AI Structured Summary
Not yet generated for this judgment
Judgment
Subhash Chandra, Member
The present first appeal has been filed under section 17 of the Consumer Protection Act, 1986 (in short, ‘the Act’) against order dated 30.05.2019 in complaint no.123 of 2007 passed by the Delhi State Consumer Disputes Redressal Commission, Delhi (in short, ‘the State Commission’) directing the appellant to refund the excess amount of premium charged along with simple interest @ 6% per annum from the date of excess amount was taken within one month of the order.
The impugned order of the State Commission reads as under:
“18. I have given a careful consideration to the subject matter. “From the records I notice that the premium charged in indisputably not in accordance with the agreed terms and thus in violation thereof. In these circumstances, the insurance company has been found to be in default, they having charged the premium more than the amount as agreed to. Insurance is also a contract like any other contract as settled by the orders passed by the Hon’ble NCDRC or the Hon’ble Apex Court from time to time. Hon’ble Apex Court in Civil Appeal no.1557 of 2004 – Export Credit Guarantee vs M/s Garg Sons International is pleased to observe as under:
It is a settled legal proposition that while construing the terms of a contract of insurance, the words used wherein must be given paramount importance, and it is not open for the court to add, delete or substitute any words. It is also well settled, that since upon issuance of any insurance policy, the insurer undertakes to indemnify the loss suffered by the insured on account of risks covered by the policy, its terms have to be strictly construed in order to determine the extent of the liability of the insurer. Therefore, the endeavor of the Court should always be to interpret the words used in the contract in the manner that will best express the intention of the parties. (Vide M/s Suraj Mal Ram Niwas Oil Mills (P) Ltd., vs United India Insurance Co. Ltd., (2010) 10 SCC 567).
From the above, it is apparent that the terms of the policy has to be followed in letter and spirit. Insurance like any other contract is also contract, the terms of which are binding to the parties to the contract.
Having regard to the discussion done and the legal position explained I am of the considered view that the complaint deserves to be allowed. It is ordered accordingly. Having done so insurance company is directed to refund the excess amount as prayed for with simple interest at the rate of 6% from the date of excess amount was taken, within one month from the date of receipt of the certified copy of this order.
Ordered accordingly.”
The brief facts of the present appeal are that the respondent had taken an Erection All Risk Policy (in short, ‘the EAR Policy’) from the appellant bearing no. 040201/21/1/0003/99 dated 01.04.1999. The period of insurance was from 01.04.1999 till 31.03.2003 (with a three month testing period) for which premium paid was Rs.66,76,171/- paid in instalments between 01.04.1999 to 01.10.2002. Along with the issuance of this policy in 1999, a Memorandum of Understanding (in short, ‘the MOU’) was also entered into between the appellant and the respondent which provided cover for third party liability, additional custom duty, debris removal, escalation, design defects and earthquake on “first loss basis”. According to the respondent, as per the insurance law, “first loss basis” means coverage for an amount that is less than the sum insured. In the instant case, the insured covered for earthquake risk was limited to 20% of the sum insured. For this purpose, the insured received a discount of 50% of the premium at the time of the MOU.
The said EAR policy was subsequently renewed from time to time by mutual consent. The first extension was from 01.04.2003 to 30.09.2004 for which an additional premium of Rs.5,84,169/- was paid. The second extension was from 01.10.2004 till 31.03.2005 for which additional premium of Rs.15,37,508/- was paid. Both the extensions were in continuation of the EAR Policy and were limited to “first loss basis”, i.e., 20% of the sum insured. This understanding between the parties was supported by the MOU of 1991, letter dated 29.03.2001 and another letter dated 28.03.2003 which were jointly executed documents. The letter dated 28.03.2003 also makes it explicit that the respondent would receive a discount of 50% on the premium.
The respondent, during a review in 2005, realized that the appellant had calculated and charged premium on the basis of 100% earthquake cover as against 20% earthquake risk that was part of the EAR Policy on “first loss basis”. The premium charged was also on the basis of earthquake cover for 100% of the sum insured. He has accordingly claimed refund of the excess amount charged and approached the State Commission with the following prayer:
(a) Set aside the impugned judgment and order dated 30.05.2019 passed by the State Commission, Delhi in complaint no. 123 of 2007 against the appellant insurance company;
(b) Allow the present appeal and award the cost of the appeal to the appellant; and
(c ) Pass any other or further order (s) as this Hon’ble Commission deems fit and proper in the facts and circumstances of the present case.
