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TMI Blog2021 (12) TMI 1371X X X X Extracts X X X X X X X X Extracts X X X X ..... , the respondent cannot be heard to now say that the insured were under an obligation to satisfy themselves, if a new term had been introduced. If one considers the facts of this case, it is evident that the insurer had caused a renewal reminder, which was acted upon and the renewal cheque, issued by the appellant - The courts remedial power, to refuse enforcement of such contracts, or contractual terms, finds support in a few decisions of this Court. There is no doubt that insurance business is run through brokers and agents. The role of an agent in this regard is to be examined. This Court has spelt out, in the context of insurance business the role of insurance agents and the liability or responsibility of insurance companies in the event of failure to discharge the duties cast upon agents, and the likely vicarious responsibility or liability of the insurer. This Court is of the opinion that the findings of the State Commission and the NCDRC cannot be sustained. The insurer was clearly under a duty to inform the appellant policy holders about the limitations which it was imposing in the policy renewed for 2008-2009. Its failure to inform the policy holders resulted in deficiency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Forum (hereafter "the District Forum"), Kottayam for a direction that the insurer ought to pay them Rs.2,07,705/- along with costs and interests on the compensation. 4. The insurer's position before the District Forum was that the terms and conditions of Mediclaim policy changed periodically. The policy for the relevant year indicated that in respect of procedures (such as angioplasty), 70% of the policy limit could be claimed subject to an overall limit of Rs.2,00,000/- for any one surgery or procedure. The insurer also argued that having been issued with the policy document which was accepted by the appellants, the latter could not then complain that they were any amounts over and above the terms agreed upon. 5. The District Forum allowed the appellants' complaint holding firstly that an insurance contract evidences a commercial transaction, and is to be construed like any other agreement, on its own terms subject to fulfillment of the conditions of uberrima fides i.e., utmost good faith by the parties and secondly that the insurer was under a duty to intimate to be insured with respect to change in terms before the renewal of the policy. On the basis of these findings, the Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch a policy was renewed on 26.03.2008. In the circumstances, it was duty of the insurer to inform the insured of the likely change in coverage to enable them to explore an alternative i.e., to opt for a policy that would cover all risks more comprehensively, even if it were to cost them more. Counsel urged that in these circumstances, the insurer was clearly guilty of deficiency of service in as much as the insurer was in the dark about the nature of the limited coverage. 8. Learned counsel on behalf of the insurer Mr. Amit Kumar urged this court to uphold the finding of the NCDRC submitting that there was no deficiency in service by the respondents. It was submitted that the appellants never disputed that in fact the policy was dispatched pursuant to the renewal. A careful reading of the policy for the year 2008-2009 would have indicated that it differed radically from the policy from the previous year because of a term indicating a monetary limit on the reimbursable expenditure, by the insurer. In these circumstances, the appellants could not place any blame upon the insurer. 9. It was submitted that the insurer was under no obligation to indicate or to intimidate to the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in question, i.e., for 2008-09 covered an overall limit of ₹8 lakhs (Rs.4,25,000/- for the first appellant and Rs.3,75,000/- for the second appellant, his wife). A copy of the policy which has been produced indicates that the premium (including service tax) paid was ₹17,705/. The period of insurance was from 00.00 hrs of 28.03.2008 to midnight of 27.03.2009. Clause 1.2 of the policy in question for 2008-09 indisputably introduced the following restrictive condition: "1.2 In the event of any claim(s) becoming admissible under this scheme, the company will pay through TPA to the Hospital/Nursing Home or the insured person the amount of such expenses as would fall under different heads mentioned below, and as are reasonably and necessarily incurred thereof by or on behalf of such Insured Person, but not exceeding the Sum Insured in aggregate mentioned in the schedule hereto. A) Room, Boarding Expenses as provided by the Hospital/ nursing home B) Nursing Expenses C) Surgeon, Anaesthetist, Medical Practitioner, Consultants, Specialists Fees D) Anaesthetist, Blood, Oxygen, Operation Theatre Charges, surgical appliances, Medicines & Drugs, Diagnostic Materials a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was received by the appellants. Clearly, the policy containing the fresh terms was issued after receipt of the premium for the year 2008-09. In this regard, interestingly, the affidavit evidence of the insurer states as follows: "3. That it is stated that the petitioners renewed their policy No.100505/48/07/00002034 for the period 28.03.2008 to 27.03.2009 and received the terms of the policy which has been renamed as "United India Health Insurance Policy (Gold)". The total coverage of the policy was Rs.8,00,000/- being Rs.4,25,000/- for petitioner No.1 and Rs.3,75,000/- for the petitioner No.2. The petitioner received no claim discount of Rs.3184.7 when renewing the same. XXXXXXXX XXXXXXXX XXXXXXX 5. That it is stated that the petitioners made representation vide letter dated 10.10.2008, to the respondent claiming the entire amount of treatment from the respondent and in reply dated 04.11.2008, it was stated that the insurance company in terms of the United India health insurance policy Gold was liable to pay to the insured 70% of the sum insured or Rs.2,00,000/- whichever was less in case of angioplasty." 