(From the
order dated 9.11.2006 passed in First Appeal No. 813 of 2006 by the State
Commission,
National Insurance Co. Ltd.
D.O.XVII, 12, Community Centre,
2nd Floor, East of Kailash,
Also at
National Insurance Co. Ltd.,
Through Regional Office-I,
Jeevan Bharati Tower-2,
Level-4, 124,
Versus
Shri D.P. Jain
2605, Sector 15,
(From the
order dated 9.11.2006 passed in First Appeal No. 812 of 2006 by the State
Commission,
National Insurance Co. Ltd.
D.O.XVII, 12, Community Centre,
2nd Floor, East of Kailash,
Also at
National Insurance Co. Ltd.,
Through Regional Office-I,
Jeevan Bharati Tower-2,
Level-4, 124,
Versus
.1. Shri Manjeet Kumar,
H. No. 1/5708, Gali No.16,
Balbir Nagar,
Shahdara,
.2. M/s. A.K.Govil & Associates,
2nd Floor, 144, Jorbagh,
BEFORE:
HON’BLE
MR.JUSTICE M.B. SHAH,
PRESIDENT.
DR.
P.D. SHENOY, MEMBER.
For the Appellant (Insurance
Co.) : Mr.
Atul Nanda,
In both the petitions Advocate.
For the Respondent in RP186/2007 : N E M O
For the Respondent(s) in RP 187/2007 : Mr. Rajeev Aggarwal.
Dated
O R D
E R
M.B.Shah, J. President.
Revision Petition No.186/2007:
In this case the
Complainant/Respondent purchased a Nokia mobile handset for a sum of Rs.6,100/- on 04.10.2004 for his
daughter which was carrying free
insurance cover for one year. The
handset was stolen from
the bag of complainant’s daughter on 21.10.2004. In this regard a report was lodged by the
complainant with the Police on the same day i.e. 21.10.2004. Thereafter, the complainant preferred a claim
with the Insurance Company, which repudiated the claim on the ground that there
was absence of ‘actual or threatened force’ as per clause of the terms and
condition mentioned in the policy. Hence, the Complainant filed a complaint
No.845/2005 before the District Forum-II,
Revision Petition No.187/2007:
The facts of this case are similar to that
of Revision Petition
No.186/2007. The Complainant
purchased a Nokia mobile handset on 22.8.2004 for a sum of Rs.17,150/- which carries a tempting offer that there would be
insurance cover free of charge for one year against theft, etc. Theft of the
Nokia mobile handset took place on 6.3.2005 by breaking open the door of the
car. For that an FIR was also lodged. But, when the claim was lodged with the
Insurance Company, the Insurance Company repudiated the claim on the ground
that there was absence of ‘forced and violent entry or exit”, as has been
incorporated in exclusion clause 1B(a) of the
insurance cover. Hence, the Complainant knocked the doors of the District
Consumer Forum by filing Case No. 759 of 2005.
That
complaint was allowed by the District Forum by order dated 27.7.2006 and the
Insurance Company was directed to reimburse the complainant a sum of Rs.17,150/-, i.e. the price of the Nokia mobile handset with
compensation of Rs.1,000/- and Rs.1,000/- as costs of litigation.
Hence,
the Insurance Company preferred First Appeal No. 821 of 2006 before the Delhi State Commission. That appeal was dismissed by the
State Commission by discussing what is meant by theft, burglary, extortion,
robbery and house breaking. Hence, this Revision Petition.
Findings:
I. Mr.Nanda, learned counsel appearing for the Insurance
Company, vehemently contended that the impugned order passed by the State
Commission is unjustified and arbitrary as the State Commission has no
jurisdiction or power to ignore the law laid down by the Apex Court in the case
of United India Insurance Co. Ltd. vs. Harchand Rai Chandan Lal
– (2004)8 SCC 644.
