Life Insurance Corporation of India vs LALITA BAI SAHU

THIS appeal under Section 15 of the Consumer Protection Act, 1986 , is directed against the order dated 6th January, 2003 in Complaint No. 78/2001 by District Consumer Disputes Redressal Forum, Durg (hereinafter called the ''District Forum'' for short), directing that the appellants/insurers would pay to the complainant/respondent, a sum of Rs. 50,000/- under the life insurance policy obtained by the complainant/respondent.

THE relevant facts not in dispute are that the appellants issued life insurance policy No. 381940001 on 26.2.1999 in favour of complainant''s husband Budhuram Sahu covering the risk from 26.2.1999 to 26.5.1999. Quarterly premium of Rs. 1,432/- was payable under the said policy. THE complainant/respondent is the nominee of insured Budhuram Sahu. Insured Budhuram Sahu died on 18.10.2000. It is also not in dispute that the complainant/respondent submitted claim with the appellants on 6.11.2000. THE claim was repudiated by the appellants/insurers by their letter dated 1.1.2001. The complainant raised the grievance in the complaint that her claim was repudiated by the insurers without justification. It was submitted that the quarterly premium due in the month of August, was to be deposited by September, 2000. However, the complainant''s husband could not do so, on account of his ill-health and in the meanwhile, he expired on 18.10.2000.

The complaint was resisted by the appellants/insurers. According to them, as the quarterly premium falling due for payment on 26.8.2000 was not paid till the expiry of grace period on 27.9.2000, the policy had lapsed. It was, therefore, averred that the complainant/respondent was not entitled to any benefit under the said policy and could not get any amount thereunder. Hence, her claim was repudiated by the appellants/insurers.

THE learned District Forum, was of the view that as the insured was not informed about the non-payment of premium, the policy could not be treated as lapsed. Hence complainant was entitled to the assured amount under the policy. THE learned Distt. Forum, therefore, directed that the assured amount of Rs. 50,000/- be paid by the appellants/insurers to the complainant/respondent. Learned Counsel for the appellants/insurers submitted that the Distt. Forum erred in holding that the policy did not lapse. It was submitted that as per terms of the policy, the premium amount was payable quarterly and a month''s grace period was allowed. It was further submitted that as per the terms of the policy enumerated in the policy document itself, non-payment of premium on the due date or within the grace period thereafter, would result in the lapse of the policy. It was submitted that in the instant case, quarterly premium falling due for payment on 26.8.2000, was not paid till the expiry of the grace period on 27.9.2000. Hence the policy lapsed and the complainant/respondent cannot get any benefit thereunder.

THE learned Counsel for the complainant/respondent, however, supported the impugned order. It was submitted that since the complainant''s husband/insured had fallen ill, he could not pay the premium amount till the expiry of grace period on 27.9.2000. It was further submitted that as the appellants/insurers did not serve the insured any notice in writing intimating him that the policy had lapsed, the appellants/insurers could not unilaterally treat the said policy as having lapsed. It was submitted that in the circumstances, the District Forum justifiably awarded assured sum to the complainant/respondent. As noticed earlier, undisputably, the insured Budhuram Sahu had obtained a policy for the assured sum of Rs. 50,000/- regarding which quarterly premium of Rs. 1,432/- was payable. It is also not in dispute that insured has paid quarterly premium for the month of May, 2000 but had failed to pay the quarterly premium falling due on 26.8.2000 which was payable till the expiry of the grace period on 27.9.2000. In view of the undisputed position as above, the question that arises for consideration is as to whether the policy could be treated as having lapsed by the insurers/appellants? It may be noticed that the only objection on behalf of the complainant/respondent is that the appellants/insurers did not serve the insured with notice intimating him that as the premium was not paid, the policy would be treated as lapsed. However, it may be noticed that in policy document, copy of which is on record of the learned District Forum, conditions and privileges of the insured have been enumerated. Condition No. 2 provides that "a grace period of one month but not less than 30 days will be allowed for payment of yearly, half-yearly or quarterly premium and 15 days for monthly premium. If death occurs within the said period and before the payment of premium then due, the policy will still be valid and the sum assured will be paid after deduction of the said premium as also unpaid premium falling due before the next anniversary of the policy. If the premium is not paid before the expiry of the days of grace, the policy lapses."

THE condition as above, mentioned in the policy document itself, would form part of agreement between the parties. As per the said term, on non-payment of premium by the due date, or within the extended period of grace, the policy would stand lapsed. THE unequivocal language of said term of policy, leaves no manner of doubt that non-payment of the premium till expiry of the grace period, would result in the policy lapsing. THEre is no clause in the terms of policy, which stipulates that the insurer should serve the insured with notice before treating the policy as having lapsed.

IN view of above, in the instant case, since the premium admittedly was not paid till expiry of grace period on 27.9.2000 the policy issued by the appellants in favour of the insured automatically stood lapsed as per terms of the policy, as noticed above. No further action such as notice in writing was required to be given by the insurers to the insured. The contentions as above, of the learned Counsel for the complainant/respondent, therefore, cannot be accepted. However, though the appeal cannot be allowed on merits, but it appears that omission on the part of the deceased to pay the premium was on account of his ill-health as is indicated by the medical certificates and documents placed on record by the complainant. The death occurred shortly after the expiry of grace period for payment of premium. There is no allegation that previous premiums were not duly paid in time. In fact, the receipts placed on record of the District Forum shows that earlier premia were duly paid by the complainant. In the circumstances, we find it a case where indulgence shall be shown by the appellant Insurance Company and that it shall consider the payment of ex gratia payment to the complainant/respondent who is the nominee and wife of the deceased. We refer in the above context to the decision of the State Commission of Kerala in Branch Manager, Life Insurance Corporation of India & Ors. v. Sarasammal, 1998 (2) CPR 239. It is accordingly hoped that appellant Life Insurance Corporation of India shall take a sympathetic view of the claim of the complaint/respondent.

Accordingly, this appeal is allowed. The impugned order of the District Forum is set aside and the complaint is dismissed. However, it is hoped that appellant Life Insurance Corporation of India shall keep our observation in Para 12 above. The parties are left to bear their own costs of this appeal. Appeal allowed.