In the intricate landscape of consumer finance and insurance, non-disclosure often presents complex legal challenges. The Government of India has taken various steps to strengthen the Consumer Disputes Redressal Commission (CDRC) and improve the consumer dispute resolution mechanism and the commission remains one of the most preferred destinations for consumers to get their disputes resolved. The term “consumer” is given a wide interpretation by the courts which favours the aggrieved individual in getting compensation from the other party violating his rights. In New India Assurance Co. Ltd. v. Hilli Multipurpose Cold Storage Pvt. Ltd. The Supreme Court emphasized the consumer-friendly nature of the consumer forum. Further, the Supreme Court in Today Homes And Infrastructure Pvt Ltd V. Ajay Nagpal And Ors. held that the Real Estate (Regulation and Development) Act, 2016 (‘RERA Act’) does not bar the ‘consumer complaints’ filed by the apartment allottees against builders under Consumer Protection Act. hence, the consumer can seek compensation in a wide range of claims. Government remains to play an active role in promoting the forum as an effective way of consumer redressal. In spite of its popularity and the number of complaints received, the pendency in the consumer commissions shows a declining trend from 5.55 lakhs in December 2022 to 5.45 lakhs in September 2023. In 2023 number of cases disposed of was 1.36 lakhs which is higher than the number of cases filed at 1.26 lakh. CONFONET 2.0 software provides a robust framework for filing complaints and making electronic tracing very easy.
National Consumer Disputes Redressal Commission remains to play an active role in the evolving landscape surrounding consumer disputes. The recent case before the National Consumer Disputes Redressal Commission (NCDRC) involving Bajaj Allianz Life Insurance Co. Ltd. and a policyholder, Bharti Mahaveer Jain, brings to light crucial issues of contract interpretation, disclosure obligations, and the boundaries of insurance coverage. This case not only underscores the importance of clear communication in financial products but also tests the limits of consumer protection in India's evolving insurance sector.
The respondent, Bharti Mahaveer Jain, availed two home loans of ₹28,95,000 and ₹48,60,000 as a co-borrower with her husband from Bajaj Finance Ltd. Along with the loans, she obtained an insurance policy on October 8, 2013, under a scheme where Bajaj Finance Ltd. was the Master Policy Holder of a Group Master Policy from Bajaj Allianz Life Insurance Co. Ltd. This policy was valid until June 20, 2016.
The respondent was enrolled in the Group Insurance Scheme with a risk commencement date of December 21, 2013, for a sum assured of ₹71,49,174. On March 20, 2014, the respondent informed the insurance company that she had been diagnosed with carcinoma of the right breast and was hospitalized on March 15, 2014.
The insurance company rejected the claim based on Clause 15(iii)(a) of the Master Policy, which excluded "any critical illness which existed at or occurred within 6 months of the entry date or the date of revival." The Claim Review Committee also rejected the critical illness claim.
The respondent then approached the State Commission in Consumer Complaint 114 of 2020, seeking payment of the sum assured, interest, compensation for mental agony and harassment, and costs. The complaint was allowed.
The appellant argued that the State Commission erred in not appreciating that a contract must be interpreted according to its terms and conditions. They cited the Supreme Court judgments in General Assurance Society Limited Vs. Chandumull Jain & Anr. and The Oriental Insurance Co. Ltd. Vs. Sony Cherian[1] to support their contention that insurance policies should be strictly construed to determine the insurer's liability.
The appellant claimed that the policy had a 15-day Free Look Period, and since no request for cancellation was received, the Certificate of Insurance (COI) stood confirmed. They maintained that the claim was rightly rejected under Clause 15(iii)(a) of the Master Policy, which excluded critical illnesses within 180 days from the date of risk.
The insurance company argued that the terms of the policy were clear and that they were justified in rejecting the claim based on these terms.
The respondent contended that the Master Policy containing the terms and conditions of the risk covered was not provided to her, and therefore, the exclusion clause relied upon by the insurance company was not in her knowledge. She argued that this violated the Guidelines, Rules, and Regulations of the Insurance Regulatory and Development Authority of India (IRDA).
