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TaxTMI 
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2021 (12) TMI 1371
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....ly. The reminder also intimated the appellants that the premium was Rs.17,705/- and had to be paid by 27.03.2008. The appellants paid the requisite amount by cheque (issued on 26.03.2008) and in this regard the receipt was received from the insurer on 30.03.2008. This receipt indicated that the insurance policy period would be operative from 28.03.2008 to 27.03.2009. The monetary coverage of the policy was Rs.8,00,000/- (Rs.4,25,000/- for the first appellant and Rs.3,75,000/- for the second appellant). The second appellant had to undergo angioplasty in June (09.06.2008 to 12.06.2008) at Chennai. The appellants submitted a claim for Rs.3,82,705.27/- to the insurer, as amounts due under the contract of insurance policy, towards the expenses incurred by them. The insurer, however, accepted the claim and paid the partial amount by releasing Rs.2,00,000/- to them. 3. Feeling aggrieved, the appellants represented to the insurer, repeatedly and unavailingly to the insurer to make good the balance amount. Exhausted, the appellants filed a complaint before the District Consumer Disputes Redressal Forum (hereafter "the District Forum"), Kottayam for a direction that the insurer ought to pay....
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....her renewed an existing policy - as they did earlier from time to time annually. Placing reliance on Biman Krishna Bose v. United India Insurance Co. Ltd. (2001) 6 SCC 477, and United India Insurance Co. Ltd. v. Manubhai Dharmasinhbhai Gajera (2008) 10 SCC 404, it was argued that the renewal of an insurance policy would imply that the existing terms would bind the parties. As a consequence, the insurer being a party cannot impose unilateral changes, either at the point of time when the policy is renewed or during its currency. 7. Learned counsel compared the terms of the previous policy (which had covered the period March 2007-March 2008) with the policy in question (for the period March 2008 to March 2009) and submitted that the overall limit of coverage was changed by the appellants as compared to the previous year. It was also stated that the previous policy covered health risks of three individuals i.e., the appellants and their son whereas the policy in question covered only the appellants. Counsel submitted furthermore that the insurer had undeniably issued a notice pursuant to which a policy was renewed on 26.03.2008. In the circumstances, it was duty of the insurer to info....
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....learly indicates that only the existing policy holder has to be notified. However, in renewal of same policy does not place any such obligation upon the insurer to intimate insured person at the point of renewal of the policy. 11. It was urged furthermore that the monetary cap of Rs.2,00,000/- in the present case was not conjured by the insurer, which merely complied the IRDA's directions. In this regard, the learned counsel submitted that insurer acted upon the IRDA's direction, which were communicated to its offices and branches by way of internal guidelines. Learned counsel also submitted that at the point of time of renewal, no implied obligation on the part of the insurer can be inferred given that each transaction signifies a fresh contract of Insurance. In other words, it is up to the insured to inquire, if the terms of the renewed policy would be in any way would be different from the previous one. Analysis and Conclusions 12. The previous policy2 indicated a limit of Rs.3 lakhs each for the appellants, and Rs.1 lakh cover to Ajay Punnen Jacob (their son). The policy in question, i.e., for 2008-09 covered an overall limit of Rs.8 lakhs (Rs.4,25,000/- for the first appe....
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....ng home B) Nursing Expenses C) Surgeon, Anesthetist, Medical Practitioner, Consultants, Specialists Fees D) Anesthesia, Blood, Oxygen, Operation Theatre Charges, surgical appliances, Medicines & Drugs, Diagnostic Materials and X-ray E) Dialysis, Chemotherapy, Radiotherapy, Cost of Pacemaker, Artificial Limbs & Cost of organs and similar expenses. (N.B: Company's Liability in respect of all claims admitted during the period of insurance shall not exceed the Sum Insured per person as mentioned in the schedule)" 14. What is apparent from the record is that upon receipt of the renewed notice, sometime in March 2008, the appellants issued a cheque dated 26.03.2008 which was duly received. That the cheque was encashed and a policy document issued by the insurer is not in dispute. Both parties, i.e., the first appellant and the Divisional Manager of the insurer have filed affidavits in evidence. However, the pleadings as well as these affidavits are unclear as to when the policy document was actually despatched and received by the insurer and on which date it was received by the appellants. Clearly, the policy containing the fresh terms was issued after receipt of the....
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....odify the terms of the policy including the premium rates. The insured person shall be notified three months before the changes are effected." The insurer had also relied upon a copy of the United India Insurance Company administrative guidelines for the new insurance products effective 28.01.2007, especially para 14 which reads as follows: "14 RENEWALS OF EXISTING POLICIES Existing Policyholders who are below the age of 35 years as on the date of introduction of this Product will be allowed to renew the Policy as Platinum. All other Policyholders will be brought under the Gold Policy. An entrant into the Platinum Policy will be allowed to continue under the Policy even after he crosses 35 years. As on date the table is available upto the age of 45 years. This will be expanded based on the claims experience of the next two years. In respect of Senior Citizens who are our existing policyholders, they will be allowed to renew the policy on existing terms and conditions but at revised rates of premium under Gold Policy. They should not be compelled to migrate to the new Scheme. If they so desire to enter the new Scheme, the same may be allowed on collection of fresh propo....
