Consumer Rights

Insurer cannot deny claim by summarily changing terms

Background: Insurance firms unilaterally change policy terms at the time of renewal and reject claims or pay a limited amount on the basis of revised conditions. This is not permissible.

Case Study: Gadiwalla, his wife, son and daughter were covered under a mediclaim policy from United India Insurance, which was first taken in 2002 and renewed over the years without break.

In 2008, Gadiwalla’s son was diagnosed with having to be suffering from erythrodermic psoriasis. The treatment is infliximob induction therapy that comprises a series of injections to be taken over a period of time. Each injection is given intravenously and its administration takes over three hours. There is a risk of adverse reactions that can even result in the patient’s death. Hence, a patient receives treatment in an intensive care unit (ICU) where he/she can be continuously monitored. The claim for the first three rounds of treatment was paid by the insurance company. The claim for the fourth round was rejected on the grounds that hospitalization was not necessary as the injection could have been administered as a clinical procedure in the out-patient department (OPD).

Gadiwalla then noticed that the insurance company had surreptitiously changed the policy terms and conditions without his knowledge or consent. The revised policy put him at a disadvantage as it imposed restrictions on the amount payable for certain operations, including major surgeries, and discontinued the no-claim bonus.

Gadiwalla along with the Consumers Welfare Association filed a complaint before the south Mumbai district forum. The insurance company contested the case and contended that the earlier claims had been paid according to the policy conditions prevalent then, but was no longer payable as the policy terms had been revised. The company claimed that it had the right to alter the terms and conditions at the time of renewal. The forum considered the case of Bimal Krishna Bose vs United India Insurance Co Ltd [III (2001) CPJ 10 (SC)], where the Supreme Court had interpreted “renewal” as “repetition of the original policy that gets extended for a further period on identical terms”. Although a new contract may come into existence on renewal, it would be on the same terms and conditions as the original policy.

In its June 10 judgment delivered by president S .M Ratnakar and member S S Patil, the forum held that changing the policy conditions arbitrarily would constitute an unfair trade practice. The forum directed the insurance company to renew the policy in accordance with the original conditions in force on February 21, 2002, when it was first issued. In connection with the rejected claim, the forum observed that Dr Arsiwala, who was an expert doctor treating Gadiwalla, had certified the necessity of administering the treatment in the ICU. Even the company had earlier paid identical claims for the same treatment, so there was no reason for taking a contradictory stand now to reject the claim. The forum, therefore, ruled that the claim would be payable and directed the insurance company to pay Rs 87,143 along with interest at 9% per annum from September 17, 2009 17.09.2009 till it is paid.

Since the treatment is of a recurrent nature, requiring the injection to be taken periodically, the forum further directed that subsequent claims for the same treatment should not be rejected on the same grounds, viz. that it could have been taken in the OPD. The forum also awarded Rs 5,000 as compensation and Rs 5,000 as costs and gave the insurance company a month to comply with the various directions given.

Conclusion: An insured can refuse to accept unilateral changes in policy conditions that are detrimental to his/her interests. The forum can also restrain the insurance company from using the same excuse to wrongly reject subsequent claims, which may recur in future.

Be the first to comment - What do you think?  Posted by admin - August 12, 2013 at 6:48 pm

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Renewing policy? Company can’t hike premium

Insurance companies cannot load premium due to adverse claim ratio.

Background: It is illegal to refuse renewal of a policy. So, when an insurance company does not want to renew a policy that has become onerous, it adopts the back-door method of loading the premium excessively, making it unaffordable for the insured, who may then volluntarily opt out.

In a ruling on June 19, 2013, the South Mumbai District Forum ordered an insurance firm to refund the excess premium charged through loading.

Case Study: Praveen Shah was insured under a Mediclaim Policy with New India Assurance from 1988. The premium for 2007-2008 was Rs 10,508. Subsequently, Mediclaim Policy 2007 was introduced. At the time of the next renewal for 2008-2009, the insurance company loaded the premium and charged Rs 22,545, which was more than double the previous year’s premium. In 2009-2010, the premium was further increased to Rs 21,357.