We
entirely agree with Mr.Nanda that the State
Commission cannot by-pass the judgement rendered by the
However,
the State Commission, while disposing of the matter, has drawn the attention to
the word ‘theft’ as used and understood in common parlance and held that
it would not mean taking away of the property by violence means. If the
property is taken away by force, it would not be understood as theft. Further,
if the words used in the insurance policy are vague, benefit of that word or
phrase is required to be given to the insured.
Whatever
be the position, in our view, once there is a binding judgment of the
.II. (a) Effect of Regulation No.3 of the
IRDA Regulations:
The
next important question which requires consideration in these Revision
Petitions is to the effect of Regulation 3 of the Insurance Regulatory and Development
Authority (Protection of Policy Holders’ Interests) Regulations, 2002,
framed by Insurance Regulatory & Development Authority (IRDA) in exercise
of powers under Section 114(A) of the Insurance Act, 1938 read with Sections 14
and 26 of the Insurance Regulatory & Development Authority Act, 1999.
The
Regulations came into effect from the year 2002. Therefore, the policies which
are issued after 2002 are being covered by the said Regulations and are required to be
followed by the Insurance Company.
It
is to be stated that the aforesaid Regulations are framed by the IRDA to ‘protect
the interests of the policyholders’.
Firstly, Regulation 3 requires to be followed by the insurance companies
so that the terms of the insurance policy do not operate harshly against the
insured and in favour of the insurer.
Regulation
– 3 thereof reads as under:
“3. Point of sale.— [(1)
Notwithstanding anything mentioned in regulation 2(e) above, a prospectus of
any insurance product shall clearly state the scope of benefits, the extent of
insurance cover and in an explicit manner explain the warranties, exceptions
and conditions of the insurance cover and, in case of life insurance, whether
the product is participating (with profits) or non-participating (without
profits). The allowable rider or riders
on the product shall be clearly spelt out with regard to their scope of
benefits, and in no case, the premium relatable to health related or critical
illness riders in the case of term or group products shall exceed 100% of
premium under the basic product. All other riders put together shall be subject
to a ceiling of 30 per cent of the premium of the basic product. Any benefit
arising under each of the rider shall not exceed the sum assured under the
basic product:
Provided that
the benefit
amount under riders shall be subject to Section 2(11) of the Insurance Act,
1938.
Explanation.— The rider or riders attached to a life policy shall bear
the nature and character of the main policy, viz., participating or
non-participating and accordingly the life insurer shall make provisions, etc.,
in its books.]
(2) An insurer or its agent or other
intermediary shall provide all material information in respect of a proposed
cover to the prospect to enable the prospect to decide on the best cover
that would be in his or her interest.
(3). Where the prospect depends upon the advice
of the insurer or his agent or an insurance intermediary, such a person must
advise the prospect dispassionately.
(4). Where, for any reason, the proposal and
other connected papers are not filled by the prospect, a certificate may be
incorporated at the end of proposal form from the prospect that the
contents of the form and documents have been fully explained to him and that he
has fully understood the significance of the proposed contract.
(5). In the process of sale, the insurer or its
agent or any intermediary shall act according to the code of conduct prescribed
by –
(i). the Authority;
(ii). The
Councils that have been established under Section 64C of the Act; and,
(iii). The recognized professional body or association of which the
agent or intermediary or insurance intermediary is a member.
The
aforesaid Regulation makes it clear that –
(i)
the prospectus of insurance product are
required to clearly state the scope of benefits, the extent of insurance cover
and in explicit manner explain the warranties, exceptions and conditions
of the insurance cover. The
phraseology used is “mandatory” by providing that it shall be stated clearly.
(ii)
Sub-Regulation (2) provides that an
insurer or its agent or other intermediary shall provide all material
information in respect of the proposed cover to the insured.
(iii)
Sub-Regulation 4 also provides that
if the proposal and other connected papers are not filled by the prospect, a certificate
is required to be incorporated at the end of the Proposal Form from
the prospect that the contents of the form and documents have been fully
explained to him.
