SBI LIFE INSURANCE COMPANY LTD. Vs. ASHALATA PARIDA

JUDGEMENT

(1.) THE appellant was opposite party No. 1 before the District Forum, Cuttack in the complaint filed by respondent No. 1 wherein respondent No. 2 was opposite party No. 2. By means of this appeal, the appellant assails the order of the afore -mentioned District Forum dated 14.2.2008 passed in CD. Case No. 234 of 2007 whereby the District Forum has directed the appellant -SBI Life Insurance Co. Ltd., 2nd Floor, Turner Mirrison Building, G.N. Vaidya Marg, Fort, Mumbai, represented through its Circle Coordinator at A/5/1, City Centre, near BDA, Nicco Park, Sachivalaya Marg, Unit -IX, Bhubaneswar to clear up the loan amount of opposite party No. 2 for its deficiency in service. At the same time, the District Forum has directed opposite party No. 2, i.e., the Branch Manager, State Bank of India, Cuttack City Branch, College Square, Cuttack, to pay compensation of Rs. 50,000 to the complainant.

(2.) HERE , we would like to mention that against the order imposing compensation, opposite party No. 2 has filed appeal in First Appeal No. 196 of 2008 before this Commission, and this Commission by a separate judgment has set aside that part of the order of the District Forum.

(3.) THE sole grievance of the complainant is inaction on the part of the appellant, i.e., the SBI Life Insurance Co. Ltd. ("SBI Life", for short) in the matter of payment of insurance claim under LBI Life Insurance Scheme after the death of the loanee, who is her husband, on the ground that the proposal had not culminated in a policy and was still at the stage of proposal. In the complaint, it is stated that the aforesaid inaction/deficiency in service on the part of the appellant amounts to gross and abysmal inefficiency, for which they are liable to make good the loss sustained by the complainant. The factual background, as laid down through the complaint filed, is as under: The complainant's husband approached the State Bank of India, City Branch, Cuttack for sanction of a loan to the tune of Rs. 12,50,000 under Housing Loan Scheme for construction of a house at Sector -VI, Markat Nagar (CDA), Cuttack. Pursuant to such approach, opposite party No. 2, i.e., the State Bank of India, sanctioned a loan of Rs. 12,50,000 on 8.7.2004 bearing Loan Account No. LAN 1593039144. As per the prevalent practice, opposite party No. 2 Bank advised the complainant's husband to take life insurance policy on the said housing loan in order to make it secured, as under the scheme for housing loan each one of the borrowers has to take an insurance cover from the SBI Life as a protection against the risk of death due to any reason during the tenure of the loan, which otherwise means that in the event of death of the husband of the complainant prior to liquidation of the loan, opposite party No. l, i.e., the present appellant would pay the amount to the Bank -opposite party No. 2. Further, the said group insurance comes under the Super Surakshya Plan of SBI Life. The husband of the complainant being impressed by the suggestion of opposite party No. 2 decided to secure the loan account in order to secure the property in case of his unnatural death/mishap. The late husband of the complainant paid the premium amount of Rs. 55,288 on 12.7.2004, which was debited from his loan account by opposite party No. 2 -Bank and remitted to the SBI Life. At the time of submission of the proposal form, the complainant's husband had given declaration of good health and other related documents for consideration of issuance of insurance policy by the appellant -opposite party No. l. The proposal form was sent through opposite party No. 2. As per the terms and conditions of the scheme, opposite party No. 2 is the group administrator (policy holder) and the loanee under the scheme is the beneficiary. The period of insurance cover is available to the housing loan borrower from the date of enrolment and is to continue till the tenure of the loan, which was insured with opposite party No. l. The insurance cover will cease when the housing loanee/borrower will complete 70 years of age or when the loan account is reduced to nil balance for any reason. In the said scheme, it is also provided that in the event of death of the insured borrower due to any cause, the sum assured will become payable to the group administrator. The sum assured will be equivalent to the outstanding loan amount including interest as per the EMI schedule. After payment of the premium by opposite party No. 2 to opposite party No. l, the complainant's husband was not informed by the opposite parties about the outcome of the insurance contract nor was any policy bond issued in his favour till February, 2005. When the matter stood thus, the husband of the complainant suffered from massive heart attack and expired on 27.3.2005 at Kalinga Hospital, Bhubaneswar. After the sad demise of her husband, the complainant got totally upset. A few days after the death of her husband, she came to know about existence of a loan account in the Bank -opposite party No. 2 and further that the said loan had been insured with opposite party No. l. After coming to know about this, the complainant informed the Bank -opposite party No. 2 on 7.6.2005 that her husband had died in the meantime and requested the Bank to settle the death claim. On receipt of the death claim, opposite party No. l wrote to opposite party No. 2 that it had already received the death claim and expressed condolence. In the said letter, opposite party No. l requested opposite party No. 2 to send necessary documents, such as treatment report, post medical reports and original EMI's payment receipt as well as the certificate of insurance. In pursuance of the aforesaid request vide communication dated 18.7.2005, opposite party No. 2 -Bank complied with the requirements and requested opposite party No. l to settle the claim. After knowing about all these developments, the complainant eagerly waited for the outcome of the settlement, which was to be done by opposite party No. l. At this stage, the SBI Life by its letter dated 29.12.2005 intimated opposite party No. 2 that the claim under the policy could not be considered since the policy was at the stage of proposal due to non -fulfilment of medical requirement and the risk was not covered under the policy. After receipt of the letter of repudiation, which was communicated to the complainant, she wrote to opposite party No. 2 that neither she nor her late husband had committed any fault with regard to the policy and they had complied with all the requirements as asked for by opposite party No. 1. Since opposite party No. l had received the premium and declaration of good health and remained silent for nine months, they were estopped to take the plea that the policy was at the proposal stage due to want of medical reports. The complainant also requested opposite party No. l to reconsider the claim. Since the opposite parties did not reconsider the decision already taken by opposite party No. l, finding no other alternative, the complainant approached the Insurance Ombudsman by filing a complaint on 18.1.2006 against opposite party No. 2 for realization of the insurance amount, which was registered as Complaint No. 21 -002 -0203. The Insurance Ombudsman, after hearing the grievance of the complainant, by order dated 29.11.2007 upheld the repudiation made by opposite party No. l and dismissed the complaint. However, the Ombudsman observed that after receipt of premium, neither the insurer nor their agent had taken any step for medical examination of the proposer. Therefore, for such negligent conduct of the insurer, the complainant was at liberty to take appropriate legal action against the insurer, who were responsible for keeping the premium amount of the proposer on hold for more than eight months without processing medical examination. The complainant, thereafter, being aggrieved with the order of the Ombudsman as well as the action of both the opposite parties, filed the complaint petition alleging deficiency in service and unfair trade practice against the opposite parties. The prayer in the complaint is mainly for a direction to the opposite parties to pay the life insurance cover under the Housing Loan Scheme in the facts and circumstances of the case, to pay the sum assured till liquidation of the loan amount and to pay compensation for the mental agony and harassment suffered by the complainant.