For 2010-2011, the premium was once again loaded and increased to Rs 45,320, making it more than double the previous year’s premium. Thus, from 2008 onwards, the premium was time and again increased arbitrarily at the time of each renewal.

Shah sent various letters protesting against the increase of premium through loading. He even took up the issue with the Insurance Regulatory Development Authority (IRDA), but his pleas fell on deaf years. He then approached the Consumers Welfare Association for help. The association, along with Shah, filed a joint complaint before the consumer forum for South Mumbai District, challenging the premium hike.

The insurance company contended that Shah had lodged three claims totalling Rs 2,72,004 for the treatment of his wife, who was also covered under the policy. Due to this, Shah’s claim ratio was 66%. The insurance insurance firm defended itself and justified its action by arguing that the premium had been rightly loaded and 15% co pay had also been introduced in view of the adverse claims experience.

The insurance company also claimed that the premium was calculated as per Regulation 7 framed by IRDA and relied on “premium rules”, which it claimed were annexed to its reply, but were actually not filed. The insurance company also contended that once the insured crosses the age of 70 years, the applicable premium will be loaded by 2.5% each year. The insurance company claimed that its actions were justified under the revised terms of the policy introduced in 2007.

The forum observed that the premium rules had not been filed by the insurance firm. However, on going through Regulation 7 of the IRDA Protection of Policyholders Interest Regulations 2002, no such provision could be found that permitted the insurer to load the premium.

The forum also relied on earlier judgments on the same issue where it had been held that loading of premium was not justified. Also, in the case of Biman Krishna Bose v/s United India Insurance, the Supreme Court had held that a renewal of an insurance policy means repetition of the original policy on the same terms and conditions as that of the original policy. Since the original policy did not have any clause permitting loading of premium, the insurance company cannot be permitted to change the policy terms and conditions to impose such loading.

Accordingly, in its judgment delivered on June 19, 2013, by S S Patil on behalf of a bench comprising himself and president S M Ratnakar, the forum ruled that the insurer was not authorized to load the premium and enhance it unilaterally and arbitrarily. The forum held this to be deficiency in service and an unfair trade practice. It, therefore, directed the insurance

company to refund a total of Rs 57,898, which was the excess amount of premium charged over a period of three years through loading. Interest at the rate of 9% per annum from the date of each loading till its refund was also awarded. In addition Rs 15,000 was awarded as compensation and Rs 5,000 as costs.

Impact: Loading of premium through unilateral change of policy terms and conditions is an unfair trade practice. The insured can challenge it and get a refund.

Be the first to comment - What do you think?  Posted by admin - at 6:46 pm

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Consumer fora can initiate ‘contempt of court’ as well

Subject: Allahabad high court rules that consumer forums can also initiate contempt proceedings.

Backdrop: There are several rulings that consumer fora are not courts, but are quasi judicial tribunals for redressal of grievances. The Consumer Protection Act provides for its own hierarchy of appeals. Administrative control is exercised by the National Commission over the State Commissions, which in turn oversee the functioning of the District Forums under them. Because of this, it is believed that the Contempt of Courts Act is not applicable to the consumer fora.

Case Study: The Muzaffarnagar District Consumer Forum had lodged a complaint with the Allahabad HC that Advocate Anil Kumar Jindal had committed contempt of the Forum. The Allahabad HC then initiated proceedings against the advocate for criminal contempt. Jindal objected, claiming that the proceedings were non-maintainable. His argument was that Section 10 of the Contempt of Courts Act empowers the HC to punish a person for contempt of a court subordinate to it. He contended that the District Consumer Forum is neither a court nor is it subordinate to the HC.

The Additional Government Advocate, however, argued that the contempt proceedings are maintainable as the consumer forum has all the trappings of a court and is subordinate to the HC.

