Bank held liable for delay in insurance purchase

The National Commission observed that procrastination by the bank in deducting the premium, despite having obtained authorisation, had led to a delay in policy issuance

Saraswati Paul had applied to the State Bank of India, Radhanagar Branch, for a loan for her grocery business. A loan of Rs 8.99 lakh was sanctioned on March 28, 2008. The terms of the loan stipulated that insurance coverage was necessary to cover risks to goods and property pertaining to the business.
 

On February 6, 2009, the bank debited Rs 2,892 from Saraswati’s account for payment of premium to obtain two Standard Fire and Perils Policies from New India Assurance Co. These policies were valid from February 9, 2009, to February 8, 2010.
 

On January 5, 2009, the truck carrying items related to her grocery business met with an accident, resulting in a loss of goods worth about Rs 6 lakh. As the accident had occurred on January 5, 2009, prior to the issuance of the policies on February 9, 2009, the loss was not covered by the insurance company. Saraswati defaulted in repayment of the loan due to the loss incurred as a result of the accident. 
 

The bank issued a demand notice to recall the entire loan of Rs 8.99 lakh, along with interest, and later filed a money suit before the civil judge (senior division) at Nadia. Saraswati then filed a consumer complaint before the Nadia District Consumer Forum alleging that the bank had been deficient in rendering services to her by failing to obtain insurance coverage in time. She claimed an amount of Rs 6 lakh along with interest and damages.
 

The District Consumer Forum dismissed the complaint by upholding the bank’s contention that it was Saraswati’s duty to obtain the insurance policy and that the consumer complaint was filed merely in retaliation for the suit filed by the bank against her.
 

Saraswati challenged the order before  the West Bengal State Commission. The bank contested the appeal. It questioned the maintainability of the complaint on the ground that there was no evidence to show that Saraswati was conducting the grocery business to earn her livelihood. It pointed out that commercial disputes are beyond the purview of the Consumer Protection Act. The bank also stated that it was Saraswati’s duty to obtain insurance coverage.
 

Saraswati pointed out that the bank had taken an application from her on May 29, 2008, authorising it to deduct the premium from her account for obtaining the insurance policies. She argued that after the bank had obtained the authorisation, it was duty-bound to obtain the policy in time but had failed to do so for several months. 
 

The premium was deducted from Saraswati’s account much later on February 6, 2009, and the policy was belatedly obtained on February 9, 2009, due to which the loss occurring on January 5, 2009, was not covered as there was no policy in force on that date.
 

The State Commission allowed the appeal and held the bank liable for deficiency in service. The bank challenged this order in revision.
 

The National Commission observed that despite the bank having taken the authorisation to collect the premium from Saraswati’s account for purchasing the policy, it had delayed collecting the amount and remitting it to the insurer for buying the policies. 
 

Hence, it held the bank liable for the loss caused due to the non-existence of insurance coverage when the incident occurred. Accordingly, by its order of December 4, 2023, delivered by Subash Chandra, the National Commission concluded that there was a deficiency in service rendered by the bank and that it had rightly been held liable by the State Commission.

Consequently, it upheld the State Commission’s decision in Saraswati’s favour and dismissed the bank’s revision petition.

The writer is a consumer activist