Jacob Punnen & Anr. v. United India Insurance Co. Ltd.
S. RAVINDRA BHAT, J.
1. The appellants challenge the order of the National Consumer
Disputes Redressal Commission (“the NCDRC”) 1 which upheld the
concurrent rejection of their application seeking relief.
2. The undisputed facts are that the appellants contracted with
the respondent (hereinafter referred to as “the insurer”), and secured a
medical insurance policy (hereinafter referred to as “Medicla im”), for
the first time in 1982. The policy was annual and w as renewed
successively, each year by the appellants by paying th e appropriate
premium - the last renewal policy forming the subject mat ter of the
present appeal. The policy renewed by the appellants on 28.03.2007
was in force for a year i.e., till 27.03.2008. Before the date of expiry of
the Mediclaim (on 27.03.2008), the insurer sent a remin der to the
appellants to renew their policy, if they so wished, annually. The reminder
also intimated the appellants that the premium was ` 17,705/- and had to
be paid by 27.03.2008. The appellants paid the requisite amount b y
cheque (issued on 26.03.2008) and in this regard the receipt was received
from the insurer on 30.03.2008. This receipt indicated that the insurance
1Order dated 11.07.2012 in Revision Petition No.2743 of 2011.
795
policy period would be operative from 28.03.2008 to 27.03.2009. The
monetary coverage of the policy was (` 8,00,000/- (` 4,25,000/- for the
first appellant and ` 3,75,000/- for the second appellant). The second
appellant had to undergo angioplasty in June (09.06.2008 to 12.06.2008)
at Chennai. The appellants submitted a claim for ` 3,82,705.27/- to the
insurer, as amounts due under the contract of insurance policy, towards
the expenses incurred by them. The insurer, however, accepted the claim
and paid the partial amount by releasing ` 2,00,000/- to them.
3. Feeling aggrieved, the appellants represented to the in surer,
repeatedly and unavailingly to the insurer to make good the ba lance
amount. Exhausted, the appellants filed a complaint before the District
Consumer Disputes Redressal Forum (hereafter “the District Forum”),
Kottayam for a direction that the insurer ought to pay them ` 2,07,705/
- along with costs and interests on the compensation.
4. The insurer’s position before the District Forum was tha t the
terms and conditions of Mediclaim policy changed periodically. The policy
for the relevant year indicated that in respect of proced ures (such as
angioplasty), 70% of the policy limit could be claimed subject to an overall
limit of ` 2,00,000/- for any one surgery or procedure. The insurer also
argued that having been issued with the policy document which wa s
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 District For um directed the
insurer to pay the appellants, `1,75,000/- as the balance amount and also
awarded ` 5,000/- as compensation. Aggrieved, the insurer approached
the State Consumer Redressal Commission which by its order upset the
findings of the Consumer Forum, holding that the terms of the pol icy
were known to the appellants who were bound by it. In these
circumstances, the appellants approached the NCDRC with a r evision
petition. The NCDRC upheld the insurer’s contention that the insurance
policy renewed by the appellants on 28.03.2008 was a fresh contract
entered into between the parties which reflected changes com pared
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE
CO. LTD. [S. RAVINDRA BHAT, J.]
with the previous terms. These conditions – the NCDRC held – w ere
known to the appellants or were presumed to be known since they had
claimed under that policy and that it was not open to them to claim
ignorance of the terms under the fresh policy which had placed
percentage and monetary cap on certain types of surgical procedures.
6. It is argued by the counsel for the appellants Ms. Arundhat i
Katju that the State Forum and the NCDRC fell into error in holding that
the appellants were aware and were deemed to have been aware of the
terms of the policy. It was emphasized that the appellants had not applied
and obtained a fresh policy but had rather renewed an existing policy –
as they did earlier from time to time annually. Placing reliance on Biman
Krishna Bose v. United India Insurance Co. Ltd. 2, and United India
Insurance Co. Ltd. v. Manubhai Dharmasinhbhai Gajer a3, it was
argued that the renewal of an insurance policy would imply that the
existing terms would bind the parties. As a consequence, the insurer
being a party cannot impose unilateral changes, either at t he point of
time when the policy is renewed or during its currency.