From
the above it is amply clear that the rule making Authority has taken much care
to protect the interest of the consumer. At this stage, whether the insurance
company can contend that even though it has not followed the binding
Regulations, the said Regulations/the Exclusion Clauses are yet binding to the
complainant?
In our view, the unexplained or unnoticed exclusion clauses would not be binding to the insured. The reason being, the Regulations are of mandatory in nature so as to protect the consumers’ interests.
(b) Position before the
coming into force of IRDA Regulations:
Secondly,
even before the Regulations came into force,
the Apex Court in Modern Insulators Ltd. Vs. Oriental Insurance Co. Ltd.
(2000) 2 SCC 734 has specifically held that Exclusion Clauses, which are not
explained to the insured, are not binding to the insured and are required to be
ignored. The Court in para 9 held thus:
“9. In view of the
above settled position of law we are of the opinion that the view expressed by
the National Commission is not correct. As the above terms and conditions of
the standard policy wherein the exclusion clause was included, were neither a
part of the contract of insurance nor disclosed to the Appellant, the
Respondent cannot claim the benefit of the said exclusion clause. Therefore, the
finding of the National Commission is untenable in law”.
From the
Regulations as well as
the law laid down by the
III. Disclosure
of material information in explicit manner:
However, Mr. Nanda, the learned counsel for the insurance company, contended that –
(a). Even if there is a breach of Regulation 3 or any other
Regulation, Regulation 11(4) specifically empowers the IRDA to initiate action
against the insurer or insurance agent or against the intermediary, joint or
severally, under the Insurance Act or under the Insurance Regulatory &
Development Authority Act. He,
therefore, submitted that once this procedure is prescribed for taking action
under the regulations, Exclusion Clauses should be read, as they are. He contended that if Statute has conferred a
power to do an act and has laid down the method in which that power has to be
exercised, it necessarily prohibits doing of the act in any other manner than
that which has been prescribed. The
principle behind the Rule is that if those were not so, the Statutory
Provisions might as well would not have been
enacted. This principle has been
followed all-throughout.
In support of his
contention, Mr.Nanda vehemently submitted that it is
a matter of well settled law that when a Statute or Regulation provides for a
manner in which a particular thing must be done, then that thing must be done
in that manner only. The Rule of law laid down in Taylor Vs. Taylor 1876 1 Ch.D 426 has been founded on sound principle and well
recognized and followed by courts in
In
our view, there is no dispute with regard to the aforesaid settled law. In the light of the aforesaid principles as
submitted by Mr.Nanda and the provisions of Regulation
(3) and others, we have to find out whether the Regulations are being followed
by the Insurance Company or not. Because, if the statute has laid down the method in which the
Insurance Company has to exercise its right to issue the policy, then that procedure must be followed by the Insurance Company and
it necessarily prohibits issuing the
policy in any other manner than what has been prescribed. The principle behind the aforesaid Regulations, is that
if these were not so, there
was no necessity of enacting the said Regulations. Hence, applying the said principles to
Regulation 3 we have to arrive at the conclusion that the Insurance Companies
are bound to follow the procedure
prescribed therein before issuing the insurance cover. The Insurance Company is
required to state the scope of benefits, the extent of insurance cover and in an
explicit manner explain the warranties, exceptions and conditions of the
insurance cover. The rider or riders are required to be clearly spelt out.
It is mandatory (the phrase used is ‘shall provide’) duty of insurer or its
agent or other intermediary to provide all material information in respect of a
proposed cover to the insured to enable him to decide the best cover that would
be in his or her interest.
Therefore, we accept the contention of
the learned Counsel for the Insurance Company, Mr.Nanda,
that when the Statute provides the manner in which a particular thing must be
done, then that thing must be done in that manner only. That means, the Insurance Company is bound to follow the said
Regulations.
It is to be
stated that Mr.Nanda has contended that if the procedure is not followed it is for the
Regulatory Authority to take appropriate
action against the Insurance Company or the intermediary or the agent as
provided under Regulation 11(4), but
would not nullify the exclusion clauses.
