The National Consumer Disputes Redressal Commission, led by Dr. Inder Jit Singh, has given a ruling emphasising that insurance policies must be interpreted in a manner that aligns with the insured’s reasonable expectations.
In this case, the wife of a deceased loan holder appealed for the settlement of an insured amount. The husband had taken a loan of Rs.10 lacs from Syndicate Bank to build a house, with a monthly repayment condition deducted from his salary. Alongside this, the bank had taken an insurance policy, called ‘Unihome Care Insurance Policy’, from United India Insurance for Rs.10 lacs. This policy was intended to cover the repayment of the loan in case of sudden mishaps to the insured property or the husband’s life.
Unfortunately, the husband passed away due to a heart attack, and when the wife filed for the settlement of the insured amount, the bank declined the request. They argued that the death was not accidental and, therefore, not covered by the policy.
The wife took the matter to the District Forum, which partially agreed with her. The bank contested this decision at the State Commission, but their appeal was dismissed. Undeterred, the bank brought the case to the National Commission.
The insurer defended their position by referring to Section II of the policy. According to this, the bank was required to compensate the deceased employee’s legal representatives if specific conditions were met. The main condition was that the insured sum would only be paid if the borrower’s death resulted directly from an unforeseen, violent incident, within twelve months. Since the husband’s death was due to a severe heart attack, the insurer argued that the policy did not cover this as it was not classified as an accident.
However, the Commission noted that the policy was primarily focused on claims related to the house, with no explicit coverage for personal accidents. Despite this, the insurer admitted that they could have paid the insured sum if the death had been accidental. The wife’s counsel argued that the bank had taken the insurance policy to cover the loan in case of both property damage and the loanee’s death.
Referring to a Supreme Court verdict in Canara Bank Vs. United India Insurance Co. Ltd. & Ors., the Commission stated that insurance policies should be read in a way that aligns with the insured’s reasonable expectations. Any ambiguity should be resolved in favour of the insured. They also clarified that their role was limited to intervening only in cases where the lower authorities had acted illegally or with gross irregularity.
Finding no such grounds, the Commission upheld the State Commission’s decision and dismissed the bank’s petition. The case, titled United India Insurance Vs. Manjula & 2 Ors., and numbered R.P. No. 1943/2017, serves as a reminder that insurance policies should be clear and unambiguous, aligning with the insured’s reasonable expectations.