To decide the legal controversy, the HC analyzed the law and its interpretation. The word “court” is not defined under the Act and its meaning would have to be culled out on the basis of various pronouncements by the SC.

In the case of Virendra Kumar Satyawadi v/s State of Punjab, an SC bench considered the characteristics of a court. It held that a court has a duty to decide disputes in a judicial manner and declare the rights of parties in a definitive judgment. Judicial adjudication requires the parties to be heard in support of their claims and to produce evidence. The dispute has to be decided in accordance with law by considering the evidence. An authority or a tribunal would be considered a court only if it fulfils all these attributes.

Going by this definition, even a Returning Officer deciding on the validity of the nomination papers under the Representation of People Act is considered to be a court. Similarly, even an Assistant Registrar under the Cooperative Societies Act is considered to be a court under the Contempt of Courts Act.

The Consumer Protection Act vests the redressal agencies with the power to decide consumer disputes following a summary procedure. Disputes are decided, just like a court. The term “court” has to be interpreted in its generic sense. Whether the consumer forum is actually a court or not is immaterial. What is relevant is that it exercises judicial power akin to a court. Hence, the provisions of the Contempt of Courts Act would be applicable.

The next question was whether the consumer fora could be considered subordinate to the HC. Article 227 of the Constitution of India provides the HC with the power of superintendence over all the courts and tribunals within its territorial jurisdiction, except those constituted under any law relating to the Armed Forces.

The SC, in S.K. Sarkar v/s Vinay Chandra, had observed that the term “subordinate court” is wide enough to include all courts which are judicially subordinate to the HC, even though administrative control over them may not vest in the HC. In view of this, an Administrative Judge has been assigned under the Allahabad HC Rules, to review judicial work of subordinate courts, tribunals, district consumer forums and other special courts.

The HC accordingly held that the consumer forum was subordinate to it.

Thus, over ruling Advocate Jindal’s legal objections, the HC held that it could proceed against him for committing criminal contempt. The proceedings will now consider factually whether contempt has been committed. [Judgement of the Allahabad HC dated 10.09.2012 delivered by Justice Ashok Pal Singh for the Bench comprising of Justice Dharnidhar Jha and himself in Contempt Application (Criminal) No. 3 of 2012 in the case of Anil Kumar Jindal & Ors.].

Impact: Those who misbehave in the consumer forum thinking that it is powerless to take action for contempt, will now have to exercise self-restraint.

Be the first to comment - What do you think?  Posted by admin - at 6:41 pm

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Consumer fora cannot decide onpower theft assessment disputes

Consumer protection

Disputes regarding assessment for electricity theft not maintainable under Consumer Protection Act (CPA) as there is no deficiency in service or unfair trade practice.

Background: Consumer fora used to entertain disputes regarding assessed bills for electricity theft. But, a couple of years ago, the SC restrained the fora from finally deciding such complaints till its ruling on the maintainability of such disputes. In its July 1 judgment, delivered by Justice Sudhansu Mukhopadhaya for a bench headed by Justice G S Singhvi, the SC held that such disputes cannot be adjudicated by the consumer fora. (UP Power Corporation Ltd & Ors v/s Anis Ahmad—Civil Appeal Nos 5467 to 5475 of 2012.) The remedy would lie before the special courts constituted under the Indian Electricity Act. The consumer fora can only deal with complaints pertaining to deficiency in service or unfair trade practice. What are the implications of this judgment for the consumer?

Case Study: Anis Ahmad and other consumers of UP Power Corporation had filed complaints before the district forum challenging the assessed bill raised against them for theft of electricity. The corporation challenged the maintainability of such complaints before the fora. The Moradabad District Forum, Uttar Pradesh State Commission and the National Commission held the complaints to be maintainable. The corporation moved the SC.

The SC observed that to file a complaint under the CPA, a person must be a consumer and there must be an allegation that the goods are defective, or there is a deficiency in service, or that unfair trade practice or restrictive trade practice has been adopted, or that the goods or services are hazardous or that the charge is in excess of the price declared or fixed by law.