7. Learned counsel compared the terms of the previous poli cy
(which had covered the period March 2007-March 2008) with the policy
in question (for the period March 2008 to March 2009) and submitted
that the overall limit of coverage was changed by the appe llants as
compared to the previous year. It was also stated that the previous policy
covered health risks of three individuals i.e., the appellants and their son
whereas the policy in question covered only the appellants. Counsel
submitted furthermore that the insurer had undeniably issued a not ice
pursuant to which a policy was renewed on 26.03.200 8. In the
circumstances, it was duty of the insurer to inform the insur ed 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 circumst ances,
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 subm itted that the
appellants never disputed that in fact the policy was dispatched pursuant
2 (2001) 6 SCC 477.
3 (2008) 10 SCC 404.
797
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 lim it on the
reimbursable expenditure, by the insurer. In these circu mstances, the
appellants could not place any blame upon the insurer.
9. It was submitted that the insurer was under no obligatio n to
indicate or to intimidate to the appellants about the likely changes under
its policies. In other words, there was no duty in law which obliged the
insurer to intimate the policy holder – at the point of time of renewal that
the terms of the new policy would be different from those of the earlier,
lapsed/expired policy. It was submitted that the term “renewal” has no
special significance given that the contract of insurance i. e., policy in
this case is the first annual one. Therefore, the policy for 2008- 09 is a
different contract of insurance from the one which preceded it. Learned
counsel submitted that the very circumstance that a higher coverage
limit was indicated in respect of two individuals only as compared to
three insured under the previous policy showed that the insurer had
complied with the offer of the insured, who desired such coverage.
10. Learned counsel for the insurer brought to the notice of this
Court that the obligation of intimating the insured, has been spelt out in
the Standardized General Terms and Clauses in Health Insurance Policy
Contracts by the Insurance Regulatory and Development Authority of
India (IRDA), in 2020. He submitted that the obligation to intimate stems
out of Clause 14 which deals with the possibility of revision of terms of
a policy including the premium rates. This clearly indicates that only the
existing policy holder has to be notified. However, in renewal of same
policy does not place any such obligation upon the insurer to intimate
insured person at the point of renewal of the policy.
11. It was urged furthermore that the monetary cap of ` 2,00,000/
- in the present case was not conjured by the insurer, whic h merely
complied the IRDA’s directions. In this regard, the learne d counsel
submitted that insurer acted upon the IRDA’s direction, whic h were
communicated to its offices and branches by way of internal guidelines.
Learned counsel also submitted that at the point of time of renewal, no
implied obligation on the part of the insurer can be inferred given that
each transaction signifies a fresh contract of Insurance. In other words,
it is up to the insured to inquire, if the terms of the renewed policy would
be in any way would be different from the previous one.
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE
CO. LTD. [S. RAVINDRA BHAT, J.]
Analysis and Conclusions
12. The previous policy4 indicated a limit of ` 3 lakhs each for the
appellants, and ` 1 lakh cover to Ajay Punnen Jacob (their son). The
policy in question, i.e., for 2008-09 covered an overall limit of ` 8 lakhs
(` 4,25,000/- for the first appellant and ` 3,75,000/- for the second
appellant, his wife). A copy of the policy which has been pro duced
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 und er
this scheme, the company will pay through TPA to the Hospital/
Nursing Home or the insured person the amount of su ch
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 S um
Insured in aggregate mentioned in the schedule hereto.
A) Room, Boarding Expenses as provided by the Hospi tal/
nursing home
B) Nursing Expenses
C) Surgeon, Anaesthetist, Medical Practitioner, Consul tants,
Specialists Fees
D) Anaesthetist, Blood, Oxygen, Operation Theatre Cha rges,
surgical appliances, Medicines & Drugs, Diagnostic
Materials and X-ray, Dialysis, Chemotherapy, Radiother apy,
Cost of Pacemaker, Artificial Limbs & Cost of organ s and
similar expenses
Expenses in respect of the following specified illn esses will
be restricted as detailed below:
4 Effective for 2006-2007
799
(N.B: Company’s Liability in respect of all claims ad mitted
during the period of insurance shall not exceed the Sum
Insured per person as mentioned in the schedule)”
13. In the previous policy 5 the stipulation, limiting for medical
expenditure under various heads, were as follows:
“1 In the event of any claim/s becoming admissible under thi s
scheme, the company will pay through TPA to the Hosp ital/
Nursing Home or the insured person the amount of su ch
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 S um
Insured in aggregate mentioned in the schedule herein.
