Bookmark
PDF
Share
CaseIQ

Bajaj Allianz General Insurance Co. Ltd. v. Sanjeev Kumar & another

State Consumer Disputes Redressal Commission

Apr 18, 2022

Judgment

CaseIQ

Smart Summary (Beta)

Factual and Procedural Background

The appeal arises from a consumer complaint filed by Respondent No. 1 (complainant), who purchased a Mahindra Scorpio Turbo vehicle in 2008, financed by Respondent No. 2, Mahindra & Mahindra Financial Services. The vehicle was insured by the Appellant insurance company for the period 30.09.2009 to 29.09.2010. On 09.06.2010, the vehicle was damaged by fire, and the complainant submitted a claim to the insurer. The Appellant alleged that the complainant had concealed material facts by wrongly claiming a 20% No Claim Bonus (NCB) despite having made a previous claim, which was a breach of the insurance policy terms. The Appellant issued a repudiation letter and sought to cancel the policy. The complainant alleged unfair trade practices and deficiency in service by both the Appellant and Respondent No. 2, and sought the insured amount along with compensation. The District Consumer Forum (now District Commission), Haridwar, passed an ex-parte order against the Appellant and subsequently awarded the insured amount of Rs. 6,79,600/- along with compensation of Rs. 1,20,400/- to the complainant. The Appellant challenged this judgment before the State Consumer Disputes Redressal Commission, Uttarakhand, Dehradun.

Legal Issues Presented

Whether the complainant was entitled to claim the insured amount despite allegedly wrongfully claiming a No Claim Bonus on the insurance policy?
Whether the insurance company discharged its obligation to verify the correctness of the No Claim Bonus claim within the stipulated period?
Whether the insurance company's repudiation of the claim was justified given the alleged concealment by the complainant?
What is the appropriate quantum of liability of the insurance company given the circumstances of the case?

Arguments of the Parties

Appellant's Arguments

The complainant concealed the material fact that he had already claimed a No Claim Bonus from a previous insurance policy, thus breaching the terms and conditions of the insurance contract.
The complainant violated the principle of utmost good faith by making a wrongful declaration to obtain the No Claim Bonus.
Due to this concealment and misrepresentation, the complainant was not entitled to claim the insured amount under the policy.
The District Commission failed to appreciate the evidence showing the breach of contract by the complainant.

Respondent No. 2's Arguments

The Respondent No. 2 stated that the complainant failed to complete necessary formalities, and therefore was not entitled to relief.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Revision Petition No. 1051 of 2017: Anjani Gupta vs. Future Generally India Insurance Company (12.12.2017)	- If an insured wrongfully claims No Claim Bonus (NCB) and the insurer had the means to verify the claim by exercising ordinary diligence, the insurer may proportionately reduce the claim but cannot repudiate it outright. - Failure of insurer to confirm NCB entitlement within stipulated period disentitles repudiation on ground of misrepresentation, but claim can be proportionately reduced.	The court applied this principle to hold that the complainant’s claim should not be entirely repudiated but reduced proportionately by 20% for the wrongful claim of NCB.
First Appeal No. 226 of 2016: L&T General Insurance Co. Ltd. vs. Sh. Shadi Lal Kapoor (06.10.2020)	Concealment of fact regarding No Claim Bonus by insured justifies repudiation of claim if insurer discharges its obligation to verify the claim.	The court noted that repudiation is justified if insurer acts diligently; however, failure to verify within mandatory period results in deficiency in service and proportionate liability.
United India Insurance Co. Ltd. vs. M/s Jindal Poly Buttons Ltd. (Revision Petition No. 2920 of 2015)	Repudiation of claim justified where insured made wrongful representation regarding No Claim Bonus.	Supported the view that concealment of NCB entitlement can render contract voidable and justify repudiation, subject to insurer’s diligence.
Inderpal Rana vs. National Insurance Co. Ltd.; Tata AIG General Insurance Co. Ltd. vs. Gulzari Singhe; National Insurance Co. Ltd. vs. Harpreet Singh	Concealment or fraud in claiming No Claim Bonus renders insurance contract voidable; failure of insurer to seek confirmation within 21 days disentitles repudiation but claim can be proportionately reduced.	These cases were relied upon to conclude that insurer’s failure to confirm NCB entitlement within mandatory time frame results in deficiency in service and proportionate reduction in claim liability.

