Delhi Consumer Commission Holds Bharti AXA And Its Agent Liable For Deficiency In Service For Failing To Inform Policyholder About Policy Cancellation

Brief Facts

The complainant, Brijesh Kumar Sharma, had taken a mediclaim policy through an agent of Instant Healthcare Pvt. Ltd ( O.P No.1) . The complainant issued a cheque for ₹3,114 as the first premium on 30.09.2009. The policy (No. 00005928) was valid from 01.01.2010 to 31.12.2010.

The complainant's wife underwent surgery for breast cancer on 20-12-2010 at Pushpanjali Crosslay Hospital, Noida. When the complainant sought a cashless facility for the treatment expenses amounting to Rs. 61,499, along with all required documents, the insurer failed to process the claim.

Aggrieved, the complainant filed a complaint before the District Consumer Disputes Redressal Forum (East), Delhi, seeking reimbursement of ₹61,499 with 24% interest, ₹25,000 as compensation for mental agony, and ₹10,000 as litigation costs.

The District Forum initially proceeded ex parte against the opposite parties and allowed the complaint. However, the State Commission, by order dated 11.05.2015, set aside the ex parte order and remanded the case for fresh consideration after allowing the insurer to file its written statement.

In its final order, the District Commission held that the complainant was not informed about the cancellation of the policy and that the agent's failure to return the premium amounted to deficiency in service, but it absolved the insurer of liability.

Dissatisfied with the insurer being exonerated, the complainant filed the present appeal before the Delhi State Consumer Commission, challenging the District Forum's finding and seeking to hold both the insurer and its agent jointly and severally liable.

Arguments of the Parties

The appellant (complainant) argued that the District Forum erred in absolving the insurer of liability despite clear evidence of deficiency in service on its part. It was contended that the insurer, despite having all details of the insured, failed to inform the complainant about the cancellation of the mediclaim policy and did not issue the mandatory 15-day notice under Clause XVIII of the policy terms. Such omission, counsel argued, rendered the cancellation illegal and amounted to deficiency in service.

The appellant further submitted the District Forum wrongly fixed liability only on the agent, even though both parties were jointly responsible for maintaining and communicating the policy's status. The counsel contended that the insurer could not escape liability merely because the agent company had ceased to exist, and that the complainant should not suffer due to internal arrangements between the two opposite parties. The counsel also highlighted that no evidence was produced to show that the insurer refunded the premium to the complainant. Accordingly, the appellant prayed that both respondents be held jointly and severally liable to pay the claim amount.

The respondent no. 2, Bharti Axa General Insurance Co on the other hand, argued that the mediclaim policy constituted a contract exclusively between the insurer and the agent, and that the insurer had already fulfilled its duty by informing the agent about the policy's cancellation and refunding the proportionate premium. It was contended that there was no direct privity of contract between the complainant and the insurer, and therefore, the complainant had no independent contractual rights against it. The insurer submitted that the policy had been cancelled prior to the complainant's wife's hospitalization, and hence, no liability could be fastened upon it. The counsel maintained that the District Forum's order was proper and warranted no interference.

Observations and Decision of the Commission

The Delhi State Consumer Disputes Redressal Commission concurred with the District Forum's finding that there was deficiency in service on the part of the opposite parties.

The Commission noted that the complainant had not been informed about the cancellation of the mediclaim policy and that the premium amount was not refunded. It observed that the insurer, having complete details of the insured, had a moral as well as legal responsibility to inform the complainant about the policy's cancellation but had only notified the agent. The agent, in turn, failed to communicate this to the complainant, misleading him into believing that his policy remained valid.

Relying on the Supreme Court's ruling in Jacob Punnen & Anr. v. United India Insurance Co. Ltd. , the Commission reiterated that it is the obligation of the insurer to inform every policyholder about any significant changes in the policy terms and that failure to do so constitutes deficiency in service.

The Commission also found that the insurer had violated the policy terms by not giving the mandatory 15-day written notice prior to cancellation. It held that the insurer, which had issued the policy, refunded the premium to the agent instead of the complainant and failed to directly notify the latter about the cancellation.

Taking these lapses into account, the Commission held that both the insurer and the agent were jointly and severally liable, disagreeing with the District Forum's decision to fix liability solely on the agent. Accordingly, the appeal was allowed, and the District Forum's order was modified to hold both respondents jointly liable to pay the awarded amount of ₹61,499 along with applicable interest.

The Commission directed that the payment be made within three months of receiving the judgment, failing which the amount would carry interest at 9% per annum from the date of the judgment until realization.

Case Title : Brijesh Kumar Sharma vs Instant Healthcare Private Ltd FIRST APPEAL NO.- FA/491/2017