A) Room, Boarding Expenses as provided by the Hospi tal/
nursing home
B) Nursing Expenses
C) Surgeon, Anesthetist, Medical Practitioner, Cons ultants,
Specialists Fees
D) Anesthesia, Blood, Oxygen, Operation Theatre Cha rges,
surgical appliances, Medicines & Drugs, Diagnostic
Materials and X-ray
E) Dialysis, Chemotherapy, Radiotherapy, Cost of Pacemaker ,
Artificial Limbs & Cost of organs and similar expenses.
(N.B: Company’s Liability in respect of all claims ad mitted
during the period of insurance shall not exceed the Sum
Insured per person as mentioned in the schedule)”
14. What is apparent from the record is that upon receipt of the
renewed notice, sometime in March 2008, the appellants issued a cheque
dated 26.03.2008 which was duly received. That the c heque was
encashed and a policy document issued by the insurer is not in dispute.
Both parties, i.e., the first appellant and the Divisional Manager of the
insurer have filed affidavits in evidence. However, the pleadings as well
as these affidavits are unclear as to when the policy doc ument was
actually despatched and received by the insurer and on which d ate it
was received by the appellants. Clearly, the policy containing the fresh
5 For 2006-2007
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE
CO. LTD. [S. RAVINDRA BHAT, J.]
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 pol icy
No.100505/48/07/00002034 for the period 28.03.2008 to
27.03.2009 and received the terms of the policy whi ch has
been renamed as “United India Health Insurance Poli cy
(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/- f or
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 repres entation
vide letter dated 10.10.2008, to the respondent clai ming the
entire amount of treatment from the respondent and in rep ly
dated 04.11.2008, it was stated that the insurance com pany
in terms of the United India health insurance polic y Gold
was liable to pay to the insured 70% of the sum insu red or
Rs.2,00,000/- whichever was less in case of angiopla sty.”
15. The insurer’s counsel had, during the course of the hearing,
relied upon a document titled ‘Guidelines on Standardization of
General Terms and Clauses in Health Insurance Policy Contr acts’
dated 11.06.2020 highlighting clauses 10 and 14 of the document. They
are extracted below:
“10 Renewal of Policy
The policy shall ordinarily be renewable except on gr ounds
of fraud, misrepresentation by the insured person.
i.The Company shall endeavor to give notice for ren ewal.
However, the Company is not under obligation to giv e any
notice for renewal.
ii. Renewal shall not be denied on the ground that the insured
person had made aclaim or claims in the preceding p olicy
years.
iii. Request for renewal along with requisite premium shall be
received by the Company before the end of the policy period .
801
iv. At the end of the policy period, the policy shall ter minate
and can be renewed within the Grace Period of ..... . days
(Note to insurers: Insurer to specify grace period as per
product design) to maintain continuity of benefits without
break in policy.
Coverage is not available during the grace period.
V. No loading shall apply on renewals based on indi vidual
claims experience”
XXXXXXXX XXXXXXXX XXXXXXX
14. Possibility of Revision of Terms of the Policy includ ing
the Premium Rates
The company, with prior approval of IRDAI, may revis e or
modify the terms of the policy including the premiu m rates.
The insured person shall be notified three months before th e
changes are effected.”
The insurer had also relied upon a copy of the United In dia
Insurance Company administrative guidelines for the new insurance
products effective 28.01.2007, especially para 14 which reads as follows:
“14 RENEWALS OF EXISTING POLICIES
Existing Policyholders who are below the age of 35 years as
on the date of introduction of this Product will be allowe d to
renew the Policy as Platinum. All other Policyholders will be
brought under the Gold Policy.
An entrant into the Platinum Policy will be allowed to continue
under the Policy even after he crosses 35 years. As on date
the table is available upto the age of 45 years. This will be
expanded based on the claims experience of the next two
years.
In respect of Senior Citizens who are our existing
policyholders, they will be allowed to renew the po licy on
existing terms and conditions but at revised rates of premium
under Gold Policy. They should not be compelled to migrate
to the new Scheme. If they so desire to enter the new Sche me,
the same may be allowed on collection of fresh proposal .
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE
CO. LTD. [S. RAVINDRA BHAT, J.]
Persons above the age of 60 years and taking a Health Policy
for the first time can be granted the Senior Citizen s 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 po licy holders,
they will be allowed to renew the policy on existin g terms and
conditions but at revised rates of premium under Gold policy ”. The
clause further stated that, “ They should not be compelled to migrate
to the new (Gold) scheme. If they so desire to enter the new scheme,
the same may be allowed on collection of fresh proposal ”.