Court's Reasoning and Analysis

The court examined the evidence and found that the complainant had declared the correctness of the No Claim Bonus claim in the insurance form but had in fact previously claimed it in an earlier policy, amounting to misrepresentation. However, the insurance company failed to discharge its obligation to verify the NCB entitlement from the previous insurer within the mandatory period of 21 days as required under the insurance regulations. This failure constituted deficiency in service and negligence on the insurer’s part. The court relied on binding precedents which establish that while wrongful claim of NCB by the insured amounts to breach of utmost good faith, the insurer’s failure to timely verify such claims disentitles it from outright repudiation of the insurance claim. Instead, the insurer’s liability should be proportionately reduced to reflect the benefit wrongly obtained by the insured. Applying these principles, the court reduced the insurer’s liability by 20% corresponding to the NCB claimed, while upholding the compensation awarded by the District Commission. The court thus balanced the insurer’s right to protect itself against fraud with the complainant’s entitlement to compensation for the loss sustained.

Holding and Implications

The appeal is partly allowed. The liability of the Appellant insurance company is modified to be reduced by 20% of the awarded claim amount, resulting in a payable sum of Rs. 5,43,680/-. The compensation amount awarded by the District Commission remains unaltered. There is no order as to costs.

The direct effect of this decision is that the complainant receives the insured amount less a proportionate deduction for the wrongful claim of No Claim Bonus, while the insurer is held accountable for not fulfilling its obligation to verify the claim within the stipulated time. No new precedent is established; rather, the decision applies established legal principles regarding utmost good faith, insurer’s duty to verify, and proportional reduction of claims in cases of misrepresentation.

Show all summary ...

STATE CONSUMER DISPUTES REDRESSAL COMMISSION UTTARAKHAND, DEHRADUN

First Appeal No. 194 / 2014

Bajaj Allianz General Insurance Company Limited Branch Office: Plot No. 1, Second Floor, DLF Industrial Area, Motinagar, New Delhi

Registered & Head Office:

G.E. Plaza Airport Road, Yerwada, Pune

Through Authorized Authority

……Appellant / Opposite Party No. 2

Versus

1. Sh. Sanjeev Kumar S/o Late Sh. Jaswant Singh R/o Village & Post Shyampur, Kangrhi, Garhwal Mohalla Haridwar District Haridwar

….…Respondent No. 1 / Complainant

2. Mahindra & Mahindra Financial Service Ltd. Ranipur Morh, Haridwar

….…Respondent No. 2 / Opposite Party No. 1 Sh. Deepak Ahluwalia, Learned Counsel for the Appellant None for Respondent No. 1

Sh. Vikrant Gambhir, Learned Counsel for Respondent No. 2

Coram: Ms. Kumkum Rani, Judicial Member II Mr. Bhagwat Singh Manral, Member Dated: 18/04/2022

ORDER

(Per: Ms. Kumkum Rani, Judicial Member II):

This appeal has been directed against the impugned judgment and order dated 04.08.2014 passed by the learned District Consumer Forum (now District Commission), Haridwar in consumer complaint No. 104 of 2011 styled as Sh. Sanjeev Kumar vs. Mahindra & Mahindra Financial Services Limited and another, wherein and whereby the District Commission has awarded the insured amount Rs. 6,79,600/- (Rupees Six Revision Petition No. 16 / 2019

Lacs Seventy Nine Thousand Six Hundred only) alongwith compensation of Rs. 1,20,400/- (Rupees One Lac Twenty Thousand Four Hundred only) to be paid by the opposite party No. 2 to the complainant within a period of one month from the date of order.

