National Insurance Co. Ltd vs Risheendran Nambiar & Anr

In this Revision Petition, by National Insurance Co. Ltd. (for short “the Insurance Companyâ€), Opposite Party No.1 in the Complaint, challenge

is laid to the order dated 30.01.2010, passed by the Kerala State Consumer Disputes Redressal Commission at Thiruvananthapuram (for short “the

State Commissionâ€) in Appeal No. 308/2007. By the impugned order, while affirming the decision dated 05.02.2007, rendered by the District

Consumer Disputes Redressal Forum at Kannur (for short “the District Forumâ€) in OP No. 239 of 2003, holding that there was deficiency in

service on the part of the Insurance Company in declining to entertain the claim, preferred by Respondent No.1 herein â€" the Complainant, under a

Shopkeepers’ Insurance Policy, the State Commission has upheld the direction to the Insurance Company to pay to the Complainant a sum of

1,90,115/-, the loss assessed by the Surveyor, and 1,000/- towards litigation costs. However, the State Commission set aside the direction to the

Insurance Company for payment of compensation of 10,000/- to the Complainant.

The short question, raised by the Insurance Company in this Revision Petition, is whether the Insurance Company could be held liable for the act of

omission or commission by its accredited Agent?

Although the answer to the afore-stated question is found in the Insurance Act, 1938 itself, but regard being had to the fact that the Learned

Counsel appearing for the Insurance Company has pressed into service certain Regulations framed under the said Act as also some decisions

rendered by this Commission to bring home his point that in the absence of any policy in favour of the Complainant, there was no privity of contract

between the Insurance Company and the Insured and, therefore, the Fora below have committed material irregularity in issuing the afore-stated

direction to the Insurance Company, we shall deal with the same, for which purpose a brief reference to the circumstances in which the afore-noted

question has cropped up would be necessary.

The Complainant was engaged in the purchase and sale of handlooms at its shop. In order to have a protective umbrella, he decided to have an

insurance policy. On 10.04.2003, he entrusted the proposal form, along with insurance premium, amounting to 2,059/-, in cash, to the accredited Agent

of the Insurance Company â€" Opposite Party No.2 in the Complaint. However, for the reasons best known to him, the Agent, in turn, submitted the

proposal form, along with his own cheque towards the premium amount, in the concerned Branch of the Insurance Company only on 09.05.2003.

Unfortunately, on 11.05.2003 around 2.00 a.m., there was a fire in the shop, which resulted in the damage to the goods.

On being informed about the incident, a Surveyor and the Manager of the Insurance Company inspected the spot on the same day and carried out

certain investigations. However, vide letter dated 12.05.2003, the Complainant was informed that since the cheque towards the premium was issued

by a third party, who had no insurable interest in the proposed risk, the same was in violation of Section 64 VB of the Insurance Act and, hence, the

proposal form submitted by the Agent on 09.05.2003 was rejected.

Being aggrieved, the Complainant filed the Complaint before the District Forum, in which the afore-stated directions were issued.

Questioning the legality and correctness of the order passed by the Fora below, Learned Counsel appearing for the Insurance Company has again

relied on Section 64 VB of the Insurance Act as also on certain Regulations contained in the Insurance Regulatory and Development Authority

(Protection of Policyholders’ Interests) Regulations, 2002. Reliance is also placed on certain decisions rendered by this Commission, wherein

while dealing with the claims under the life insurance policies, it has been held that where no concluded contract of insurance exists, the Insurance

Company cannot be made liable to pay the sum assured under the policy.

Having perused the afore-stated provision in the Insurance Act, as already noted above, we are unable to persuade ourselves to agree with the

Learned Counsel. Sub-Section (4) of Section 64 VB, on which heavy reliance was placed by the Insurance Company in its afore-stated letter, reads

as follows:

“(4) Where an insurance agent collects a premium on a policy of insurance on behalf of an insurer, he shall deposit with, or despatch by post to, the

insurer, the premium so collected in full without deduction of his commission within twenty-four hours of the collection excluding bank and postal

holidays.â€​

The said provisions casts an obligation on the Agent of the Insurance Company to deposit the amount of premium, collected by him on any policy of

insurance, with the Insurance Company, within 24 hours of the collection. In the instant case, there is no dispute that the Agent failed to deposit the

amount of premium collected by him from the Complainant in cash within the said stipulated time and, hence, there was clear default on his part.

However, the question formulated above is whether the Insurance Company could be made liable for the said inaction/omission on the part of its

accredited Agent? In our view, the answer to the said question is contained in Sub-Section (5) of Section 42 of the Insurance Act, which reads as

follows:

“(5) The insurer shall be responsible for all the acts and omissions of its agents including violation of code of conduct specified under clause (h) of

sub-section (3) and liable to a penalty which may extend to one crore rupees.â€​

A plain reading of the said provision leaves little scope for doubt that an Insurance Company is liable for all the acts and omissions of its Agent,

including violation of the code of conduct, specified in the said Section itself. In the light of the said clear provision, the decisions pressed into service

on behalf of the Insurance Company are of no avail to it.

In light of the afore-noted statutory provisions, we do not find any jurisdictional error in the impugned order, warranting interference in the

revisional jurisdiction conferred on this Commission.

Consequently, the Revision Petition fails and is dismissed accordingly, leaving the parties to bear their own costs.