Order Name: SBI Life Insurance Company Ltd. Vs. Hemangi & 2 Ors.
Case No.: F.A. No. 593/2022
The National Consumer Disputes Redressal Commission, led by Mr. Subhash Chandra and Dr. Sadhna Shanker, recently clarified an important point about insurance contracts: silence cannot be interpreted as acceptance. A contract is only valid when acceptance is clearly communicated.
Case Background
The situation involves a woman whose late husband had taken two home loans, each worth ₹14 lakhs, from the State Bank of India. These loans were supposed to have insurance coverage under the "SBI Life – RINn Raksha Insurance Policy." Although the husband submitted a policy proposal and the bank forwarded a premium of ₹11,080 to the insurer, the insurance company demanded additional health information. After receiving the required details, the insurer returned the premium to the borrower’s account and informed him that he would not be covered. Unfortunately, the borrower died from a heart attack while abroad, and the insurance claim was denied due to lack of coverage. The widow then filed a complaint with the Maharashtra State Commission, which ruled in her favor, prompting the insurer to appeal to the National Commission.
Insurer’s Arguments
The insurer contended that despite the bank issuing the loan and sending the premium, the insurance policy was never finalized because the late husband failed to provide necessary health information. They refunded the premium and argued that no contract was in place. Citing past cases like Uttamchand vs. LIC, the insurer emphasized that merely paying a premium does not guarantee an insurance policy. They also referred to Avtar Singh & Others vs. SBI Life Insurance Co. Ltd., where it was determined that cashing a premium cheque doesn’t equate to a contract.
National Commission’s Findings
The Commission focused on whether the deceased was eligible for life insurance and if the insurer was right to deny the claim. Upon reviewing the facts, it was clear that no life insurance policy was issued to the complainant’s husband. The complainant argued that the insurance should have been guaranteed when the home loans were approved and the premium paid. However, the Commission referenced the Supreme Court ruling in LIC of India vs. Rajavasireddy & Others, stating that a contract requires a clear communication of acceptance. Since the proposal was returned and the premium refunded before the husband’s death, no contract was formed, and the insurer had no obligation to pay the claim. The Commission, therefore, overturned the State Commission’s decision, requiring no costs from either party.
Takeaway
This case underscores the importance of clear communication in forming an insurance contract. Simply paying a premium or submitting a proposal does not guarantee coverage. Both parties need explicit agreement to establish a binding insurance contract.