15. The insurer's counsel had, during the course of the hearing, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the new Scheme. If they so desire to enter the new Scheme, the same may be allowed on collection of fresh proposal. Persons above the age of 60 years and taking a Health Policy for the first time can be granted the Senior Citizens Policy only." Analysis:- The first point: on renewal 16. In the facts of the present appeal, the insurer insisted that the 2008-09 'Gold' policy was in fact a 'new' one, and not a renewal, which was available with the appellants, before the second appellant's surgery took place. There is some dispute on this aspect; the appellants contended that the amended terms of the 2008-09 Gold policy were received only after three months of the payment of the renewal premium, and thus there was no scope for them to have read and given consent to the cap on angioplasty coverage in the new Gold policy. 17. The insurer had placed reliance on the administrative guidelines (supra) to highlight the clause on renewal, in order to demonstrate that the 2008-09 Gold policy was a new insurance product, and not a renewal of the previous Mediclaim policy. However, the same clause stated that, "In respect of senior citizens who are our existing policy holders, they will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Irrespective of the answer to the question of whether the renewal of an insurance contract results in a new contract or otherwise, the issue which arises is whether the appellants, as beneficiaries of the policy, could complain about mistake in its terms, and the possible consequences of such mistake. 21. There cannot be any gainsaying to the fact that if parties are not agreed on the terms, one of the likely results would be its avoidance. "Mistake" is not defined, under the Contract Act, 1872; however, Section 22 of the Act5 enacts that a unilateral mistake of fact, does not result in its nullity. The general law on avoidance of a contract was explained by this court in Canara Bank v. United India Insurance Co. Ltd. (2020) 3 SCC 455 in the following terms: "[T]o make a contract void, the non-disclosure should be of some very material fact. No doubt, it would have been better if the Bank and the insured had given at least one tripartite agreement to the Insurance Company but, in our view, in the peculiar facts of this case, not disclosing the tripartite agreement or the names of the owners cannot be said to be such a material fact as to make the policy void or voidable. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellants. The second point: duty of insurers 23. This court next proceeds to address itself to the second question, namely what are the duties of an insurer, when a policy holder seeks renewal of an existing policy. The insurer here contends that the consumer was under an obligation to inquire about the terms of the policy, and any changes that might have been introduced, in the standard terms. It was urged that the appellants, in the facts of this case, should have inquired from the concerned agent; since they omitted to do so, they were bound by the terms of the policy. 24. A striking feature of insurance law, is the principle of uberrima fide (duty of utmost good faith) which applies to both the insured as well as one who seeks indemnity and cover. In United India Insurance Co. Ltd. v. M.K.J. Corpn. 1996 (6) SCC 428 this court underlined the importance of this principle, and its application to the insurer, in the following terms: "It is a fundamental principle of Insurance law that utmost good faith must be observed by the contracting parties. Good faith forbids either party from concealing (non-disclosure) what he privately knows, to draw the other into a bargai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g, and for Spain. The plaintiff-insured, however, argued that there was an initial agreement in favour of jurisdiction in England, as the country of their habitual residence at the time of contract, and that that agreement was never displaced. The Court of Appeal rejected the insurer's objection, and held as follows: "Against the background of these principles, which in the absence of relevant submission from the parties I am content to adopt, then, the argument was to be conducted purely in terms of the judge's own analysis, I would regard his decision, that there was an albeit inchoate consensus in favour of English law and jurisdiction at a time prior to the submission and acceptance of Nordea's proposal, as a critical finding, raising the question whether that consensus had ever been displaced. It is true that the application forms are at a stage pre-contract: however, in my judgment they constitute, on the judge's finding, an agreement that if a contract is ultimately made it will be on the terms agreed in the application forms. It seems to me that on that basis there would be a strong argument that that finding never had been displaced. That would be because, al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of policy. The second, is that most policies - health and medical insurance policies being no exception, are in standard form. It would be worthwhile to notice at this stage that one who seeks coverage of a life policy/a personal risk, such as accident or health policy has little choice but to accept the offer of certain standard term contracts - which are termed as contracts d' adhesion, a French legal term. This has been defined as 7 "A standard-form contract prepared by one party, to be signed by the party in a weaker position, usually a consumer, who has little choice about the terms. Also termed Contract of adhesion; adhesory contract; adhesionary contract; take it or leave it contract; leonire contract. Some sets of trade and professional forms are extremely one-sided, grossly favouring one interest group against others, and are commonly referred to as contracts of adhesion. From weakness in bargaining position, ignorance or indifference, unfavoured parties are willing to enter transactions controlled by these lopsided legal documents" 27. The Law Commission8 has addressed this issue in the report titled 'Unfair (Procedural & Substantive) Terms in Contract'. The comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission. 30. During the hearings, it was urged on behalf of the insurer that the agent would have ordinarily informed the policy holder as she or he was in touch with them. The insurer did not lead evidence in this regard. Its agent was not asked to affirm any affidavit. In these circumstances, the inference to be drawn is that the agent did not inform - at the time of renewal of the policy, in 2008, about the limits in regard to coverage of individual procedures but also omitted them any information that there could have been possibility of higher coverage by payment of higher premium which might have resulted in a higher limit for the various surgeries or procedures covered by the policy. 