Narasamma vs Branch Manager, L.I.C. of India

THE complainants who are wife and minor children of one M.N. Hanumantharaju have filed this complaint before this Commission to issue a direction to release the entire amount on the policy bearing No. 361040176 insured by the deceased M.N. Hanumantharaju with the applicable bonus, accidental and all other benefits amounting to Rs. 6,60,000/- with interest @ 18% p.a. on the said amount from 29.9.1997 till payment and also for a direction to the opposite parties to pay a sum of Rs. 50,000/- towards deficiency in service, Rs. 25,000/- towards unfair and restrictive trade practices and Rs. 25,000/- towards negligence.

THE allegations made in the complaint are that one M.N. Hanumantharaju was an agent bearing No. 2455602 under LIC of India and he had also taken a policy on his life under Bheema Kiran in Policy No. 361040176 dated 28.8.1994 for a period of 30 years on a monthly premium of Rs. 292/-. THE said monthly premiums were to be deducted regularly from out of the commission payable to the said M.N. Hanumantharaju and the same were deducted from October, 1994 regularly. The said M.N. Hanumantharaju''s agency came to be terminated w.e.f. 12.6.1996 but he was eligible to receive renewal commission on policies canvassed earlier. He was getting a commission even after the termination of the agency also. The said Hanumantharaju when he was alive had given a letter dated 25.3.1997 requesting the opposite parties by giving all the particulars of the policies sold under his agency and the commission he is entitled to get. The said letter has been addressed to the Senior Divisional Manager, LIC of India who is opposite party-2 who in turn forwarded the said letter to the 1st opposite party i.e. the Branch Manager, LIC of India, Doddaballapur to take appropriate action in the matter. In the said letter the insured had made it clear to the opposite parties with regard to the policies sold under his agency and commission payable regularly till the maturity of the said policies. According to the complainants it was incumbent upon the opposite parties to adjust the premium due on the policy from out of the commission amount due to the insured Hanumantharaju which was retained by the opposite parties. The opposite parties did not do this book adjustment for the reasons best known to them, though substantial amount of commission payable to the insured was available with them along with the policy records pertaining to the insured who has insured his life with the same branch where he was operating as an agent. The opposite parties had no reasons to withhold the commission payable to him for a considerable period of time without adjusting the said commission amount towards premium on the said policy.

The insured M.N. Hanumantharaju died on 13.7.1997 due to accidental drowning leaving behind the complainants as the legal heirs. The complainant forwarded all the required documents to the opposite parties on 29.8.1997 and requesting them to release the sum assured with all applicable benefits, bonus etc., for which there was some correspondence by the opposite parties. However, the opposite parties by letter dated 8.7.1998 rejected the claim of the complainants stating that the policy had lapsed. The opposite parties are duty bound to adjust the commission amount towards the premium of the insured and they are also duty bound towards their customers to atleast inform to make suitable arrangement in case the accrued commission was not at all sufficient to cover the monthly premium. The opposite parties, from the date of termination of the agency of the insured M.N. Hanumantharaju till today did not spell a word with regard to any of the difficulties faced by them in adjusting the commission amount towards the monthly premium payable by the insured. The opposite parties have released the commission amount in favour of the complainants without adjusting the same towards the premiums even after the death of the insured Hanumantharaju. This attitude on the part of the opposite parties amounted to showing negligence, deficiency in service besides adopting unfair and restrictive trade practices. The complainants further contended that the opposite parties after retaining the commission accrued to the insured now cannot say that the policy had lapsed and hence, the complainants are not entitled for the claim. Since there was no response from the opposite parties, a legal notice was sent through an Advocate which was served on the opposite parties on 4.8.1998 bringing to their notice of the facts for which there was no response by the opposite parties. Hence, the complainants have approached this Commission for the relief mentioned above.