2. The facts giving rise to the appeal, in brief, are as such that the respondent No. 1-complainant has purchased a Mahindra Scorpio Turbo vehicle bearing registration No. UK08-N-1812 make of the year 05 of 2008 on 17.09.2008 after paying Rs. 10,22,000/- to Dehradun Premium Motors Pvt. Ltd., By-pass Road, Ajabpur Kalan, Dehradun; the above mentioned vehicle was financed by the respondent No. 2- Mahindra & Mahindra Financial Services, Ranipur Mod, Haridwar. As per the facts of the consumer complaint, an accident took place on 09.06.2010 at about 10:30'Clock in the night at nearby Roorkee Road, wherein the insured vehicle burnt and damaged due to such fire; the original papers kept in the insured vehicle were also burnt in the above accident; the information of the above mentioned accident was given to the insurance company - appellant and moved his (complainant's) claim form; appellant has wrote a letter to the respondent No. 1- complainant stating that he has concealed the material fact inspite of availing 20% of 'No Claim Bonus' during the period of said incident, which amounts to breach of the terms and conditions of the insurance policy and asked the complainant to explain within 7 days as to why the complainant's claim should not be repudiated and also why the complainant's insurance policy should not be cancelled. As per the consumer complaint, the appellant - opposite party No. 1 as well as respondent No. 2 - opposite party No. 2 are making pressure on the respondent No. 1 - complainant to pay the monthly installment regularly which amounts to be unfair trade practice and deficiency in service on the part of the appellant and the respondent No. 2. Therefore, the complainant has sought relief by filing the consumer complaint with the request to direct

the opposite parties to pay the value of the insured vehicle amounting to Rs. 10,22,000/- (Rupees Ten Lacs Twenty Two Thousand only) to the respondent No. 1 - complainant alongwith compensation and the costs.

3. The District Commission was pleased to pass the ex-parte order dated 08.11.2011 against the appellant.

4. The opposite party No. 2 has submitted its written statement before the District Commission stating that on account of non-completing the formalities on behalf of the complainant, the matter was finally decided, hence the complainant is not entitled to any relief from the company.

5. After hearing both the parties and perusing all the evidence, whether oral and documentary, the District Commission passed the impugned judgment on 04.08.2014.

6. On having being aggrieved by the impugned judgment, the appeal has been preferred before this Commission.

7. We have heard both the sides and perused the records available before us.

8. It is an admitted fact that the complainant's above vehicle was insured from 30.09.2009 to 29.09.2010 with the appellant. It is admitted that 20% No Claim Bonus was provided while issuing the insurance policy to the complainant - respondent No. 1. The declaration as affixed to paper No. 18/12 (on District Commission's record) also depicts that it was specifically given a declaration on behalf of the respondent No. 1, which is reproduced as under:-

"I/we hereby declare that the rate of NCB claimed by me/us is correct and that no claim has arisen in the existing policy period (copy of the Policy enclosed). I/we further undertake that if this declaration is found to be incorrect, all benefits under the policy in respect of Section -I of the policy will stand forfeited."

Thus, it is an admitted fact that as per the terms & conditions of the insurance policy cover note, the rate of No Claim Bonus is applicable in the case when it has not been claimed in earlier policy. There is no such document available on the record of the District Commission's file on behalf of the respondent No. 1 that the respondent No. 1 has brought the fact within the knowledge of the appellant that he has already obtained the No Claim Bonus while purchasing the earlier insurance policy. It is also crystal clear that the appellant has also been unable to show any such document that the insurance company has discharged its own obligation for inquiring about the fact of No Claim Bonus from the previous insurance company. Thus, the fact of conducting any such inquiry on behalf of the appellant about the fact whether the claimant has taken any No Claim Bonus from the earlier insurance company from 30.09.2009 to 29.09.2010, is not proved from the record.

9. Learned counsel for the appellant has stated that the District Commission has failed to appreciate the evidence submitted on behalf of the company that there was a gross breach of the terms & conditions by the respondent No. 1 and with oblique motive, the respondent No. 1 concealed the fact that he has already claimed a No Claim Bonus amount from his immediate previous erstwhile policy and thereby he was not entitled to No Claim Bonus @ 20%. Learned counsel for the appellant has also contended that the complainant has violated one of the basic principle of

insurance, i.e. Principle of Utmost Good Faith by claiming No Claim Bonus, hence he was not held entitled to claim any insured amount.

10. From the record, it is crystal clear that when the respondent No. 1 has submitted his claim form for the purpose of getting insured amount, the appellant has to enquire of the details and particulars from the previous insurance company, but the same was not done.

11. Learned counsel for the appellant has submitted the following cited case laws and argued that as per the principle laid down in the above case, the respondent No. 1 is not entitled to insured amount, as he concealed very relevant fact of No Claim Bonus and mislead the insurance company in disclosing the fact that he has already claimed the No Claim Bonus amount from the erstwhile insurance company, thereby the respondent No. 1 has given a wrong and false declaration, therefore, as per the terms & conditions of the insurance policy, the insurance company has not entitled to pay the insured amount to the respondent No. 1.