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....Krishna Bose (supra), i.e., inapplicability of old terms, in the cases of renewal, when the contracts provide "or otherwise", has to be applied contextually. If the renewed contract is agreed, in all respects, by both parties, undoubtedly the fresh terms (with restrictions) would be binding. However, that would not be the case when a new term is introduced unilaterally about which the policy holder is in the dark. Further, the allusion to continuation of the terms of the Gold policy in respect of senior citizens (who were not to be compelled to migrate to another policy) but were to be subject to the same terms, upon payment of a different rate of premia, reinforces the conclusion that there was in fact, a renewal of the existing terms. 20. Arguendo, assuming the appellants had received the policy documents on time, i.e., requisite disclosure had been made, and then the appellants had in fact misunderstood the terms and mistaken the new Gold policy for the previous policy, the question is, post payment of premium, were they in a position to protest, or do anything about it. Irrespective of the answer to the question of whether the renewal of an insurance contract results in a new ....
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....greement, is not to be deemed a mistake as to a matter of fact." 21. This section provides that an agreement would be void if both the parties to the agreement were under a mistake as to a matter of fact essential to the agreement. The mistake has to be mutual and in order that the agreement be treated as void, both the parties must be shown to be suffering from mistake of fact. Unilateral mistake is outside the scope of this section. " [emphasis supplied] Therefore, the law in India is that unless the unilateral mistake about the terms of a contract is so serious as to adversely undermine the entire bargain, it does not result in automatic avoidance of a contract. Applied to the facts of this case, it is evident that the appellants could insist on the old insurance policy, on the premise that it renewed the pre-existing policy. The other conclusion would be cold comfort to the party seeking insurance cover, as the choice would be to avoid it altogether- too drastic as to constitute a choice. The first point is answered accordingly, in favour of the appellants. The second point: duty of insurers 23. This court next proceeds to address itself to the second question, namely ....
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....other, about a material change in the terms, at the stage of pre-contract, was highlighted in Sherdley v Nordea Life and Pension [2012] 2 All ER (Comm) 725; SA [2012] EWCA Civ 88. The insured invested in two individual unit-linked life insurance contracts with Nordea Life and Pensions SA ("Nordea"). The contracts were designed to enhance the tax efficient growth of a capital assurance plan. At the relevant time, the insured were living in both Wales and Spain and were British nationals. At the time of contract, they were habitually resident in the jurisdiction of England and Wales; when they commenced proceedings, they had become habitually resident in Spain. Their investments went "disastrously wrong"; when they sued Nordea in England, the company argued that there was no jurisdiction in England under the "Judgments Regulation" (EC No 44/2001) and claimed that proper jurisdiction were courts in Spain, or Luxembourg. The contractual documents referred to than three law and jurisdiction agreements: for England, for Luxembourg, and for Spain. The plaintiff-insured, however, argued that there was an initial agreement in favour of jurisdiction in England, as the country of their habitu....
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....ontract of insurance, at the formation stage (or as in this case, at the stage of renewal), the respondent cannot be heard to now say that the insured were under an obligation to satisfy themselves, if a new term had been introduced. If one considers the facts of this case, it is evident that the insurer had caused a renewal reminder, which was acted upon and the renewal cheque, issued by the appellant. At that stage, or just before the renewal premium was furnished the insurer, or its agent was under a duty to alert the appellants that the change in terms, was likely to impact their decision, and if so required, offer a better or fuller coverage. One cannot be oblivious to two circumstances here. The first, is that medical or health insurance cover becomes crucial with advancing age; the policy holder is more likely to need cover; therefore, if there are freshly introduced limitations of liability, the insured may, if advised properly, and in a position to afford it, seek greater coverage, or seek a different kind of policy. The second, is that most policies - health and medical insurance policies being no exception, are in standard form. It would be worthwhile to notice at this s....
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....t, 1986 since it adopts unfair methods or practices for the purpose of selling the flats by the Builder." 29. Contracts of adhesion (as contracts d' adhesion are also called), as discussed previously, leave little or no choice to the customer; in this case, the policy holders were left with no room to bargain and negotiate. In the present case, the standard form contract, renewed year after year, left the appellants only with the choice of raising the insurance cover. The last renewal, of course, resulted in the deletion of their son as a beneficiary. However, even with this little choice, the result of their being kept in the dark about the new terms which placed limits on individual surgical procedures meant that had any other information with respect to the increased coverage which could have resulted in the higher individual limits (for surgical procedures) from they might have benefitted was denied to them. For that reason, the "informational blackout", so to say, on the part of the insurer, was a crucial omission. 30. During the hearings, it was urged on behalf of the insurer that the agent would have ordinarily informed the policy holder as she or he was in touch with them....
