AI Structured Summary
Not yet generated for this judgment
Judgment
THIS Revision Petition is filed against the concurrent decisions of the Fora below.
THE facts of this case in brief are as follows:
M /s. S.M.S. Tele Communication (for short SMS'') is a proprietary concern which provides telephone connections through EPABX system. SMS obtained loan from State Bank of Travancore (for short the Bank'') by way of hypothecation of infrastructure. The Bank took an insurance policy from the petitioner and debited the premium amount to the account of the complainant, SMS. During the currency of the policy on 22.5.2006, there was short circuit due to which EPABX system was totally damaged beyond use. Immediately, SMS sent service engineers and made alternate arrangements with a view to not inconvenience the customers. SMS also informed the Bank, which in turn wrote a letter to the Insurance Company on 24.5.2006. The matter was brought to the notice of the police who registered it as a case in Crime No. 490/2006 dated 25.5.2006.
THE claim made by SMS was repudiated by the Insurance Company stating that the claim falls under head (A) general exclusion Clause No. 7 under Standard Fire and Special Perils policy. It is a case of the complainant that repudiation was unjust as the finding was cryptic. The Insurance Ombudsman also rejected the claim.
THEREFORE , SMS filed a complaint before the District Forum seeking reimbursement of loss of Rs. 8,12,500 towards loss of goods damaged along with Rs. 1 lakh as compensation towards mental agony, trauma, etc. SMS also claimed Rs. 14,566 towards insurance policy charges along with Rs. 20,000 towards costs.
THE Bank filed counter admitting sanction of loan to the complainant and taking of an insurance policy on behalf of the complainant. The Bank requested the Insurance Company to settle the claim.
THE Insurance Company contested the case stating that the matter cannot be decided in summary proceedings under the provisions of the Consumer Protection Act. The Insurance Company further mentioned that the investigation revealed that the damage was due to lightening which resulted in an accidental fire. Invoking Clause 7 of the general exclusions, it can repudiate the claim, therefore, it does not amount to deficiency in service.
THE District Forum, after considering the evidence before it observed that the loss to the EPABX system by lightening and held that Clause 7 of the general exclusions does not apply to the instant case. The Surveyor appointed by the Insurance Company assessed the net loss at Rs. 4,77,473. Therefore, the District Forum directed the Insurance Company as well as the Bank to pay this amount towards damage of the equipment along with Rs. 25,000 towards compensation and Rs. 2,000 towards costs.
DISSATISFI ED by the order of the District Forum, the Insurance Company preferred an appeal before the State Commission.
THE State Commission did not agree with the interpretation of Clause 7 by the Insurance Company and observed as follows: "The District Forum has considered the report of the Surveyor in toto and accordingly awarded compensation only on the assessment made by the Surveyor. No doubt it did not agree with the interpretation of Clause 7. Having gone through the entire record, we are of the opinion that the appellant Insurance Company in order to evade just claim has been dragging on the matter without settling the claim. The repudiation is unjust. The entire record would undoubtedly show that the equipment was damaged as a result of lightening. Since the EPABX system cannot be said to be an electrical machine/apparatus/fixture the repudiation was unjust. It was a machine other than electrical. The District Forum has rightly appreciated the facts in correct perspective. We do not see any merits in the appeal".
Accordingly, the State Commission dismissed the appeal.
AGGRIEVED by the order of the State Commission, the Insurance Company has filed this revision petition before us.
THE learned Counsel for the petitioner submitted that the following exclusion of Clause No. 7 is applicable to the case on hand: "Loss destruction or damage to any electrical machine, apparatus, fixture, or fitting arising from or occasioned by over running, excessive pressure, short circuiting, arcing, self beating or leakage of electricity from whatever cause (lightening included) provided that this exclusion shall apply only to the particular electrical machine, apparatus, fixture or fitting so affect and not to other machines, apparatus, fixtures or fittings which may be destroyed or damaged by fire so set up." (emphasis supplied).
Therefore, this claim is not payable.
THERE was no question of bringing to the notice of the SMS (the complainant) about this exclusion clause as the policy was taken by the Bank and not by the complainant. The complainant had filed the claim with the Bank and requested the Bank which in turn made correspondence with the Insurance Company which indicates that he was aware of the existence of the policy. Findings:
BEING aware of the existence of the policy is one thing and being aware of the contents and meaning of the clauses of the policy is another. It is not the case of the Insurance Company that the contents and the meaning of the policy were made known to the complainant (SMS). It is also nowhere on record that the Insurance Company had explained the meaning of all the exclusion clauses to the Bank and requested them in turn to bring them to the notice of the complainant.