12. In the case of Revision Petition No. 1051 of 2017: Anjani Gupta vs. Future Generally India Insurance Company decided on 12.12.2017, the Hon'ble National Consumer Disputes Redressal Commission, New Delhi has relied on the cited case law, which is as under:

"4. The legal issue involved in this petition is no more res-integra the same having already been decided by a Three-Members Bench of this Commission in RP No.1836 of 2016, Branch Manager, National Insurance Company Ltd. Vs. Naresh Kumar decided on 20.02.2017. The Three-Members Bench took the following view in the above referred matter:

"a. The cases in which it is established that the insured by making wrongful declaration has taken benefit of No Claim Bonus and the insurer

had means to verify the correctness of the declaration of the insured seeking No Claim Bonus by exercising ordinary diligence of verifying the truthfulness of the claim from the insurer's own record, Exception to 19 of Indian Contract Act would come into play and the insurer would not be justified in repudiating the insurance claim on the ground of misrepresentation or concealment of fact. However, because the insured had taken benefit of No Claim Bonus and paid less premium, the insurance claim would be reduced proportionately.

b. In cases of the insured taking the insurance policy of the vehicle from new insurance company and it is established that the insured by making wrongful declaration has taken benefit of No Claim Bonus and where the insurer had failed to seek confirmation regarding correctness of the declaration submitted by the insured in support of plea for No Claim Bonus within the stipulated period as provided in GR 27 of Indian Motor Tariff, the insurer would not be justified in repudiating the insurance claim. However, because the insured had taken benefit of No Claim Bonus by making false declaration his insurance claim would be reduced proportionately."

It would, therefore, be seen that if No Claim Bonus is wrongfully taken by the insured, the claim would still be payable on a non-standard basis, if the insurer had the means to verify the correctness of the declaration made by the insured, while claiming the No Claim Bonus. In the present case also, the respondent had an opportunity to verify the correctness or otherwise of the declaration made by the

petitioner/complainant by making necessary enquiry from the concerned insurer. That having not been done, the complainant is entitled to reimbursement of the loss sustained by him, subject of course to proportionate deduction. Since the No Claim Bonus was availed by the complainant @ 25%, the amount payable to the

complainant/petitioner has to be reduced in the same proportion.

5. A perusal of the survey report would show that the surveyor had assessed the loss to the complainant at Rs.1,20,338/-. The complainant / petitioner is therefore, entitled to 75% of the assessed amount of Rs.1,20,338/-. The revision petition is therefore, disposed of by directing the respondent to pay 75% of Rs.1,20,338/- to the complainant/petitioner within four weeks from today alongwith interest on that amount @ 8% per annum from the date on which the consumer complaint was filed. The revision petition stands disposed of."

13. We have perused the above cited case law wherein the Hon'ble National Commission has relied the three members bench's decision of the same Commission (National Commission) and has held that the complainant is entitled to get 75% of the assessed amount of Rs. 1,20,338/- and directed the respondent to pay 75% of Rs. 1,20,338/- to the complainant within four weeks from the date of judgment alongwith interest on that amount @ 8% per annum from the date on which the consumer complaint was filed.

14. Learned counsel for the appellant has relied upon the cited case law

First Appeal No. 226 of 2016; L&T General Insurance Co. Ltd. vs. Sh. Shadi Lal Kapoor decided on 06.10.2020 and has stated that the insured has concealed the fact that he has already taken the benefit, hence claim of the respondent - claimant was repudiated vide letter dated

25.06.2012.