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....agents. When there is no insurance agent as defined in the regulations and the Insurance Act, the general principles of the law of agency as contained in the Contract Act are to be applied. 12. Agent in Section 182 means a person employed to do any act for another, or to represent another in dealings with third persons and the person for whom such act is done, or who is so represented, is called the principal. Under Section 185 no consideration is necessary to create an agency. As far as Bhim Singh is concerned, there was no obligation cast on him to pay premium direct to LIC. Under the agreement between LIC and DESU, premium was payable to DESU who was to deduct every month from the salary of Bhim Singh and to transmit the same to LIC. DESU had, therefore, implied authority to collect premium from Bhim Singh on behalf of LIC. There was, thus, valid payment of premium by Bhim Singh. The authority of DESU to collect premium on behalf of LIC is implied. In any case, DESU had ostensible authority to collect premium from Bhim Singh on behalf of LIC. So far as Bhim Singh is concerned DESU was an agent of LIC to collect premium on its behalf." 33. This reasoning was applied in Life ....
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....taken cognizance of by the insurer as well, when it relied on guidelines (applicable for new insurance products, with effect from 28.1.2017) which inter alia, stated that "In respect of Senior Citizens who are our existing policyholders, they will be allowed to renew the policy on existing terms and conditions but at revised rates of premium under Gold Policy. They should not be compelled to migrate to the new Scheme. If they so desire to enter the new Scheme, the same may be allowed on collection of fresh proposal." The insurer's argument here was that no existing senior citizen policy holder could be compelled to migrate to a new Scheme. However, in the present case, the Mediclaim holders were kept in the dark, and asked to renew a policy, the terms of which had undergone a significant change in that its cover was radically different, and imposed limitations on the insurer's liability. The argument of the insurer has no merit and is not acceptable. 36. Worldwide, nations are seeking viable answers to the question of how to offer health care to their citizens. The World Health Organization (WHO) defines health as a dynamic state of complete physical, mental, spiritual and soc....
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....h insurance business" means the effecting of contracts which provide for sickness benefits or medical, surgical or hospital expense benefits, whether in-patient or out-patient travel cover and personal accident cover;] The IRDA (Health Insurance) Regulations, 2016, (which replaced the previously applicable regulations of 2013- which were preceded by guidelines regulating health insurance products contains regulations which are relevant for the purpose of this case. Chapter III of these regulations contains general provisions relating to Health Insurance. The relevant part of Regulation 11 reads as follows: "11. Designing of Health Insurance Policies a. Subject to Regulation 3 as applicable, Health insurance product may be designed to offer various covers; i. For specific age or gender groups ii. For different age groups iii. For treatment in all hospitals throughout the country, provided the hospitals comply with the definition specified iv. For treatment in specific hospitals only, provided the morbidity rates used are representative v. For treatment in specific geographies only, provided the morbidity rates used are representative Provided, such specifica....
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....uct. These have been given statutory shape. Yet, the obligation of the insurer to provide information to existing and policy holders, for them to exercise choice, meaningfully, and choose products suited to their needs, existed. In this case, that obligation was breached. 40. In view of the above discussion, this Court is of the opinion that the findings of the State Commission and the NCDRC cannot be sustained. The insurer was clearly under a duty to inform the appellant policy holders about the limitations which it was imposing in the policy renewed for 2008-2009. Its failure to inform the policy holders resulted in deficiency of service. The impugned order of the NCDRC as well as the order of the State Commission are hereby set aside. The order of the District Forum is accordingly restored. Consequently, the appeal is allowed; in the circumstances of this case, the respondent shall bear additional costs, quantified at Rs.50,000/-. FOOTNOTES:- 1. Order dated 11.07.2012 in Revision Petition No.2743 of 2011. 2. Effective for 2006-2007 3. For 2006-2007 4. LIC v. Raja Vasireddy Komalavalli Kamba, (1984) 2 SCC 719 (para 15). 5. Extracted below: "Section 22. Contract c....
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....ment of the highest attainable standard of health is one of the fundamental rights of every human being without distinction of race, religion, political belief, economic or social condition." In Calcutta Electric Supply Corporation Ltd. v. Subhash Chandra Bose, (1992) 1 SCC 441 this court, quoting from various international covenants, observed that, "the term 'health' implies more than an absence of sickness. Medical care and health facilities not only project against sickness but also ensure stable man power for economic development. Facilities of health and medical care generate devotion and dedication to give the workers' best, physically as well as mentally in productivity. It enables the worker to enjoy the fruit of his labour, to keep him physically fit and mentally alert for leading a successful, economic, social and cultural life. The medical facilities, are therefore, part of social security and like gilt edged security, it would yield immediate return in the increased production or at any rate reduce absenteeism on grounds of sickness, etc. health is thus a state of complete physical, menial and social well-being and nut merely the absence of disease or infirmity"....