In the case before the SC, Ahmad and others, who had filed the consumer complaints, had industrial connections meant for commercial purpose. Since the complaints in respect of commercial purposes were excluded under the CPA, the SC ruled that the complaints were not maintainable before the consumer fora. Besides, none of the persons had alleged any deficiency in service or unfair trade practice, but had merely disputed the final order of assessment in respect of unauthorized use or theft of electricity.

The SC also observed that the provisional assessment is subject to a final assessment by the assessing officer after giving notice to the person who is supposed to have indulged in unauthorized use or theft of electricity. The Electricity Act also provide for an appellate authority to challenge the final assessment. The court ruled that the since the assessing officer is a public servant and his assessment is a quasi-judicial decision, any dispute regarding the assessment would not constitute a consumer dispute.

Under the Electricity Act, illegal use and electricity theft attracts a civil consequence of levying a charge at twice the applicable rate, and a criminal prosecution where the offender can be punished with imprisonment or fine or both. Special courts have also been constituted under the Electricity Act for speedy adjudication of such disputes.

The SC said even though the CPA offers an additional remedy, and the Electricity Act provides that in the event of a conflict between the two Acts, the CPA will prevail, it would not vest the forum with the jurisdiction to decide disputes regarding assessment for unauthorized use or electricity theft. It held that both the Acts run parallel. The fora can decide an electricity dispute only if it relates to deficiency in service, unfair trade practice or overcharging.

Conclusion: The SC judgment does not debar consumer fora from adjudicating complaints regarding supply of electricity, so long as the dispute fits within the four corners of the CPA. In short, if a consumer makes out a case of deficiency in service, over-charging, unfair trade practice or restrictive trade practice, consumer fora can adjudicate the dispute.

Background: Consumer fora used to entertain disputes regarding assessed bills for electricity theft. But, a couple of years ago, the SC restrained the fora from finally deciding such complaints till its ruling on the maintainability of such disputes. In its July 1 judgment, delivered by Justice Sudhansu Mukhopadhaya for a bench headed by Justice G S Singhvi, the SC held that such disputes cannot be adjudicated by the consumer fora. (UP Power Corporation Ltd & Ors v/s Anis Ahmad Civil Appeal Nos 5467 to 5475 of 2012.) The remedy would lie before the special courts constituted under the Indian Electricity Act. The consumer fora can only deal with complaints pertaining to deficiency in service or unfair trade practice. What are the implications of this judgment for the consumer?

Be the first to comment - What do you think?  Posted by admin - at 6:39 pm

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Not only banks, employees too liable for deficiency in service

Background: Officials of banks and PSUs fail to improve their attitude and are not perturbed by litigation, as they feel that it is the organization which will be held liable while they will go scot-free. Dealing this complacent attitude a major blow, the South Mumbai Consumer Forum has held bank officials liable jointly with the bank of deficiency in service and unfair trade practice.

Case Study: The Greater Bombay Co-operative Bank had acquired a flat in a building at Murbad in Kalyan under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Ordinance. In its advertisement issued in a local newspaper, the bank announced the auction sale of this flat, representing that the built-up area was 360 sq ft and the expected price as Rs 3,29,000. Sanjay Pendurkar successfully bid for the flat, which was then sold to him for Rs 3,29,000. The bank’s authorized officer executed a sale deed in Sanjay’s favour and handed over all the relevant documents to him on November 30, 2010.

Soon after taking possession, Sanjay had the flat measured and found that its carpet area was only 195 sq ft, while its built-up area was 234 sq ft, not 360 sq. ft as advertised by the bank. He promptly sent a letter on December 8, 2010, requesting the bank to cancel the sale and return the amount paid by him. The bank ignored Sanjay’s letter.

A few months later, on March 6, 2011, Sanjay came across an advertisement in Nav Shakti newspaper for the auction sale of the same flat which had been sold to him. The only difference was that the built-up area of the flat was stated to be 222 sq ft, for which the expected price was Rs 2,22,000. Sanjay was shocked because he was in possession and occupation of this flat which had already been sold to him.