IN response to the notice issued by this Commission the opposite parties filed the written version admitting that the said Hanumantharaju was working as an agent under them and he had a policy under Bheema Kiran and the commission payable to him was adjusted towards his monthly premium which was done from October, 1994. His agency came to be terminated w.e.f. 12.6.1996. From the date of termination of the agency till the date of death, all the commissions that were due to him were paid during his life-time. The premiums due upto and inclusive of premium due December, 1996 were recovered out of these payments. Thus, the policy lapsed from 28.1.1997 for non-payment of premium dues. On 17.3.1998 commission bills pending from the date of death were settled in favour of the wife of the deceased agent. According to them the policy of the insured continued to be in lapsed condition on the date of death of life assured. They have further contended that the policy was specifically issued under LIC commission deduction scheme of recovering the monthly premiums from out of the commission as and when paid monthly. The agent/life assured under the above scheme of the LIC while taking of the policy on his life had specifically authorised the LIC to recover the premiums from out of the commission payable to him, in terms of the authorisation letter dated 31.8.1994 given by the insured to the LIC. The said letter dated 31.8.1994 contained certain conditions pertaining to the alternative arrangements that the agent/life assured had agreed to make in the event of the commission not paid to him for whatsoever may be the reasons. They have further submitted that in the instant case the insured was aware of the fact that the commission was not released from January, 1997 to July 1997 as he did not receive any commission from the LIC. INspite of this fact, he did not make alternative arrangement as stipulated in the authorisation letter dated 31.8.1994 and hence, the policy remained in a lapsed condition from January, 1997 to July, 1997 as the monthly premiums were not paid by the insured in terms of the agreed arrangement. That being so, the opposite parties were justified in repudiating the claim of the complainants on the ground that the policy was in a lapsed condition. According to them there was no deficiency on their part and requested this Commission to dismiss the complaint. The opposite parties also filed their amended version. The parties have filed their affidavits and produced documents. We heard Mr. K.R. Anantha Murthy, learned Counsel on behalf of the complainants and the learned Counsel Mr. C.V. Sathyanarayan on behalf of the opposite parties. They took us through the pleadings, affidavits and the relevant documents.

THE learned Counsel Mr. K.R. Anantha Murthy submitted before us that the Insurance Company, was not justified in repudiating the claim on the ground that the policy was in a lapsed condition. He pointed out that Hanumantharaju was serving with the opposite parties as an agent at Doddaballapur Branch and had obtained a policy under Commission Deduction Scheme which is similar to Salary Savings Scheme. THE same branch was maintaining his agency account as well as his personal policy account and the branch office had to make only book adjustment from commission account to the personal policy account, which the opposite parties failed to give effect to even though sufficient commission was available to the insured. He has further pointed out that in this regard the insured had given a detailed representation on 25.3.1997 wherein he had brought to the notice of the opposite parties that the annual premiums collected through his agencyship was Rs. 1,36,526/- and the complainant and his legal heirs are entitled to 5% of the renewal commission which will be sufficient to meet the premium amount of the policy. THE opposite parties have failed to reply to the said representation. Hence, he submitted before this Commission that the opposite parties have not applied their mind while rejecting the complainants'' claim. He has also further pointed out that the Insurance Company, has not informed the insured that the monthly commission payable to him after his termination of agency was not sufficient to cover the monthly premium to be adjuted towards his policy especially when the Insurance Company, has not disputed the total policies canvassed and sold by the insured under his agencyship. He has also further pointed out that the authorisation letter obtained by the Insurance Company, from the insured was not part and parcel of the policy conditions as such the same does not have any legal force. He has placed reliance on the following decisions : 1. 1993 (2) CPR 208 2. AIR 2000 SC 43 3. I (2000) CPJ 50 (NC) 4. I (1999) CPJ 74 (NC) He requested this Commission to allow the complaint by holding that the O.Ps. are negligent and have shown deficiency of service and hence, to award the policy amount with all the benefits and interest as claimed in the complaint in the interest of justice and equity. We heard Mr. Sathyanarayan, learned Counsel on behalf of the respondents. He contended that the agent/life assured is bound by the terms and conditions of the policy bond and also by the commission deduction scheme of the LIC. He pointed out that the insured in the present case had given a letter of authority in favour of LIC for enabling the LIC to adjust the monthly premium under the policy from out of the commission earned by the agent. If there is no commission payable to the insured the policy cannot be kept in full force during the life-time of the agent/life assured. In other words, as long as the agent earns commission, part of the Commission is adjusted towards monthly premium due and if no such commission is earned by the agent, the policy becomes lapsed for non-payment of the monthly premium in terms of the policy bond. The letter of authority which is part and parcel of the scheme specifically provides that the agent/life assured shall be entirely responsible for any consequences on account of non-payment of premiums on his policy for reasons beyond LIC''s control, such as in the event of non-accrual of commission or delay in preparation of commission. The Insurance Company, has admitted in his written version that the insured was eligible to receive renewal commission as per rule in terms of the LIC letter dated 16.7.1996. He justified the action of the Insurance Company in repudiating the claim on the ground that the policy of the insured was in a lapsed condition. He has placed reliance on the decision of the National Commission rendered in R.P. 234/1992, 435/1994, 527/1992 and F.A. 620/1993 and contended that the Insurance Company was justified in rejecting the claim of the complainants on the ground that the policy was in a lapsed condition and hence there was no deficiency on the part of the Insurance Company. Hence, he requested this Commission to dismiss the complaint as devoid of merits. We have carefully considered the rival submissions of the learned Counsels for the parties in the light of the materials available on record. The short point for our consideration in this complaint is whether the O.Ps. were justified in repudiating the claim of the complainants on the ground that the insured policy was in a lapsed condition.