The respondent claimed that the condition regarding the exclusion of the critical illness benefit was only produced before the State Commission for the first time in the Written Statement. She argued that since carcinoma of the right breast constituted a critical illness, the sum assured of ₹71,49,714 was payable by the appellant.
The respondent contended that due to the insurance company's failure to release the insurance amount, she had to pay 72 loan installments amounting to ₹65,03,832. She argued that the repudiation of her claim constituted a deficiency in service and unfair trade practice.
The respondent cited the Supreme Court judgments in Bharat Watch Company Vs. National Insurance Company[2] and Modern Insulators Ltd. Vs. Oriental Insurance Co. Ltd. to support her argument that it was the duty of the parties to disclose known facts, and in the absence of communication of the exclusion clause, the insurer could not claim its benefit.
Additionally, the respondent claimed that the appellant was not authorized to issue a certificate of insurance under the Master Insurance Policy, as it had already been withdrawn on October 8, 2013, as per the list of products with IRDA. She argued that the Master Policy dated October 21, 2015, issued to Bajaj Finance Ltd. had no legal validity.
The respondent also alleged that the appellant had violated IRDA guidelines and circulars issued under Section 34 of the Insurance Act, 1938. She claimed that the appellants had issued notices under Section 138 of the Negotiable Instruments Act and Section 25 of the Payment and Settlement Act, 2007 to coerce her.
The National Consumer Disputes Redressal Commission (NCDRC) delivered a detailed decision on this appeal, carefully considering the arguments from both parties. The NCDRC identified the core issue as whether the treatment of critical illness (carcinoma) was covered under the Certificate of Insurance (COI) issued as an add-on to the loan under the Master Policy, and whether the rejection of the claim constituted a deficiency in service. The Commission acknowledged the appellant's argument, based on Supreme Court judgments, that insurance contracts should be strictly interpreted. However, they also considered the respondent's contention that non-disclosure of policy terms constitutes a deficiency in service. The NCDRC noted that the appellant had not denied failing to communicate the policy terms and conditions to the respondent. They deemed this significant, as the respondent was not made aware that claims for critical illnesses couldn't be made within six months of the policy's start date. The Commission held that since the terms and conditions were not conveyed to the respondent, the appellant's argument about the 15-day free look period and subsequent confirmation of the policy was not sustainable. They upheld the State Commission's interpretation allowing the appeal for insurance cover for critical illness. The NCDRC disagreed with the State Commission's order regarding the repayment of loan installments. They clarified that the Certificate of Insurance only covered specific items under the Group Insurance Scheme and did not extend to repayment of EMIs for the loan from Bajaj Finance Limited. The Commission found no merit in ordering repayment of the loan amount, as it was not part of the insurance policy in question and was not properly pleaded in terms of deficiency of service regarding the loan account. The NCDRC partially allowed the appeal with the following directives: a) The appellant was ordered to pay ₹3,07,604 to the respondent as medical expenses under the insurance policy. b) This amount should be paid with 9% per annum interest from the date of admission, within eight weeks. If not paid within this timeframe, the interest rate would increase to 12%. c) The awards of ₹25,000 for mental agony and ₹15,000 as litigation costs were upheld. d) The State Commission's direction to refund ₹65,03,832 was set aside. The Commission clarified that in a claim related to critical illness, the appellant could only be held liable for the treatment of critical illness as claimed. They emphasized that the housing loan issue was separate and not related to the insurance claim for critical illness treatment.
By partially allowing the appeal, the Commission has struck a careful balance between upholding contractual obligations and protecting consumer rights. This judgment highlights the need for clear delineation between different financial products, even when they are offered as part of a package. For insurers, this case serves as a stark reminder of their duty to ensure that all policy terms, especially exclusions, are clearly communicated to policyholders. For consumers, it reinforces the importance of thoroughly understanding the terms of their insurance policies and the specific coverages they provide.