Consumer Education and Research Society vs Life Insurance Corporation of India

COMPLAINANT No. 1 is a registered voluntary Association and complainant No. 2 is the son of the assured Kum. Virbala P. Shah who died in U.K. on 22.7.68, two days after she delivered her son- complainant No. 2

KUM. Virbala P. Shah mother of complainant No. 2 took a Life Insurance Policy from the opposite party - the Life Insurance Corporation of India (hereinafter referred to as LIC) for Rs. 10,000/- in the year 1965 when she was unmarried. They Policy issued by the LIC was subject to first pregnancy clause which reads as under: "Notwithstanding anything within mentioned to the contrary, it is hereby declared and agreed that should the death of the life assured occur as result of pregnancy or from any other cause directly or undirectly attributable to pregnancy, Corporation''s liability shall, in case such pregnancy has occurred before she had a normal full time confinement, be limited to either:- (a) a sum equal to the total amount of premiums (exclusive of extra premium) paid under this Policy, without interest less any sum paid by the Corporation, in respect of business in cash, portions of sum assured or of surrender value or otherwise. (b) the surrender value of the Policy, whichever shall be greater but shall not exceed in any case the amount which would otherwise have been paid at death."

After taking the Policy Kum. Virbala married in May, 1966 and left India for U.K. with her husband in October, 1966.

On July 20, 1968 she delivered a male child, the present complainant No. 2 after full confinement in Good-Hope Hospital at Sutten Coldfield, U.K. through ceasarian operation. Unfortunately she died on 22.7.1968 on account of cardiac arrest and an inquest was held and her death by cardiac arrest was confirmed. The copy of the report by the doctor is produced at Annexure-2. It is stated that Mrs. Virbala Shah was under constant care of qualified doctor right from the time of conception to the time of her delivery in Good-Hope hospital at Sutton Coldfied. She was also enjoying the benefits available to the pregnant mothers from the State of England.

IT is an admitted position that there was no nomination in the life policy of Virbala. The father of Mrs. Virbala lodged a claim for the assured amount of Rs. 10,000/- with LIC but the LIC repudiated the claim on the ground that her death was directly connected with first pregnancy clause and, therefore, was entitled to the return of premium only according to Clause 4 of the Policy. Mr. Popatlal, father of Mrs. Virbala died and thereafter the paternal grand-father Jayantibhai Kothari took up the matter on behalf of the minor with LIC but the opposite party did not pay the assured amount.

THAT the complainant No. 2 completed 18 years in the year 1986 and on 27.2.1989 he filed form No. 3806 claiming the assured amount. A reminder was sent and in reply to this reminder the opposite party No. 2 sent a discharge voucher for Rs. 1421.70 p which was the premium amount and did not entertain the claim of the complainant No. 2. This amount was not acceptable to complainant No. 2 and he, therefore, approached the complainant No. 1, a registered voluntary consumer association and the association took up the matter with the Insurance Company. But the claim was not entertained and, therefore, the present complaint has been filed jointly by both the complainants. The main contentions of the complainants are that:- (1) the so-called first pregnancy clause was not applicable in respect of a female who had not undergone full time confinement but who was expected to go to qualified doctors in the event of delivery. And in this case this endorsement has been added mistakenly/clandestinely to avoid the claim of the beneficiary, inconsistent with and contrary to their own policy declaration. (2) the first pregnancy clause is not applicable to the cases of this type. The case of Virbala has not been dealt with in good faith and there was absence of fair dealing is evident from the fact that Kum. Virbala was not informed of her rights under law. She would certainly have paid extra premium if she was informed of pregnancy clause to dispense with that clause. (3) even within the terms of endorsement on this Policy Kum. Virbala had a normal full time confinement at the end of which the child was born alive and in good health. The death occurred two days later due to cardiac arrest and not due to pregnancy. Repudiation of claims under these conditions is a deficiency of services and gross negligence on the part of the Opposite Party.

The complainant has further stated that after the nationalisation of insurance business the opposite parties are under a duty to conduct business of insurance in a manner which facilitates the settlement of claim of beneficiary. The policies should have been guided by the consideration of service to the people and the opposite parties are under duty to exercise its powers in a fair and reasonable manner keeping in mind the underlying objectives of its nationalisation. However, the attitude and approach of the opposite party are in no way better, in fact, worse than an ordinary commercial organisation. It has no respect for fairness in the dealings.

IN response to our Summons the opposite parties have filed affidavit-in-reply in which the opposite parties have taken several preliminary objections but the following are pressed. 1. That there is delay and laches in filing the complaint. 2. That since the opposite party-Corporation is carrying its business and situated in Bombay the Commission has no territorial jurisdiction. 3. That there is no deficiency in service inasmuch as the opposite parties have rendered all possible services to the representatives of the assured. 4. That the complicated issues of facts and law cannot be decided in this summary proceedings.

WE find no merits in any of the objections. The claim was made by the father and maternal grand-father of complainant No. 2 when he was a minor but the same was not entertained. He also made a claim personally with the Insurance Company within 3 years after completing 18 years and the LIC also made an offer of returning the premium. Therefore it cannot be said that no efforts were made by the present claimant. The complaint having been filed within 2 years from the date of offering the premium amount, it cannot be said that the complaint is not within statutory period. With regard to the second objection regarding territorial jurisdiction it is admitted that the Policy was taken at Ahmedabad and premium was paid at Ahmedabad. Part of the cause of action being arisen at Ahmedabad, this Commission has territorial jurisdiction.