15. In the case of L&T General Insurance Co. Ltd. (supra), the decision of the Hon'ble National Commission passed in United India Insurance Co. Ltd. vs. M/s Jindal Poly Buttons Ltd. in Revision Petition

No. 2920 of 2015 has been mentioned, wherein the Hon'ble National Commission has held wherein the insurer has repudiated the claim of the insured on the ground that a wrongful representation was made by the insured to the insurer with regard to the no claim bonus. The Hon'ble National Commission in the above cited case has made the below mentioned observation:-

"4. In the matter of Inderpal Rana Vs. National Insurance Co. Ltd. (supra), Tata AIG General Insurance Co. Ltd. Vs. Gulzari Singhe (supra) and National Insurance Co. Ltd. Vs. Harpreet Singh (supra), the Coordinate Benches of this Commission have taken a view that if the insurer has taken an insurance policy with the advantage of No Claim Bonus by fraud/concealment of facts, it would render the insurance contract voidable and repudiation of insurance claim by the concerned insurance company would be justified. However, in the matter of Harpreet Singh (supra), the Division Bench of this Commission relying upon Motor Tariff Rule GR 27 took the view that failure of the insurer to seek confirmation about the genuineness of information furnished by the insured regarding No Claim Bonus from the previous insurer within 21 days constitute the breach of tariff and would disentitle the insurer to take shelter of plea of misrepresentation of fact by the petitioner. Thus, in the said case, the Division Bench directed reimbursement of insurance claim proportionate to the extent of less premium paid by claim the No Claim Bonus."

16. Here it is pertinent to mention that the appellant has never complied with his obligation to write a letter to the previous insurance company for confirming the entitlement of No Claim Bonus within a mandatory period of 21days. Here is it also to be noted that the company has not taken sufficient efforts in due time to get the report from the previous insurance company after issuing a letter to the earlier insurer in this respect, so that the fact about the entitlement of 'No Claim Bonus' could be confirmed whether insured has previously obtained 'No Claim Bonus' or not.

17. The principal as laid down in the above mentioned cited case laws is, therefore, fully applicable to this appeal.

18. The repudiation letter (paper No. 4/3 of the District Commission's record) was issued by the company on dated 21.08.2010 mentioning that as per information submitted by your good self you have availed 20% NCB inspite of having experienced a claim on previous policy, this had lead to breach of Insurance contract and as per declaration which states as:

"I/We the above named, do hereby, to the best of my / our knowledge and belief, warrant the truth of the foregoing statements in every respect and agree that if I have made any false or fraudulent statement of there be any suppression or concealment, the policy shall be cancelled and the claim shall be forfeited."

19. The Insurance Company asked the claimant to submit the information within 7 days by issuing the above repudiation letter as to why the claim should not be repudiated and also why your policy should not be cancelled. It is crystal clear that the claimant has purchased the insurance policy for the period of 30.09.2009 to 29.09.2010 (paper No. 18/3 of the

District Commission's record) which shows that an amount of Rs. 3,770/- @ 20% NCB was given to the respondent No. 1-complainant while issuing the insurance cover note for the above mentioned period.

20. It is crystal clear that the appellant company has not discharged such obligation to write a letter to the previous insurance company or by sending it through online services to the earlier insurance company for confirming the entitlement of NCB within a mandatory period of 21 days. Therefore, such act of the company amounts the deficiency in service on the part of the appellant - insurance company on account of not discharging of such obligation on its behalf.

21. Thus, we are of the definite view that the insurance company has committed a gross negligence by not taking proper and due efforts for obtaining the information from the earlier insurer about the NCB entitlement.

22. In the light of the above cited case laws (i) Anjani Gupta (supra) and (ii) L&T General Insurance Co. Ltd. (supra), we are of the considered view that the respondent No. 1-complainant has misrepresented about the No Claim Bonus to the appellant. We are also of the view that the respondent No. 1 - complainant should not be entitled to the entire claim and the claim of the respondent No. 1 should be reduced proportionately by 20% of the coverage amount.

23. The appeal is, therefore, partly allowed, only to the extent of modification of liability of the appellant being reduced to 20% of the awarded claim amount, i.e. Rs. 6,79,600/- which comes (679600- 135920=543680) as Rs. 5,43,680/-. No modification of the impugned judgment with respect to the compensation awarded. No order as to costs.

24. A copy of this judgment be uploaded forthwith on the website of the Commission for perusal of the parties. A copy of the judgment be sent to the District Commission, Haridwar for record and necessary information.

25. Statutory amount, if any, deposited by the appellant be returned to the appellant. The record of the District Commission, if any, be returned to the concerned Commission.

26. Appeal file be consigned to record room alongwith a copy of this Judgment.

(BHAGWAT SINGH MANRAL) (MS. KUMKUM RANI)