THERE is no dispute that the insured Hanumantharaju was serving in the O.Ps. as an agent at Doddaballapur Branch and also obtained policies under the commission deduction scheme. The same branch was maintaining his agency account and personal policy account and the said branch was adjusting his commission towards his policy. However, since there was delay in getting the commission by the insured he had made a representation by sending a letter dated 25.3.1997 bringing to the notice of the Insurance Company, about the amount he collected as an agent and the commission which he is entitled to and the failure on the part of the branch in adjusting the said amount towards his premium. According to the said letter he collected through his agencyship a total sum of Rs. 1,36,526/-. Hence, he is entitled to 5% as renewal commission. Though this letter was sent to the authority, no reply was given to the insured. The insured was under the impression that the branch was adjusting the commission towards his policy premium. Now the Insurance Company cannot contend that there was no commission to the insured so as to adjust the said amount towards his premium. If there was no commission which was adjustable to the premium, it was the bounden duty of the Insurance Company to inform the insured the fact that there was no commission or even if the commission is available, it was not sufficient to cover the premium of the policy of the insured. In the present case the Insurance Company has not bothered to respond to the letter addressed by the insured. It is pertinent to know here that after the death of the insured the Insurance Company has paid certain amounts to the legal representatives of the insured towards the commission amount. If the commission was not available to the insured so as to adjust towards his policy, how the Insurance Company has paid the said commission to the legal representatives of the insured after his death. It is a clear case where the Insurance Company has totally neglected to adjust the commission towards the premium of the insured. The insured had clearly stated in his letter the amount which he was entitled to get as commission even after the termination of his agencyship. The Insurance Company had not bothered to reply to the said letter.

COMING to the authorisation letter submitted by the insured to the Insurance Company is concerned, admittedly, it is not a part of the policy. In this connection the Advocate for the complainant has invited our attention to a decision reported in 1993 (2) CPR 208, wherein the Maharashtra State Commission has observed that the claim of the complainant cannot be rejected by the O.P. i.e., the Insurance Company for a condition which does not find place among the written conditions of the policy. In the present case the policy conditions are not incorporated in the policy. A separate authorisation letter has been taken from the insured. The learned Counsel Mr. Sathyanarayan has however, placed reliance on the decisions which we referred above. In the first case the National Commission has observed that although the policy had lapsed for non-payment of the premium, the DF directed payment of 50% of the sum assured considering the broad view of the case. The State Commission confirmed the order of the District Forum on humanitarian and compassionate grounds although it realised that as per the terms of contract no amount is payable. However, the National Commission has held that the grounds on which the Corporation repudiated the claim are perfectly valid and accordingly, it has allowed the revision petition. In the present case we have observed that the policy had not lapsed for non-payment of premiums. It was the negligence on the part of the Insurance Company, in not adjusting the commission towards the premium of the insured. That being so, this decision cannot be applied to the facts of the present case. As far as the second decision is concerned, the National Commission has observed that the repudiation of the claim for valid and justified grounds cannot be interfered with. In the present case, according to us, the repudiation of the claim was not made on valid grounds. Hence, the said case is not applicable to the present one. In R.P. No. 527/1992, the National Commission has observed that when a policy had lapsed on account of the default of the insured there was no deficiency in service on the part of the Insurance Company and the Insurance Company was justified in not paying the double accident benefit to the insured. Since in the present case we are holding that the policy had not lapsed the principle laid down in the said revision petition cannot be applied.

Now coming to the decision cited by the learned Counsel for the complainant is concerned, he has invited our attention to the Supreme Court decision reported in AIR 2000 SC 43, in which the Supreme Court has observed that in a salary savings scheme of LIC, the employer was agent of LIC for employee, it was the duty of the employer to deduct the premium from the monthly salary of the employee and transmit to the Insurance Company and non-deduction of the said amount will amount to deficiency in service. Placing reliance on the said decision the learned Counsel Mr. Anantha Murthy submitted that it was the duty of the Insurance Company to adjust the commission amount which was available to the insured towards his premium and non-adjustment of the said amount will amount to deficiency of service.

AFTER reassessing the entire materials available on record in the light of the arguments advanced by the learned Advocates for the parties, we are of the opinion that the opposite parties are not justified in repudiating the claim on the ground that the insurance policy of the insured M.N. Hanumantharaju was in a lapsed condition at the time of his death. Hence, we allow this complaint and direct the opposite parties to pay the insured amount on the policy bearing No. 361040176 insured by the deceased M.N. Hanumantharaju with all the benefits with interest at 15% p.a. from the date of the complaint till the date of payment. Since we are awarding interest on the said amount, we decline to pass any compensation to the complainants. We further direct that the said amount should be paid by the opposite parties within a period of two months from the date of receipt of a copy of this order. The complainants are also entitled for a costs of Rs. 2,000/- towards this proceeding. Complaint allowed with costs.