18. In such a situation, there can be said to be no consensus ad
idem on the introduction of the cap on the coverage by the insurer, as
the appellants were not informed that they had paid premium for a new
policy, but were led to believe that they had in fact rene wed a pre-
existing policy on the same terms, with only difference being the removal
of their son as a beneficiary and a higher coverage (from Ru pees 6
lakhs to Rupees 8 lakhs in total) for the appellants, which was accepted
by the insurer. The general rule of acceptance of an insurance proposal
by the assured involves unconditional acceptance of all the terms.6 Thus
the cap on the coverage placed by the insurer without prior intimation to
the assured and without providing an opportunity to the assured to seek
alternate insurance policies that were more favourable to th eir needs
was restrictive, and thus not enforceable.
6 LIC v. Raja Vasireddy Komalavalli Kamba, (1984) 2 SCC 719 (para 15).
803
19. In these circumstances, this Court is of the opinion t hat the
eventuality contemplated in Biman Krishna Bose (supra), i.e.,
inapplicability of old terms, in the cases of renewal, when the contracts
provide “or otherwise”, has to be applied contextually. If the renewed
contract is agreed, in all respects, by both parties, undoubtedly the fresh
terms (with restrictions) would be binding. However, that would not be
the case when a new term is introduced unilaterally about w hich the
policy holder is in the dark. Further, the allusion to continuation of the
terms of the Gold policy in respect of senior citizens (who were not to be
compelled to migrate to another policy) but were to be sub ject to the
same terms, upon payment of a different rate of premia, reinforces the
conclusion that there was in fact, a renewal of the existing terms.
20. Arguendo, assuming the appellants had received the policy
documents on time, i.e., requisite disclosure had been made, and t hen
the appellants had in fact misunderstood the terms and mi staken the
new Gold policy for the previous policy, the question is, post payment of
premium, were they in a position to protest, or do anything ab out it.
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 Act7 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. 8 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 tripa rtite
7 Extracted below:
“Section 22. Contract caused by mistake of one part y 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.”
8 (2020) 3 SCC 455
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE
CO. LTD. [S. RAVINDRA BHAT, J.]
agreement to the Insurance Company but, in our view, in the
peculiar facts of this case, not disclosing the tri partite
agreement or the names of the owners cannot be said to be
such a material fact as to make the policy void or voi dable.
We are clearly of the view that there is no fraudule nt claim
made. There is no false declaration made and neither i s the
loss and damage occasioned by any wilful act or connivance
of the insured”. [Para. 45, emphasis supplied]
What is a “material fact” was explained in Satwant Kaur Sandhu
v. New India Assurance Co. Ltd. 9, as follows:
“The term “material fact” is not defined in the Act and,
therefore, it has been understood and explained by the courts
in general terms to mean as any fact which would infl uence
the judgment of a prudent insurer in fixing the pre mium or
determining whether he would like to accept the ris k. Any
fact which goes to the root of the contract of insurance and
has a bearing on the risk involved would be “materi al”.
[Para 22].
22. In Tarsem Singh v. Sukhminder Singh 10,this court clarified
that a unilateral mistake would not render a contract void under Indian
contract law:
“20. Section 20 of the Act lays down as under:
“20. Agreement void where both parties are under mistake
as to matter of fact.—Where both the parties to an
agreement are under a mistake as to a matter of fac t
essential to the agreement, the agreement is void.
Explanation. —An erroneous opinion as to the value of
the thing which forms the subject-matter of the agreement ,
is not to be deemed a mistake as to a matter of fact.”
21. This section provides that an agreement would be void if
both the parties to the agreement were under a mistake as t o
a matter of fact essential to the agreement. The mis take has to
be mutual and in order that the agreement be treated as void,
9 (2009) 8 SCC 316
10 (1998) 3 SCC 471
805
both the parties must be shown to be suffering from mistake
of fact. Unilateral mistake is outside the scope of this sect ion.”
[emphasis supplied]
Therefore, the law in India is that unless the unilateral mi stake
about the terms of a contract is so serious as to adversely undermine the
entire bargain, it does not result in automatic avoidance of a contract.
