Vague and Unclear Terms and Conditions of an Insurance Policy-: An Instrument For Insurance CompanyIt has often been found that at the time of claim of insurance made by the insured, the insurance company manipulates that your claim is in violation of the insurance policy or your claim is not maintainable as it comes within the purview of Exclusion clause of the policy. The insurance companies always try to make an effort to repudiate the claim on various grounds. The one and most significant and popular ground is of ambiguous and vague terms and conditions of the insurance policy.
On the same apex Court has given several decisions held that in case the terms and conditions of an insurance policy is vague, it would be the duty and liability of the insurer to make it clear that the claim filed before it falls within the purview of the exclusion clause of the policy. Means if any kind of ambiguity is found in the terms and conditions of an insurance policy, the same shall be understood for the benefit of insured and the contract of insurance shall be construed in favor of the insured.
In the matter of Life Insurance Corporation of India vs. Ram Singh Tanwar, 2007 CTJ (CP) (NCDRC) the apex court has held that in the matter of repudiation of a policy by insurance company, the approach followed by the company should be based on extreme care and caution. It must not look like in a routine way.
In the above said matter the complainant took an endowment insurance policy with profit from Life Insurance Company. The complainant was an illiterate person and was a driver. When the complainant was driving the truck from Pali to Jaipur, an accident took place and the complainant got an injury in his right leg. The amputations and surgical operation was required for the complainant for his survival. Complainant moved an application before the LIC for the same. The insurance Company refused the claim of complainant on the only ground that the surgical operation of one leg is not sufficient to pay the sum assured.
Complainant made a complaint before the District Forum and got an order in his favour stating that the LIC is liable to pay the insured sum of Rs. 25,000/-. Against this order the LIC went before the State Consumer Dispute Redressal Commission. The State Commission affirmed the decision passed by the District Forum and made a reference to the decision of the Supreme Court in United India Insurance Company Ltd. vs Puspalaya printers 2004 (3) SCC 649 that if there is an ambiguity, or a term is capable of two possible interpretations, the one beneficial to the insured should be accepted consistent with the purpose for which the policy is taken, namely to cover the risk on the happening of certain event.
Aggrieved by the judgment passed by the State Commission; the LIC moved a revision petition before the National Consumer Dispute Redressal Commission.
The issues considered by the NCDRC:1. Whether the LIC is liable for deficiency in services under the Consumer Protection Act, 1986.
2. Whether the order passed by the State Commission in favour of complainant is justifiable or against the principle of natural Justice.
The NCDRC observed the matter and held that the complainant is an illiterate person who was earning the money for getting his livelihood through the driving a vehicle and he lost his one leg and became unfit for driving. Therefore the complainant is not able to drive the vehicle and being an illiterate person he is not able to do any other job to earn the money. In that situation it is required for the officials of the LIC to change their negative approach in dealing. Accordingly the revision petition dismissed and the order passed by the State Commission affirmed by the National Commission.
The same issue has been considered by the Supreme Court in National Insurance Co. Ltd. Vs Ishar Das Madan Lal 2007 CTJ 338 (Supreme court) (CP), the respondent had a business of jewellery and he took one policy from the appellant called as Jeweller Block Policy. One day 140 gm jewellery has stolen from the shop of the respondent and he lodged an FIR in respect of the same. The respondent also filed an insurance claim before the appellant but the insurance company refused to settle the claim. Then only the complainant filed the complaint before the State Commission, JandK under the J and K Consumer Protection Act, 1987. But the same has been dismissed by the State Commission on the ground that the claim filed by the complainant covered by the exclusion clause of the policy.
Against the order passed by the State Commission, the complainant herein referred as respondent moved an appeal before the Hon'ble High court. Hon'ble High Court held that the theft occurred in the shop of the respondent is nothing but a plain theft and there was no entrustment on the part of the owner. An insurer determines the extent of its risk and accordingly they fix the quantum of premium. The Hon'ble Court stressed the word that the insured must know the extent of his cover at the time of entering into a contract with the insurance company. So he may get able to take other possible policy if he required. The High Court also held that the policy taken by the Complainant covered insurance against the theft. Accordingly the Hon'ble Court ordered in favour of complainant.
By aggrieved from the order passed by the Hon'ble High Court the Insurance Company moved an appeal before the Supreme Court.
Issues considered by the Hon'ble Supreme Court:
1. Whether the claim made by the complainant covered by the exclusion clause of the policy?
2. Whether the insurance company is liable for deficiency of services?
The Hon'ble SC held that the word “Entrust” has different meaning, entrust means giving responsibility of goods to a person for the purpose of care and protection. If a customer enters the shop, pretending the examination of valuable goods and takes away the same from the shop, then there is no question of entrustment. If a customer is not a man of trust or the goods are not entrusted to him by the shopkeeper, the exclusion clause would not apply. Therefore the insurance company is liable for the deficiency in services on their part.
The Hon'ble Supreme Court affirmed the judgment passed by the Hon'ble high court with reasoning that the plea taken by the appellant has no merit that the theft form Entrust is not covered by the policy.
In New India Assurance Company Ltd. Vs Mrs. Mary Jane Govias and Others, 2007 CTJ 138 (CP) (NCDRC), the Hon'ble National Commission dismissed the appeal filed by the Insurance Company aggrieved from the order passed by the State commission on the ground that the please taken by the insurance company that the claim made by the complainant comes under the purview of exclusion clause of the policy has no merit. The Insurance Company presented before the Hon'ble commission that the complaint fall under the ‘Exclusion Clause' which is as under:
i. Any illness/disease which was existing at the time of inception of cover for the first time;
ii. Any illness/disease contracted within 30 days from commencement of cover.
It is held by the Hon'ble commission that the evidence filed by the complainant clearly shows that the patient and doctor of the patient both were unaware of any disease before taking the policy from the insurance company. Therefore the insurance company is liable to pay the claim filed by the complainant with interest at 12%. The same view has been taken by the apex court in different matters like United India Insurance Co. Ltd. Vs Pushpalaya Printers, 2004 CTJ 421 (SC) (CP) =2004 3 SCC 694, M/s Peacock Plywood Pvt. Ltd. Vs The Oriental Insurance Co. Ltd. 2006, 14 SCALE 300, United India Insurance Co. Ltd. Vs Kiran Combers and Spinners, 2007CTJ 105 (SC) (CP) = 2007 1 SCC 368, B.V. Nagaraju Vs M/s Oriental Insurance Co. Ltd., 1996 CTJ 373 (SC) (CP)= 1996 4 SCC 648, and LIC Vs Raj Kumar Rajgarhia and Anr. (1999) 3 SCC 465. In the aforesaid judgments it is held that in any case where there is any ambiguity or term is capable of two interpretations, interest of justice would be served if interpretation one beneficial to the policy holder is accepted.
From the above said reasoning it is clear that the apex court has tried to exercise their authoritative control or power over the repudiation from the claim by the insurance company on the only ground that the claim requested by the insured is beyond the terms and conditions of the policy and comes within the horizon of the exclusion clause of the policy.
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SURVEYORS- Link between Insurer and Insured: The insurance business operates on the principle of indemnity, that is, putting the customer in same position financially in which he was before the loss happened. As there is a tendency on the part of customer, to benefit out of an insurance transaction.
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