Now it is a settled position of law that nonpayment of insurance amount without legitimate ground is a deficiency in service because the Insurance Company is legally liable to pay full assured amount after the Policy is accepted and there is no valid reason for repudiation.

THAT the Commission has the same jurisdiction as the Civil Court and in the present case the evidence is almost admitted. The question that arises is the proper interpretation and conclusion from the approved facts. Therefore it cannot be said that there are complicated questions of law and facts and the party would not get proper opportunity. There is no merit in this contention also. The main defence of the LIC is the insertion of Clause 4 popularly known as pregnancy clause. The opposite party is a statutory corporation and a State within the meaning of Article 12 of the Constitution of India and, therefore, its actions are governed by the policy which should be fair and non-arbitrary or discriminatory. The purpose of introducing the pregnancy clause is to differentiate between policy holders who are likely to go to unqualified persons for delivery and the women who are likely to go to qualified doctors. The risk factor is, therefore, dependent upon the above probability. According to the complainant there is a provision that if a single premium of Rs. 51 per Rs. 1,000/- is paid the pregnancy clause may not be applied. This has not been disclosed by the LIC to the assured.

NOW it cannot be disputed that the assured was a graduate. The proposal form itself shows that she was a graduate and was employed as a teacher. She has given her father''s address because her employment was transferable. The assured was unmarried and, therefore, she may not be knowing when she will get married, but it can be fairly anticipated that an educated working lady would not go to any unqualified person for her delivery if she becomes pregnant. Again if Rs. 50/- more were payable to eliminate the pregnancy clause, if she had been told about this fact, the assurd might have opted for paying Rs. 50/- more for Rs. 10,000/- policy. Lastly, the LIC manual for agents (page 17) gives power to the Insurance Company to waive this pregnancy clause and obviously this power is given to the LIC to exercise the same when they come to know that in fact the delivery has been made, in a hospital and before a qualified doctor. In the instant case the assured was admitted in a U.K. hospital having facility of qualified doctors and in fact nothing happened during the confinement and she delivered a male child who is supposed to be healthy and she died after two days. Therefore it cannot be said that her death was due to the treatment she had received from unqualified doctors. Therefore it was a fit case in which the LIC could have waived this clause. Having considered the oral evidence, affidavit and documents produced by the parties we are of the opinion that Kum. Virbala was not only educated and graduate but was also serving as a teacher and there was no likelihood that she would go to a quack for delivery. There is no evidence to show that proper information was given to her. She had given only her permanent address since her job was transferable and by merely referring to the permanent address the Insurance Company cannot jump to the conclusion that she is a resident of a very small village where medical treatment would not be available. Assuming for the sake of argument that when the clause was applied, the Insurance Company might be under misapprehension but when the clear fact was submitted to the Company that for the purpose of delivery she was admitted in one of the most modern hospitals and was attended by qualified doctors and had delivered the child but died after two days not on account of treatment of non-qualified doctors for which the Insurance Company was asking for higher premium the Insurance Company being a nationalised service oriented company ought to have paid this claim. According to our opinion the nominee is entitled to the insurance amount when it is proved to beyond doubt that the policy was in existence and the insured died by natural death. According to our opinion the pregnancy clause was not applicable in respect of Kum. Virbala who was in the normal course expected to go to a qualified doctor in the event of delivery. The endorsement was added either indifferently or under a mistake which according to our opinion is inconsistent and contrary to the declared policies of the Corporation. The contention of Mr. Desai that there was no deficiency in service because the Insurance Company has rendered all possible services is totally mis-conceived. The denial of a legitimate claim where the clause was not applicable or if applied could have been waived is a clear deficiency in service and the contention that the complaint involves complicated issues of facts and law and, therefore, should not be decided in the summary proceedings is also mis-conceived. These issues can be decided on affidavit because the facts are not disputed at all. The question only is whether the application of pregnancy clause is justified and legal or not. Such contention has been decided of Hon''ble National Commission in the Decision of M/s. Rajkamal & Co. v. United India Insurance Company Ltd. & Ors. in I (1992) CPJ 121 (NC) O.P. No. 44 of 91 decided by (NC) on 9.1.92 and, therefore, we reject this contention also.

NOW the question raises as to what relief should be granted to the complainant because considerable time has been passed. It cannot be disputed that the natural guardians of the minor has not filed any proceedings in the Court or before any other adjudicating authority. No doubt, the minor when he attains the age of major has also the right to file the proceedings within statutory period. But for delay one cannot find fault with the Insurance Company. The Insurance Company therefore cannot be penalized for such a long delay. We, therefore, do not propose to pass an order for interest exceeding three years. We are also of the opinion that on account of non payment of the amount of Rs. 10,000/- the complainant might have suffered mental agony and distress but this is not a case in which an exemplary or punitive damage can be given. It is true that the value of Rs. 10,000/- which were available in 1968 has been depreciated to a great extent. Considering the facts and circumstances of the case we direct that the Insurance Company will pay Rs. 3,000/- for pain and suffering. ORDER The complaint is allowed. The Opposite Party - The Life Insurance Corporation of India is ordered to pay Rs. 10,000/- to complainant No. 2 - the insured amount with interest @ 18% for last three years and will pay a further interest @ 18% from the date of the award till the payments are made. 2. The Insurance Company will pay Rs. 3,000/- for pain and suffering to complainant No. 2. 3. The Insurance Company shall also pay the cost which is quantified at Rs. 500/-. 4. The Opposite Party will deposit this amount within three weeks from the date of receipt of the order. Complaint allowed.