Summary
Axis Bank made life insurance a condition of a home loan. On sanction it remitted Rs 6.24 lakh as premium to Max Life from the loan amount, and the borrower's treadmill test showed nothing abnormal. He died of cardiac arrest on 8 August 2017. Only after his death was reported did the insurer courier a letter dated 3 August postponing the proposal on 'treadmill test findings'. It then refunded the premium and declined the policy. The consumer fora found no concluded contract. The Supreme Court held that the facts raised a presumption that the proposal had been accepted, following D. Srinivas v. SBI Life. The ante-dated letter and the refund were a mala fide breach of utmost good faith and a deficiency in service.
Issues
- Whether, where premium for mandatory home-loan life cover was remitted and retained and the medical test was normal, there was a concluded insurance contract despite no formal acceptance before the insured's death.
- Whether the insurer's post-death ante-dated postponement letter, refund of premium and repudiation amounted to deficiency in service.
Provisions considered
- Clause 4.1(k) and the borrower's premium-disbursal authorisation, Home loan agreement with Axis BankLife cover was a pre-requisite for the loan and the authorisation to remit premium became effective only on compliance with the insurer's formalities, so remittance on sanction indicated that the insurer's requirements had been met. (¶¶ 11, 12, 18)
Held
- LIC v. Raja Vasireddy Komalavalli Kamba lays down only a flexible test of whether acceptance is clearly indicated; following D. Srinivas v. SBI Life Insurance, where the premium is accepted after or subject to a compulsory medical examination, acceptance may be presumed and the insurance contract, being one of utmost good faith, binds both parties. (¶¶ 20, 21, 23, 24)
- The premium was remitted and retained from sanction on 25.07.2017, the treadmill test of 30.07.2017 flagged no health issue and no contrary communication was made, so from the insurer's side the process was complete; the postponement letter, ante-dated 03.08.2017 but dispatched by courier only at 19:38 on 16.08.2017 after intimation of death, followed by a unilateral refund and a declination, was mala fide. (¶¶ 14, 15, 16, 17, 18, 19, 25)
- Even without the long delay seen in D. Srinivas, what matters is the trigger and circumstances of the rejection; the insurer's conduct failed the test of reasonable conduct and amounted to deficiency in service. (¶¶ 25, 26)
Result
Civil Appeal No. 9237 of 2022 allowed and the National Commission order dated 12.09.2019 in First Appeal No. 1834 of 2019 set aside; the consumer complaint allowed, and the insurer (respondent No. 2) directed to process the claim and remit the payable sum; parties to bear their own costs.