examination shall generally form part of the expenses allowed in arriving at the premium. Furthermore, insurers are required to maintain a list of approved medical examiners and institutions for conducting these examinations, with details of fees available to prospective policyholders upon request. Conducting a proper medical examination enables insurers to accurately assess risk, identify any pre-existing medical conditions and determine appropriate terms and coverage. Neglecting this examination is a significant lapse in the insurer’s service as it weakens their ability to evaluate risk accurately and places undue burden on the insured, particularly in cases where claims are later repudiated on grounds of non-disclosure of pre-existing conditions. Without a rigorous initial examination, disputes may arise if the insurer later denies claims based on undisclosed health issues that could have been identified at the outset. It is a well-documented practice among insurance agents to expedite policy issuance by marking “NO” against health-related questions in proposal forms without conducting or recommending the required medical examination. This not only circumvents a critical step in the underwriting process but also risks severe consequences for policyholders. In the event of a claim, insurers often repudiate coverage based on alleged non-disclosure of pre-existing conditions that a medical examination would have likely identified. Thus, bypassing this step directly contradicts IRDAI’s emphasis on transparency and thoroughness during the proposal process. The insurer must be vigilant in safeguarding the interests of policyholders by adhering to regulatory and ethical standards. Therefore, insurance companies must ensure that their agents act in good faith and follow all procedural requirements. Insurers cannot later exploit negative answers provided in the proposal regarding medical conditions when they neglected to uphold their duty of conducting or facilitating a thorough medical examination. In such cases, the onus lies with the insurer to verify the applicant’s health condition before policy issuance. By neglecting to conduct an adequate medical examination or verify previous medical records, the insurance company essentially waives its right to later challenge the accuracy of information provided in the proposal form. Therefore, any attempt to deny a claim on the ground of non-disclosure of medical conditions is both unfair and a breach of the insurer’s duty of care. The insurer is precluded from taking advantage of alleged non-disclosures and is, thus, liable to honor the policy terms in good faith.

1.                   While respondent No.2 – Insurance Company has relied upon plethora of judgments in support of its argument that insurance contracts are based on utmost good faith (uberrima fides) and any material fact must be disclosed, it is equally true that these principles apply to the insurer as well. When the insurance company itself fails to adhere to IRDAI guidelines by disregarding the necessary diligence, it cannot justifiably benefit from these legal precedents. As such, the cited judgments cannot support the stance of respondent No.2, given their own lack of adherence to the prescribed standards of due diligence and transparency as laid down by IRDAI. Thus, by repudiating the genuine claim of the appellant – complainant, respondent No.2 – opposite party is deficient in rendering service and also indulged into unfair trade practices, for which, respondent No.2 is also liable to compensate the appellant – complainant for suffering mental agony and harassment. In our view, respondent No.2 is also liable to refund the amount of ₹85,000/- and any other amount(s) to the complainant alongwith interest from their respective dates of deposit, which the complainant paid towards the outstanding loan, after the death of the Life Assured, to avoid penal action.

9]                For the reasons recorded above, the appeal is accepted. The impugned order dated 07.02.2024 passed by District Commission-II, U.T., Chandigarh is set aside. Consumer Complaint No.63 of 2021 is partly accepted with costs against Opposite Party No.2 – PNB MetLife India Insurance Company Limited only, who is held liable and directed as under:-

1. to repay the entire outstanding loan amount of ₹1,09,141/- (as on 07.11.2020) and/or any other amount due towards the said loan after 07.11.2020, alongwith any penal interest/charges accrued thereupon, to opposite party No.1 – Punjab National Bank, within a period of 15 days from the date of receipt of certified copy of this order and apply to opposite party No.1 for issuance of ‘No Due Certificate’ to the complainant, failing which, opposite party No.2 shall be liable to pay penalty of ₹200/- per day to the complainant, till compliance of this direction. 
2. to pay an amount of ₹85,000/- and any other amount(s), [which the complainant paid to opposite party No.1 – PNB towards the outstanding loan amount after the death of the Life Assured], to the complainant, alongwith interest @9% p.a. w.e.f. the respective dates of deposits, [as after the death of the Life Assured, the entire loan liability rests with opposite party No.2], within a period of 30 days from the date of receipt of a certified copy of this order, failing which, the said amounts shall carry interest @12% p.a. from the date of default i.e. after expiry of stipulated period of 30 days till realization.
3. to pay to compensation to the tune of ₹50,000/- for mental agony and harassment and unfair trade practice and cost of litigation to the tune of ₹11,000/-, to the complainant, within a period of 30 days from the date of receipt of a certified copy of this order, failing which, the said amounts shall carry interest @9% p.a. from the date of default i.e. after expiry of stipulated period of 30 days till realization.

10]              In this view of the matter, the appeal as well as complaint against opposite party No.1 – Punjab National Bank stands dismissed with no orders as to costs. However, it is made clear that opposite party No.1 – Punjab National Bank shall not raise any dues qua the said loan account from the appellant-complainant and shall also issue ‘No Due Certificate’ to the complainant through opposite party No.2. 

11]              Pending application(s), if any, in this case stands disposed of accordingly.

12]              Certified copies of this order be sent to the parties free of charge forthwith.

13]              File be consigned to Record Room after completion.

Pronounced

18.12.2024.

[JUSTICE RAJ SHEKHAR ATTRI]

PRESIDENT

 

 

 

[RAJESH  K.  ARYA]

MEMBER

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