Police department held liable for lapsed policies

Sakinder Singh, a constable with the Punjab police, had taken three Jeevan Saral with profit policies from the Life Insurance Corporation (LIC) of India on August 31, 2012. Each policy was for Rs 5 lakh, with a monthly premium of Rs 2,062 deducted from his salary.

Singh passed away on June 18, 2014, due to illness. When his widow, Jagdeep Kaur, and children Lovepreet, Manpreet, and Sukhpreet claimed the policy benefits, they were shocked to learn that the policies had lapsed because the premiums had not been paid since November 2012. This was surprising since the premiums had been deducted from Singh’s salary. Seeking clarity, the family applied under the Right to Information (RTI) Act and discovered that while the premiums for all three policies had been deducted from Singh’s salary from November 2012 to January 2014, the remittance of these premiums had been deliberately discontinued.

The family filed a consumer dispute with the Fatehgarh Sahib District Consumer Commission, alleging deficiency in service on the part of both the police and LIC. However, the complaint was dismissed on the grounds that the police department had not provided any service, thus making a consumer complaint non-maintainable.

The family then appealed to the Punjab State Commission. The police department reiterated its defence that the claim was not maintainable under the Consumer Protection Act. It also argued that premium collection had ceased based on verbal instructions from Singh and that Singh was aware the policies had lapsed as his salary was paid without premium deductions.

On behalf of the claimants, it was argued that Singh had provided written authorisation for premium deduction. Salary statements confirmed the premiums had been deducted from November 2012 to January 2014 but were not deposited with LIC. The arbitrary discontinuation of deductions from February 2014 onwards, without informing Singh, meant he couldn’t pay the premiums directly.

LIC argued that since the policies lapsed before the completion of three years, even the surrender value was not payable, and the policy could not be revived after Singh’s death.

The State Commission ruled that LIC was not liable for the police department’s failure to remit the premiums. It ordered the police department to settle the claims.

The police department challenged this order through a revision petition. The National Commission observed that as the employer, the police department had a duty to deduct and remit the premiums, except in situations beyond its control, such as insufficient salary to cover the premium instalment due to the employee taking a loan or being on leave without pay.

The National Commission dismissed the police department’s defence of discontinuing the premium deductions based on oral instructions, without obtaining a written confirmation. It ruled there was no justifiable reason for failing to deduct and remit the premiums. The Commission noted that even when the salary is insufficient to cover the premium, the employer must inform the insured employee so they can make alternative arrangements for payment. Accordingly, by its order dated July 26, 2024, delivered by Inder Jit Singh, the National Commission dismissed the revision and upheld the order directing the police to pay Rs 15 lakh towards the claim benefits under the three policies. Additionally, the Commission awarded 6 per cent interest from October 1, 2014, and Rs 11,000 towards compensation and costs.

The writer is a consumer activist