Applied to the facts of this case, it is evident that the appellants could
insist on the oldinsurance policy, on the premise that it renewed the pre-
existing policy. The other conclusion would be cold comfort to the party
seeking insurance cover, as the choice would be to avoid it altogether-
too drastic as to constitute a choice. The first po int is answered
accordingly, in favour of the 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 ca se, 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. 11 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-dis closure)
what he privately knows, to draw the other into a barg ain,
from his ignorance of that fact and his believing the contrary.
Just as the insured has a duty to disclose, similarly, it is the
duty of the insurers and their agents to disclose all m aterial
facts within their knowledge, since obligation of go od faith
applies to them equally with the assured. The duty o f good
11 1996 (6) SCC 428
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE
CO. LTD. [S. RAVINDRA BHAT, J.]
faith is of a continuing nature. After the completi on of the
contract, no material alteration can be made in its terms
except by mutual consent. The materiality of a fact is jud ged
by the circumstances existing at the time when the cont ract is
concluded.”
Other decisions too have expressed the same view. 12 In Modern
Insulators Ltd. v Oriental Insurance Co. Ltd 13 this court observed
that:
“It is the fundamental principle of insurance law that u tmost
good faith must be observed by the contracting partie s and
good faith forbids either party from non-disclosure of the
facts which the parties know. The insured has a duty to disclose
and similarly it is the duty of the insurance company and its
agents to disclose all material facts in their knowledge since
the obligation of good faith applies to both equally.”
25. The universal applicability of the principle of uberrima fides
to both parties to a contract of insurance- and in the context of omission
of one of them (the insurer) to notify the other, about a material change
in the terms, at the stage of pre-contract, was highlighted in Sherdley v
Nordea Life and Pension14. The insured invested in two individual unit-
linked life insurance contracts with Nordea Life and Pe nsions SA
(“Nordea”). The contracts were designed to enhance the tax ef ficient
growth of a capital assurance plan. At the relevant tim e, the insured
were living in both Wales and Spain and were British nationals. At the
time of contract, they were habitually resident in the ju risdiction of
England and Wales; when they commenced proceedings, they had become
habitually resident in Spain. Their investments went “disastrously wrong”;
when they sued Nordea in England, the company argued that there was
no jurisdiction in England under the “Judgments Regulation” (EC No 44/
2001) and claimed that proper jurisdiction were courts in Sp ain, or
Luxembourg. The contractual documents referred to than three law and
jurisdiction agreements: for England, for Luxembourg, and for Spai n.
The plaintiff-insured, however, argued that there was an initial agreement
12 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
132000 (2) SCC 734
14 [2012] 2 All ER (Comm) 725; SA [2012] EWCA Civ 88
807
in favour of jurisdiction in England, as the country of thei r habitual
residence at the time of contract, and that that agreement wa s never
displaced. The Court of Appeal rejected the insurer’s objec tion, 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 pu rely in
terms of the judge’s own analysis, I would regard his decision ,
that there was an albeit inchoate consensus in favo ur 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 eve r been
displaced. It is true that the application forms are at a stag e
pre-contract: however, in my judgment they constitute, on the
judge’s finding, an agreement that if a contract is ultim ately
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, although the Sherdleys had signed the
proposal acceptance forms, Nordea had not brought t o the
Sherdleys’ attention that, on page 6 of the proposa l, an
applicable law and jurisdiction clause was now propo sed in
a form which departed from the earlier consensus. A n
insurance contract is a contract of the utmost good faith,
and I do not think it is consistent with that requi red good
faith that an insurer should present to an insured an alteration
in the previously agreed law and jurisdiction provis ions of
their proposed contract without making that clear t o the
insured. That is consistent with the Directive’s requ irements
that the applicable law of the parties’ insurance c ontract
should be communicated to the insured before the conclusion
of the contract “in a clear and accurate manner, in writing ,
in an official language of the Member State of the
commitment”. If, however, there had been no prior agreement
on English law and jurisdiction, then I think that a
straightforward proposal, in writing, which the insu red was
asked to read carefully, as the Sherdleys were asked to re ad
Nordea’s proposal, before indicating their consent on a
proposal acceptance form, would satisfy the requirements of
article 23.”
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE
CO. LTD. [S. RAVINDRA BHAT, J.]
