Insurer must pay claim in auto-cover period

Since the insured had died on January 12, 2015, well within the auto-cover period, the National Commission held the claim to be payable

Ramprit Paswan purchased Super Cash Gain Insurance Policy from Bajaj Allianz Life Insurance. The policy was for the period October 13, 2012, to October 12, 2028, with a sum assured of Rs 4 lakh.  The annual premium was Rs 46,176. His son Ugan Paswan was the nominee.

After Ramprit expired on January 22, 2015, due to cardiac arrest, his son lodged a claim. The insurer repudiated the claim on March 31, 2015, on the ground that the policy had lapsed due to non-payment of premium.

Ugan filed a complaint before the District Forum. He stated that his father had paid the premium annually for three years. However, when his father attempted to pay the premium for the fourth year, it was not accepted despite repeated attempts. When he demanded a written explanation, the insurer replied that the policy was valid and that no premium was due. So, Ugan questioned how the insurer could refuse to honour the claim on the pretext that the policy had lapsed on March 31, 2015, due to non-payment of premium.

Bajaj Allianz did not care to contest the case. It did not appear for the hearing, despite the Forum issuing several notices. So, the complaint was decided ex parte. The Forum observed that the requisite premium had been paid, yet the claim had not been honoured. It indicted Bajaj Allianz for being guilty of deficiency in service, and ordered it to settle the claim by paying the Rs 4 lakh sum assured, together with 10 per cent interest.

Additionally, it ordered the insurer to pay Rs 15,000 as compensation for mental harassment, another Rs 15,000 towards financial compensation, Rs 5,000 aslitigation expense, and Rs 2,000 towards miscellaneous expenses. Forty-five days were given for compliance. In case of delay, the interest rate would rise to12 per cent per annum.

Bajaj Allianz Life appealed to the Bihar State Commission, which concurred with the District Forum’s view and dismissed the appeal with the observation that the repudiation was wrong and unjustified.

Bajaj Allianz Life then filed a revision petition before the National Commission.

It argued that the annual premium was received only for two years. The premium for the third year, which was due on October 13, 2014, could not be considered to have been paid as the cheque had got dishonoured due to insufficient funds.

The company claimed the insured had not even approached it to revive the policy within the grace period. The insurer argued that the policy terms had not been properly interpreted. It relied on Clause 5 to justify its stand that the policy would lapse and the premium paid would stand forfeited without any benefits payable to the insured.

The National Commission disagreed with this contention. It pointed out that the policy provided for autocover for two years from the date of unpaid premium. Since the policy was taken on October 13, 2012, and thesecond annual premium had been paid on October 12, 2013, it concluded that the auto cover would be valid for the next two years till October 12, 2015. As the insured had died on January 12, 2015, well within the auto cover period, the Commission held the claim to be payable.

The Commission observed that it was because of this clause that the insurer had initially replied that the policy was valid and that no dues were outstanding. Accordingly, by its order of October 7, 2021, delivered by C. Viswanath, the National Commission dismissed the revision petition and upheld the decisions holding the insurer liable to settle the claim.

The writer is a consumer activist