In our view, the
aforesaid submission
cannot be accepted. It cannot be contended with impunity that
even if the Insurance Company has not followed the said Regulations, at the
most the Regulatory Authority may take appropriate action, as provided under
sub-Regulation (4) of Regulation 11. Taking appropriate action under
sub-regulation (4) of Regulation 11 itself is an additional power vested with
the Regulatory Authority. But, not
taking of appropriate action would not mean that the Statute can be ignored
with impunity by
the Insurance Company. If the
Regulations are ignored and the procedure prescribed before issuing the policy
cover is not followed, then the unexplained exclusion clauses are required to
be ignored.
If
the procedure prescribed by the Regulations is not followed by the Insurance
Company before issuing insurance policy cover and the premium is recovered with
pleasure for earning profit, then the Insurance Company must suffer the consequences as it is
to be held that exclusion clauses which
are not explained, are to be ignored for the purpose of insurance cover. We have to reiterate that this is the view
taken by the
.(iv). Mr. Nanda, the learned counsel next contended that in all other cases where violence is used and theft has taken place, the Insurance Company has paid the insured the claimed amount. As against this contention we would state that payment of insured amount in such cases was the bounden obligation under the insurance policy. That would not empower the Insurance Company to contend that even if the Insurance Company or its agent or its intermediary, has not followed the Regulations by not explaining the exclusion clauses to the insured i.e. the purchaser of the Nokia Mobile handset in the present case, the Insurance Company can rely upon the exclusion clause for avoiding its liability by not making payment of the sum insured in case of theft.
.(v). Mr.Nanda raised another contention that the relationship between the Insurance Company and the HCL, which is the intermediary to whom the policy covers were given, is that of principal to principal and therefore, HCL would be liable to reimburse the complainants.
In
our view, this submission is devoid of any substance. The Insurance Company has undertaken to reimburse the Complainant in the
event of peril. It is to be stated that a copy of the Certificate of Insurance given to the
consumer of Nokia GSM Mobile Handset, is
produced on record for our perusal. It
mentions, “HCL-SAFEGUARD NOKIA GSM MOBILE HANDSET INSURANCE COVER”. The certificate is issued by stating that
it is signed by the authorized signatory for the National Insurance Co. Ltd.
This would mean that the Insurance Company would be straightaway liable.
.(vi). Finally, the learned counsel for the Insurance Company vehemently submitted that the contention with regard to not following Regulation No. 3 was not raised before the District Consumer Disputes Redressal Forum or the State Commission and, therefore, this Commission should not deal with the same.
In our view, the said submission is required to be rejected because:
.(a). Firstly, we have to state that at the admission
stage by order dated 13.11.2006 we have directed as under:
“Heard the learned counsel for the parties.
In our
view, prima facie, it is apparent that there is a total violation of Regulation
3 of the Insurance Regulation and Development Authority (Protection of
Policyholders’ Interest) Regulations, 2002.
However, learned counsel for the petitioner submits that whether the
said Regulation 3 is followed by the insurance companies or its intermediary,
appropriate affidavit would be filed within a period of 4 weeks from today by a
responsible officer of the insurance company.
We hope that correct facts would be stated by the concerned officer
without suppressing any material.
This
observation is made because the responsible officer of the agent of the NOKIA
states that there was no question of explaining any terms of the policy to the
complainant/purchaser of the NOKIA handset.
Learned counsel, Mr.Amit
K. Das, appearing for NOKIA states that the insurance policy is purchased by
the HCL and is given to the NOKIA for promoting their sale and the dealer of
the NOKIA is handing over this policy to the consumer.
Stand over to
Meantime, it would be open to the dealer of NOKIA to file the necessary affidavit. Dasti in addition:”
None has filed the affidavit
stating that procedure prescribed under Regulation No.3 was followed and exclusion
clauses were explained.