31. There is no doubt that insurance business is run through brokers and agents. The role of an agent in this regard is to be examined. This Court has spelt out, in the context of insurance business the role of insurance agents and the liability or responsibility of insurance companies in the event of failure to discharge the duties cast upon agents, and the likely vicarious responsibility or liability of the insurer. 32. In Delhi Electric Supply Undertaking v. Basanti Devi (1999) 8 SCC 229 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m from Bhim Singh on behalf of LIC. So far as Bhim Singh is concerned DESU was an agent of LIC to collect premium on its behalf." 33. This reasoning was applied in Life Insurance Corporation of India v Rajiv Kumar Bhaskar 2005 (6) SCC 188. It would be useful, in the present context to extract the relevant terms of the notification, 11[especially Clauses 3 (2) and 4 (1)] issued by the IRDA: "3(2) An insurer or its agents or other intermediatory shall provide all material information in respect of a proposed cover to the prospect to enable the prospect to decide on the best cover that would be in his or her interest." ************** *************** ************** 4(1) Except in cases of a marine Insurance cover, where current market practices do not insist on a written proposal form in all cases, a proposal for grant of a cover, either for life business or for general business, must be evident by a written document. It is the duty of an insure to furnish to the insured free of charge, within 30 days of the acceptance of a proposal, a copy of the proposal form." In the present case, even if, for arguments' sake, one was to accept the submissions of the insurer which is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion of how to offer health care to their citizens. The World Health Organization (WHO) defines health as a dynamic state of complete physical, mental, spiritual and social well-being and not merely the absence of disease or infirmity.12 Healthy living conditions and good quality health is not only a necessary requirement it is also recognized as a fundamental right. Article 25 of the Universal Declaration of Human Rights 194813 lays down that everyone has the right to a standard of living, adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care. The International Covenant on Economic, Social and Cultural Rights, 1976, too recognizes the right to health, of citizens of every nation.14 37. Part IV of the Indian Constitution which contain the Directive Principles of State Policy imposes duties on the state. Some of its provisions directly or indirectly are associated with public health. These principles direct the state to take measures to improve the condition of health care of the people. Articles 38 imposes duty on state that state secure a social order for the promotion of welfare of the people. Without an overall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... morbidity rates used are representative v. For treatment in specific geographies only, provided the morbidity rates used are representative Provided, such specifications are disclosed clearly upfront in the product prospectus, documents and during sale process. And provided that no insurer shall offer any benefit or service without any insurance element. ********** ********** ********** c. Insurer shall not compel the insured to migrate to other health insurance products. In case of migration from a withdrawn product, the insurer shall offer the policyholder an alternative available product subject to portability conditions. d. Insurers shall ensure adequate dissemination of product information on all their health insurance products on their websites. This information shall include a description of the product, copies of the prospectus as approved under the Product Filing Guidelines, proposal form, policy document wordings and premium rates inclusive and exclusive of Service Tax as applicable…." Regulation 13 is relevant for the purposes of this appeal; it deals with renewal of policies, and reads as follows: "13. Renewal of Health Policies issued by Gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. 2. Effective for 2006-2007 3. For 2006-2007 4. LIC v. Raja Vasireddy Komalavalli Kamba, (1984) 2 SCC 719 (para 15). 5. Extracted below: "Section 22. Contract caused by mistake of one party as to matter of fact.-A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact. -A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact." 6. Reliance Life Insurance Co. Ltd. vs Rekhaben Nareshbhai Rathod 2019 (6) SCC 175; Life Insurance Corporation of India vs Asha Goel 2001 (2) SCC 160; P.C. Chacko vs Chairman, Life Insurance Corporation of India 2008 (1) SCC 321 and Satwant Kaur Sandhu vs New India Assurance Company Limited 2009 (8) SCC 316 7. Black's Law Dictionary, 9th edn., p. 368 8. The Law Commission of India in its 199th Report 9. Central Inland Water v Brojo Nath Ganguly&Anr1986 (3) SCC 156; Life Insurance Corporation of India v Consumer Education and Research Centre &Ors1995 (5) SCC 482, where it was observed that: "The appellants or any person or authority in the field of insurance owe a public duty to evolve their policie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate reduce absenteeism on grounds of sickness, etc. health is thus a state of complete physical, menial and social well-being and nut merely the absence of disease or infirmity". 13. Article 25 reads as follows: (1) Everyone has the right to a standard of living adequate for the health and well-being of himself and of his family, including food, clothing, housing and medical care and necessary social services, and the right to security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond his control. (2) Motherhood and childhood are entitled to special care and assistance. All children, whether born in or t of wedlock, shall enjoy the same social protection. 14. Article 12(of the Covenant, of 1976, reads as follows: "1. The States Parties to the present Covenant recognize the right of everyone to the enjoyment of the highest attainable standard of physical and mental health. 2. The steps to be taken by the States Parties to the present Covenant to achieve the full realization of this right shall include those necessary for: (a) The provision for the reduction of the stillbirth-rate and of infant mort ..... X X X X Extracts X X X X X X X X Extracts X X X X
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