Sanjay had a legal notice issued to the bank for the intentional misrepresentation of flat’s area, thereby inducing him to pay Rs 1,07,000 more, under the wrong impression that the size of the flat was larger. The bank ignored the notice as well as a subsequent reminder.

Apprehensive that the bank would continue with the auction and evict him forcibly so that it could hand over the flat to whoever would succeed in the fresh auction, Sanjay filed a consumer complaint before the South Mumbai District Forum, against the bank, the manager of its Bhuleshwar branch and its authorized officer. The forum served a notice, yet the bank and its officials did not care to appear or file their reply.

The forum compared the two advertisements issued by the bank for the auction of the same flat. In its ex parte order of June 29, 2013, delivered by presiding officer S M Ratnakar on behalf of the bench, along with S S Patil, the forum observed that the first advertisement stated the built-up area to be 360 sq ft, while the subsequent one stated it was 222 sq ft. The forum concluded that the bank had made a misrepresentation about the area and had over-charged Sanjay. Comparing the expected price advertised by the bank in the two advertisements, the forum found the difference to be Rs 1,07,000. It held that the bank as well as its officials were guilty of deficiency of services and unfair trade practices.

Accordingly, the forum held the bank, its Bhuleshwar branch manager Karadikar and authorized officer Rajesh Gujar jointly liable to a refund Rs 1,07,000, along with 9% interest from the date of the sale certificate till its refund. Additionally, costs of Rs 5,000 were awarded to Sanjay. The forum also held that the issuance of a notice for a public auction without cancellation of the sale certificate would constitute an encroachment on Sanjay’s right and title to the flat. It, therefore, permanently restrained the bank and its officers from dispossessing Sanjay from the flat.

Impact: The forum judgment holding the officials liable should shake up complacent officials and hopefully bring about an attitudinal change.

 

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Alcohol on breath doesn’t imply being drunk: Consumer panel

Subject: The smell of alcohol does not establish intoxication.

Backdrop: A casual noting in a hospital record uncorroborated by medical tests, cannot be used to reject an insurance claim.

Case Study: Suresh owned a Skoda which was insured with Oriental Insurance Co. The car was totally damaged following a highway accident in 2008. An FIR was lodged over the incident. The car was later repaired by an authorized Skoda dealer at a cost of Rs 10,46,961.

Despite filing an insurance claim with all supporting documents, Suresh’s claim was rejected on grounds that the driver and other passengers in the vehicle were under the influence of alcohol at the time of the incident. Suresh immediately wrote back pointing out that this was incorrect. Since the insurance company did not respond, Suresh filed a complaint before the Additional Consumer Forum for Bangalore.

The insurance firm contested the case saying that the claim lodged was for an amount that exceeded the declared value of Rs 7,55,556 under the policy. The liability of the insurance company cannot be more than the insured amount. Also, the estimate for repairs had been submitted but the actual bills had not been furnished. The investigator appointed had reported that Suresh and the vehicle’s other occupants were under the influence of alcohol when the accident occurred. Another investigator reported that there was a noting in the hospital’s accident register that Suresh’s son and two other occupants of the vehicle were found to be disoriented, their breath smelt of alcohol, and their speech was slurred. The insurance company contended that the claim had been rejected in accordance with policy terms and conditions.

The District Forum observed that sections 185 and 202 of the Motor Vehicles Act provide that a driver would be considered intoxicated only if he is tested and found to have more than 30 mg of alcohol in his blood, per 100 ml. In the present case, except for a casual noting in the hospital register, no test had been done to ascertain whether alcohol had exceeded the legally stipulated limit. The mere smell of alcohol cannot lead to an inference that a person is incapable of taking care of himself. The Forum ruled that the a claim could not be rejected on the basis of an unscientific method.

