The Supreme Court while allowing an appeal filed by the appellants against Max Life Insurance Corporation i.e., respondent no. 2 and Axis Banks Ltd. has held that it is a clear case of deficiency of service and non-bonafide conduct by Max Life.

The Bench of Justice K.M. Joseph and Justice Hrishikesh Roy stated –

"The case at hand shows clear malafide on the part of respondent No. 2 in the manner they dealt with the insurance policy, after learning of the death of the insured person on intimation from the affected persons. The way the issue was addressed by the respondent No. 2 following the information conveyed does fail, in our opinion, the test of Reasonable Conduct. On top of that, to cover up their late reaction, most tellingly, the ante dated letter under the garb of an unfounded medical reason was dispatched. These in our opinion, amount to a clear case of deficiency of service and a non-bonafide conduct by the respondent no.2. The contrary finding in the impugned order do not pass our judicial scrutiny."

The Bench further stated that the impugned judgment passed by the National Consumer Disputes Redressal Commission (National Commission) is unsustainable and hence, set aside the same.

Advocate Harshit Khanduja appeared on behalf of the appellants.

Advocate Devendra Kumar Singh and Advocate Suman Bagga represented respondent no.1 and respondent no. 2 respectively.

The present appeal arose out of a home loan secured by the appellants for which obtaining the life insurance in the name of the deceased was a pre-requisite as set out by respondent no.1. The respondent no. 1 acting as an agent for respondent no. 2 sanctioned home loan of Rs. 70,99,172/- and from the disbursed loan amount, insurance premium of Rs. 6,24,172/- was paid on behalf of the insured by the bank to the insurance company. The loan amount was settled by the borrowers during the pendency of the appeal.

The insured had faced a medical test as a pre-condition for securing the home loan and although he died of cardiac arrest soon thereafter, respondent no. 2 refused to settle the loan account when the insurance claim was made. Consequently, a Consumer Complaint was filed by the appellants before the State Consumer Disputes Redressal Commission, Haryana (State Commission). The State Commission, however, dismissed the Consumer Complaint with the observation that there was no privity of contract between the insurer and the insured. The appeal was filed before the National Commission but that was also dismissed. Hence, the appellants being aggrieved by this approached the Supreme Court.

The contention was that when the medical/treadmill test result of the insured was normal, there was no reason to either postpone or reject the insurance policy when the payable premium was ascertained and debited by the bank to the insurance company. The counsel representing respondent no. 2 submitted before the Apex Court that the proposal was postponed by six months, and eventually the policy was declined and the insurance company refunded the premium sum to the bank with intimation to the appellant and therefore no concluded life insurance policy existed in this case.

The Supreme Court noted, "… the home loan document issued by the bank to the applicant Gokal Chand (Annexure P-1) makes it a condition precedent to obtain the life insurance cover for getting the home loan. … The reason for deferment is surprisingly shown as treadmill test finding, although, no abnormality as such was detected in the said test report, as noted earlier. Yet, the insurance company dispatched an ante-dated letter (written after getting intimation about the death of the insured), informing about 6 months postponement of the proposal."

The Court thereafter observed that the insurance company hurriedly dispatched the ante-dated letter, purporting to postpone the proposal, only after getting information about the death of the insured.

The Court further opined, "Though, we acknowledge that there is no excessive delay in the current case between medical test & repudiation unlike in D. Srinivas (supra), where the period was over 2 years, what needs to be focused upon in the interest of justice is the trigger & surrounding circumstances which led to the rejection of proposal by the insurance company. In that light, the conduct of the respondent No. 2 cannot be countenanced against the good faith standards that an insurance contract warrants."

It was at last directed by the Court to respondent no. 2 to process the complainant's insurance claim and remit the payable sum.

Accordingly, the Apex Court allowed the appeal and complaint, and set aside the impugned judgment.

Cause Title – Gokal Chand (D) Thr. LRS. v. Axis Bank Ltd. & Anr.

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