Insurance companies can’t deny claim over unsaid T&C

Pushpa Girimaji

My wife had an insurance policy covering accidental death, issued by her credit card company. After her tragic death from an accidental fall into a manhole six months ago, I remembered the policy and sent the claim. However, the insurance company has rejected it on the ground that the policy only covered accidents during travel. This, however, was never made known to us either by the credit card or the insurance company. In fact, we never got any details of the policy conditions. Can I challenge this decision of the insurance company before the consumer court? Against whom should I file the case?

The Insurance Regulatory and Development Authority (Protection of Policy Holders’ Interest) Regulations mandate that the insurance companies or their agents or intermediaries clearly and explicitly explain to the policy holder at the time of selling the policy, all the terms and conditions, including the exclusion clauses. Unfortunately, many insurance companies violate this regulation.

In this case, since the insurance was offered by the credit card company to its card holders, it should have made known the terms and conditions of the policy as well as the exclusion clauses. Its failure to do so amounts to violation of the IRDA Regulation. In addition, since this is a shortcoming in the service rendered by the credit card company, it comes under the definition of “deficiency in service” as per the Consumer Protection Act. Also, making a misleading claim about a product or a service is an unfair trade practice and by describing the insurance as an accident policy covering all accidents, the company committed an unfair trade practice. Besides, the company violated the consumer’s right to information. So, on all these counts, the bank should be hauled up.

The insurance company is as guilty for failing to send the policy document and the terms and conditions of the policy, in clear violation of the IRDA Regulation. So you need to complain against both the parties.

You can seek redress of your complaint before the consumer court constituted under the Consumer Protection Act. In National Insurance Company Vs D.P. Jain (RP No 186 of 2007), the apex consumer court referred to the IRDA Regulation on the protection of policy holders’ interest and said: “If the regulations are ignored and the procedure prescribed (by the IRDA) before issuing a policy cover is not followed, then the unexplained exclusion clauses are required to be ignored”. Your case also falls under this category.

You can also question the repudiation before the Insurance Ombudsman, where the redressal is much simpler and quicker. However, you have to choose one of the forums.

Can you quote a consumer court order on a similar case?

Only recently, the National Consumer Disputes Redressal Commission decided on a similar case and directed the insurance company to pay. Here, Ramji Lal, who had an HDFC credit card, had been issued a personal accident policy by the card company. Following his death from a firearm fired by a miscreant, his wife made a claim. Here too, the insurance company rejected the claim quoting the policy condition, which said that the insurance covered only ‘bodily injury resulting in death, solely and directly from air/rail/road accidents caused by external, violent and visible means’.

Following the repudiation, the wife and children filed a complaint before the consumer court. Subsequently, in response to the appeal filed by the insurance company, the apex consumer court first considered whether the credit card was in operation, because in one of the earliest cases on the issue, the apex consumer court had held that the policy would be co-terminus with the credit card and if the credit card was not valid, then the insurance policy would also be invalid. In this case, the credit card was valid.

The apex consumer court also rejected the argument of the insurance company that as per the terms and conditions of the policy, the insurance was applicable only to accidents caused during travel and, therefore, the claim was not payable. In a number of cases, the apex consumer court has made it clear that insurers cannot bind a policy holder to terms and conditions not made known to him or her.

The Commission then looked at a number of its own decisions to determine whether the death was a murder or an accident and came to the conclusion that it fell under the definition of an accident. So, in the end, the Commission upheld the order of the State Commission and asked the insurance company to pay the insured Rs 5 lakh. (United India Insurance Company Vs Sudha Rani and others, Revision Petition No 2453 of 2011, order dated September 1, 2017)