It also observed that the claim would be restricted to the sum insured, subject to a deduction for the salvage value and adjustment as per excess clause requiring the insured to bear a part of the loss. It held that Suresh would be entitled to Rs 6 lakh along with 9% interest from the date of claim, awarding an additional Rs 3,000 as costs.

The insurance company appealed to the Karnataka State Commission which concurred with the view taken by the District Forum and dismissed the appeal. But the insurance company challenged the orders by filing a revision petition before the National Commission. According to the insurance company, there was a delay of 76 days in filing the revision, whereas the actual delay was of 131 days for which no satisfactory explanation was given. The Commission said that this revealed a casual attitude. It castigated the insurance company for over burdening the courts despite two concurrent adverse findings against it through well reasoned orders of the lower consumer fora. It dismissed the petition with a direction to pay Rs 5,000 as costs to the Consumer Welfare Fund. (Judgement dated 7.5.2013 in the case of Oriental Insurance Co. Ltd. v/s M. Suresh in Revision Petition No. 881 of 2013)

Impact:This judgement lays down that a person cannot be said to be intoxicated unless alcohol level exceeds the prescribed limit which can only be confirmed through a medical test. Also, well reasoned orders should not be challenged to drag litigation.

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A consumer can approach a forum even if his claim has been rejected by the Insurance Ombudsman

‘Death due to fall after slipping is an accident’


    A fall at home due to slipping of foot is an accident and claim is payable under an accident policy.


    Background: When an old person slips at home, resulting in subsequent death, can the insurance company reject a claim on the presumption that the fall was age-related and hence the death was due to a natural cause? In a recent judgment delivered by S M Ratnakar, along with member S S Patil, the South Mumbai district consumer forum ruled that a claim cannot be rejected on such a pretext.


    Case Study: Dr Shirish Vakil had taken Janata Personal Accident Insurance Policy from National Insurance Co when he was 69 years old for a period of 12 years (November 12, 1997-November 11. 2009) with a sum insured of Rs 5 lakh.
    Shirish, though retired, was in good health. On November 3, 2009, he slipped and fell at home. The fall impacted the rear portion of his head, making him feel giddy. There was no serious injury visible externally. But at night, his condition deteriorated and he was taken to Bhatia Hospital, where a CT scan was done. Due to want of beds, he was shifted to Harkisandas Hospital, which registered a medico-legal case and informed the police. He was diagnosed to be having an introcerebral or intracranial bleed. On November 6, Shirish succumbed to injuries.
    His son, Sunil, then claimed the sum insured. But the firm rejected it, contending that the fall was due to giddiness, an age-related problem, and hence the death could not be termed as accidental. Sunil moved the Insurance Ombudsman, which upheld the firm’s contention. He then filed a complaint through
the Consumer Welfare Association. The firm said a claim under the policy would be payable if the insured sustains bodily injury, resulting solely and directly from the accident caused by outward violent and visible means.
    The forum observed it would require to consider whether Shirish’s case amount to an “accident” as interpreted by the National Commission in the case of Reeta Devi v/s National Insurance Co. Ltd. [IV (2007) CPJ 355 (NC)]. The forum noted that the CT scan mentions subdural hematoma of 0.8cm, also seen in left frontoparietal lobe region. The hospital records clearly show “intracerebral bleed”. Statement of the domestic servant present at the time of incident, as recorded by the police, also showed that Shirish’s foot had slipped in the bedroom. The forum said the records establish that the fall was accidental. Hence, the forum ruled that the claim was payable, and that its wrongful rejection constituted a deficiency in service and also an unfair trade practice.
    The forum held that the Insurance Ombudsman order would not act as an impediment to the proceedings before it, as this question had already been settled by the National Commission. Accordingly, it directed the firm to pay the sum insured along with interest at 6% pa from December 7, 2009, till payment. In addition, Rs 20,000 compensation was awarded for harassment and Rs 3,000 as costs.


    Conclusion: A consumer can approach a forum even if his claim has been rejected by the Insurance Ombudsman. Under an accident policy, a claim for any injury or untoward incident caused by outward violent and visible means is payable.

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