.(b). Further, we make it clear that Consumer Fora are not required to follow the adversary system and remand the matter to trial Court in such cases. If that system is required to be followed, then there is no necessity for separate enactment for rendering inexpensive and speedier justice to the consumers. We reiterate that Consumer Fora are required to follow inquisitorial (to hold inquiry by itself) procedure for finding out the truth for rendering inexpensive or less expensive speedy justice. The consumer would be frustrated if the matter involving small amount is remanded and he is required to approach the District Consumer Forum again and again. That itself would result in injustice to the consumers and hence that lengthy procedure is required to be avoided.
.(c). Further, at the time of hearing of the matter the learned Counsel for the dealer has stated that it is not necessary to explain exclusion clauses because only one standard cover is there.
After the arguments were over, learned Counsel Mr. Nanda tendered an affidavit on behalf of the Insurance Company contending that the statement made by the learned Counsel for the Dealer, while addressing the Commission, that the dealers are not obliged to explain to the handset purchaser anything under the Regulation No.3, was in the context and scope of Regulation 3(2).
In our view, giving of such gloss to the admission is neither justifiable nor acceptable. In any set of circumstances, as stated above, neither the Insurance Company nor its agent nor the intermediary (HCL) nor the dealer has filed affidavit contending that they have followed the procedure prescribed under Regulation No.3 and explained the exclusion clauses to the purchasers of Nokia handset. It is to be emphasized that such type of advertisement of giving free insurance cover, gives an added advantage of marketing of Nokia handset and increasing the sale of goods/handsets.
Again it is to be stated that the insurance cover is handed over to the consumer by the dealer of Nokia. Therefore, the statement made on behalf of the dealer is of importance and not that of intermediary, or insurance Company because insurance cover is not handed over by the intermediary, or Insurance Company or its agent.
.(d). It is also the duty of the Insurance Company or its agent or its intermediary to abide by the Regulations and whether they have followed that Regulation or not is required to be stated by them. It is the duty of the Insurance Company, prima facie, to prove and establish that the Insurance Company has followed the said Regulation/procedure.
It is to be stated that terms which are mentioned at the over leaf of the insurance certificate are in very small print, and require magnifying glass for reading the same. So, we can draw an inference that it is not read by anyone.
.(e). It is a matter of common knowledge that consumers are attracted to purchase a particular goods or brand of mobile handset depending upon the advertisement as it gives an additional benefit of free insurance cover.
No doubt, we have to state, that wherever the Nokia Company was party to the litigation, the learned counsel representing the Company, without prejudice to the rights of the Company, has agreed to pay the amount as ordered by the District Forum. One such case is Revision Petition No.3110/2006 (National Insurance Co. Ltd. vs. Gynander Singh, decided on 03.05.2007). In that case, this Commission observed as under:
We hope that companies in
Unfortunately, such practice is not followed by the Insurance Company after receiving the premium and Insurance Companies are dragging the consumers to unending litigation.
In conclusion, we hold that:
.(i). ‘Exclusion Clauses’ are required to be ignored if the Insurance Company or its Agent or Intermediary does not adhere to the mandatory requirement of explaining the ‘Exclusion Clauses’ before issuance of insurance cover.
.(ii). The procedure prescribed under Regulation 3, is required to be followed. In case the said procedure is not followed, apart from aforesaid consequences, the Regulatory Authority can take action Under Regulation 11(4) against the Insurance Company.
.(iii). The Regulations are based on settled law declared from time to time by the Courts. (Re: Modern Insulators Ltd. vs. Oriental Insurance Co. Ltd. (2000) 2 SCC 734].
(iiii) Intermediary, the HCL, in the present case, has issued the insurance cover as an agent of the Insurance Company. Therefore, the Insurance Company is bound to reimburse the Complainant in case of theft of the mobile handset. Free insurance cover is a method adopted as a part of aggressive marketing.
In the Result, the Revision Petitions are dismissed. There shall be no order as to costs.
Sd/-
………………………………J.
( M.B. SHAH )
PRESIDENT
Sd/-
..………………………………..
(P.D. SHENOY)
MEMBER