THE National Commission in the case of National Insurance Co. Ltd. v. D.P. Jain, III (2007) CPJ 34 (NC), observed as under: "9. The next important question which requires consideration in these Revision Petitions is to the effect of Regulation 3 of the Insurance Regulatory and Development Authority (Protection of Policy Holders'' Interests) Regulations, 2002, framed by Insurance Regulatory and Development Authority (IRDA) in exercise of powers under Section 114(A) of the Insurance Act, 1938 read with Sections 14 and 26 of the Insurance Regulatory and Development Authority Act, 1999.
The Regulations came into effect from the year 2002. Therefore, the policies which are issued after 2002 are being covered by the said Regulations and are required to be followed by the Insurance Company. 11. It is to be stated that the aforesaid Regulations are framed by the IRDA to protect the interests of the policy holders''. Firstly, Regulation 3 requires to be followed by the insurance companies so that the terms of the insurance policy do not operate harshly against the insured and in favour of the insurer.
Regulation 3 thereof reads as under: "3. Point of sale -(1) Notwithstanding anything mentioned in Regulation 2(e) above, a prospectus of any insurance product shall clearly state the scope of benefits, the extent of insurance cover and in an explicit manner explain the warranties; exceptions and conditions of the insurance cover and, in case of life insurance, whether the product is participating (with profits) or non -participating (without profits). The allowable rider or riders on the product shall be clearly spelt out with regard to their scope of benefits, and, in no case, the premium relatable to health related or critical illness riders in the case of term or group products shall exceed 100% of premium under the basic product. All other riders put together shall be subject to a ceiling of 30 per cent of the premium of the basic product. Any benefit arising under each of the rider shall not exceed the sum assured under the basic product.
Provided that the benefit amount under riders shall be subject to Section 2(11) of the Insurance Act, 1938. Explanation - -the rider or riders attached to a life policy shall bear the nature and character of the main policy, viz. participating or non -participating and accordingly the life insurer shall make provisions, etc., in its books. (2) An insurer or its agent or other intermediary shall provide all material information in respect of a proposed cover to the prospect to enable the prospect to decide on the best cover that would be in his or her interest.
(3) Where the prospect depends upon the advice of the insurer or his agent or an insurance intermediary, such a person must advise the prospect dispassionately. (4) Where, for any reason, the proposal and other connected papers are not filled by the prospect, a certificate may be incorporated at the end of proposal form from the prospect that the contents of the form and documents have been fully explained to him and that he has fully understood the significance of the proposed contract. (5) In the process of sale, the insurer or its agent or any intermediary shall act according to the code of conduct prescribed by - (i) the Authority; (ii) The Councils that have been established under Section 64C of the Act; and (iii) The recognized professional body or association of which the agent or intermediary or insurance intermediary is a member.
The aforesaid Regulation makes it clear that - (i) the prospectus of insurance product are required to clearly state the scope of benefits, the extent of insurance cover and in explicit manner explain the warranties, exceptions and conditions of the insurance cover. The phraseology used is "mandatory" by providing that it shall be stated clearly;
(ii) Sub -Regulation (2) provides that an insurer or its agent or other intermediary shall provide all material information in respect of the proposed cover to the insured; (iii) Sub -Regulation 4 also provides that if the proposal and other connected papers are not filled by the prospect, a certificate is required to be incorporated at the end of the Proposal Form from the prospect that the contents of the form and documents have been fully explained to him.
From the above, it is amply clear that the rule making Authority has taken much care to protect the interest of the consumer. At this stage, whether the Insurance Company can contend that even though it has not followed the binding Regulations, the said Regulations/the Exclusion Clauses are yet binding to the complainant? 15. In our view, the unexplained or unnoticed exclusion clauses would not be binding to the insured. The reason being the Regulations are of mandatory in nature so as to protect the consumers'' interests.
The Commission held as under: "(i) Exclusion Clauses'' are required to be ignored if the Insurance Company or its Agent or Intermediary does not adhere to the mandatory requirement of explaining the Exclusion Clauses'' before issuance of insurance cover.
(ii) The procedure prescribed under Regulation 3d, is required to be followed. In case the said procedure is not followed apart from aforesaid consequences, the Regulatory Authority can take action under Regulation 11 (4) against the Insurance Company. (iii) The Regulations are based on settled law declared from time -to -time by the Courts (Re: Modern Insulators Ltd. v. Oriental Insurance Co. Ltd., I (2000) CPJ 1 (SC)=(2000) 2 SCC 734) (iv) Intermediary, the HCL, in the present case, has issued the insurance cover as an agent of the Insurance Company. Therefore, the Insurance Company is bound to reimburse the complainant in case of theft of the mobile handset. Free insurance cover is a method adopted as a part of aggressive marketing."
THE ratio of the above decision is squarely applicable to the case on hand. Accordingly, this Revision Petition is dismissed. There shall be no order as to cost.