It is the appellant’s case that the premium charged on the EAR policy was correct and that the refund being sought after almost six years of taking of the policy. The subsequent MOUs and letters in confirmation amounted to the respondent agreeing to all the terms of the policy. This cannot be un-done now. The appellant has relied upon the judgment of the Hon’ble Supreme Court in Deokar Exports Pvt. Ltd. Vs New India Assurance Co. Ltd., (Appeal no.5103 of 2002 decided on 23.09.2008), wherein it has been held that:
“In a contract of insurance, rights and obligations are strictly governed by the policy of insurance. No exception or relaxation can be made on the ground of equity”.
Reliance has also been placed on Oriental Insurance vs Sony Cheriyan – (1999) 6 SCC 451 wherein the Hon’ble Supreme Court held as under:
“The insurance policy between the insurer and the insured represents a contract between the parties. Since the insurer undertakes to compensate the loss suffered by the insured on account of risk covered by the insurance policy, the terms of agreements have to be strictly construed to determine the extent of liability of the insurer. The insured cannot claim anything more than what is covered by the insurance policy’’.
The respondent has contended that the appellant has not denied that the premium charged was on the basis of earthquake cover for 100% either before the State Commission or in the present appeal. Therefore, it is the appellant’s case that he cannot be faulted. The respondent also contended that the proposal form had not been produced before the State Commission and therefore, this document cannot be relied upon by the appellant in this appeal. It is the contention of the respondent that the policy, the subsequent MOU and letters dated 29.03.2001 and 28.03.2003 should be read as a part of the insurance policy and that the appellant should have calculated the premium on the basis of 50% discount on the premium that was provided in order to limit the earthquake risk to a first loss basis as was, in fact, the agreement between the two parties. In not doing so, the appellant had been held liable for deficiency in service by the State Commission which had ordered vide the impugned order in his favour.
Parties have filed their written arguments. We have heard the learned counsel for the parties who have also filed their short synopsis of arguments and perused the records carefully.
It is evident that the EAR policy that was taken in 1999 for a period of three years initially was also renewed subsequently on payment of additional premium. It is not disputed that the EAR Policy was supplemented by way of MOU in 1999 and by two joint letters between the parties dated 29.03.2001 and 28.03.2003. From these documents, it is evident that a discount of 50% had been offered on the premium to be paid on the policy and that the risk covered for earthquake was on “first loss basis”. In its conclusion, the State Commission has held that since the risk covered was on “first loss basis”, premium to be charged should have been on a reduced rate which was admitted in the joint letter dated 29.03.2001 and 28.03.2003. However, since the appellant has charged premium for a policy on ‘first loss basis” as if it were a regular policy and the EAR policy is a continuing policy, the difference in the premium should be refunded with interest to the respondent. Therefore, the impugned order of the State Commission cannot be found fault.
The respondent has relied upon the judgment of the Hon’ble Supreme Court in Canara Bank vs United India Insurance Co. Ltd., - (2020) 3 SCC 455 wherein it has held that provisions of the insurance policy must be read and interpreted to meet reasonable expectations of the parties including the insured and the beneficiaries, as below:
“It is also well settled that coverage provisions should be interpreted broadly and if there is any ambiguity the same should be resolved in favour of the insured. On the other hand, the exclusion clauses must be read narrowly. The policy and its components must be read as a whole and given a meaning which furthers the expectations of the parties and also the business realities. According to us, the entire policy should be understood and examined in such a manner and when that is done, the interpretation becomes a commercial sensible interpretation”.
It has accordingly been argued that the EAR policy and the MOU and joint letters be read as a whole and refund allowed.
As there is no dispute regarding the MOU of 1991 and the letters dated 29.03.2001 and 28.03.2003, it is evident that the intention of the respondent as insured and the appellant as the insurer was to provide earthquake risk cover under the EAR policy on “first loss basis”, i.e., at 20%. However, the premium that was charged was on the basis of 100% earthquake risk cover. This is clearly not as per the joint understanding of the parties. The impugned order has correctly set right this anomaly in directing refund of the excess premium that was charged and compensating the respondent with interest at the rate of 6%.
We therefore, find no reasons to interfere with the impugned order which is hereby affirmed. Accordingly, the appeal is dismissed without merits.