26. In view of the state of law, which is, that the insurer w as
under a duty to disclose any alteration in the terms of t he contract of
insurance, at the formation stage (or as in this case, at the st age of
renewal), the respondent cannot be heard to now say that the i nsured
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 tha t the
insurer had caused a renewal reminder, which was acted upon a nd the
renewal cheque, issued by the appellant. At that stage, or just before the
renewal premium was furnished the insurer, or its agent wa s under a
duty to alert the appellants that the change in terms, was likely to impact
their decision, and if so required, offer a better or fuller coverage. One
cannot be oblivious to two circumstances here. The first, is that medical
or health insurance cover becomes crucial with advancing age; the policy
holder is more likely to need cover; therefore, if there are freshly
introduced limitations of liability, the insured may, if advised properly,
and in a position to afford it, seek greater coverage, or seek a different
kindof policy. The second, is that most policies – health a nd 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 contrac ts – which are
termed as contracts d’ adhesion, a French legal term. This has been
defined as15
“A standard-form contract prepared by one party, to be signe d
by the party in a weaker position, usually a consume r, who
has little choice about the terms. Also termed Cont ract of
adhesion; adhesory contract; adhesionary contract; take it
or leave it contract; leonire contract.
Some sets of trade and professional forms are extremely on e-
sided, grossly favouring one interest group against others,
and are commonly referred to as contracts of adhesion. From
weakness in bargaining position, ignorance or indiff erence,
unfavoured parties are willing to enter transactions contr olled
by these lopsided legal documents”
27. The Law Commission16 has addressed this issue in the report
titled ‘Unfair (Procedural & Substantive) Terms in Contract ’. The
15 Black’s Law Dictionary, 9th edn., p. 368
16 The Law Commission of India in its 199th Report
809
commission recommended enactment of a law to counter such unfair
terms in contracts. The draft legislation suggested by the report, defined
an unfair contract as follows:
“A contract or a term thereof is substantively unfai r if such
contract or the term thereof is in itself harsh, opp ressive or
unconscionable to one of the parties.”
28. The courts’ remedial power, to refuse enforcement of such
contracts, or contractual terms, finds support in a few decisions of this
Court.17 Recently, while deciding a consumer dispute, this Court applied
the principle that unfair terms in a contract, cannot be enforced, if there
is absence of free choice, on the part of a consumer, in Pioneer Urban
Land & Infrastructure Ltd v Govindan Raghavan 18. It was held that
a term introduced in a standard form contract can be u nfair, as to
constitute an unfair trade practice19under the Consumer Protection Act,
1986, and observed as follows:
“A term of a contract will not be final and binding if it is
shown that the flat purchasers had no option but to s ign on
the dotted line, on a contract framed by the builde r. The
contractual terms of the Agreement dated 08.05.2012 are ex-
17 Central Inland Water v Brojo Nath Ganguly&Anr 1986 (3) SCC 156; Life Insurance
Corporation of India v Consumer Education and Research Centre &Ors 1995 (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 policies subject to such reasonable , just and fair terms and conditions
accessible to all the segments of the society for insuring the lives of eligible persons. The
eligibility conditions must be conformable to the Preamble, fundamental rights and the
directive principles of the Constitution. The term policy under Table 58 is declared to be
accessible and beneficial to the large segments of the Indian society. The rates of premium
must also be reasonable and accessible.”
18 2019 (5) SCC 525
19 Defined by Section 2 (r) of the Act as follows:
(r) “unfair trade practice” means a trade practice which, for the purpose of
promoting the sale, use or supply of any goods or f or the provision of any
service, adopts any unfair method or unfair or deceptive practice including any
of the following practices, namely-
------------------------- ------------------------
(vi) makes a false or misleading representation concerning the need for, or the
usefulness of, any goods or services;
(vii) gives to the public any warranty or guarantee of the performance, efficacy
or length of life of a product or of any goods that is not based on an adequate or
proper test thereof:…”
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE
CO. LTD. [S. RAVINDRA BHAT, J.]
facie one-sided, unfair, and unreasonable. The incorporati on
of such one-sided clauses in an agreement constitut es an
unfair trade practice as per Section 2 (r) of the C onsumer
Protection Act, 1986 since it adopts unfair methods or
practices for the purpose of selling the flats by the B uilder.”
29. Contracts of adhesion (as contracts d’ adhesion are also called),
as discussed previously, leave little or no choice to the customer; in this
case, the policy holders were left with no room to bargain and negotiate.
In the present case, the standard form contract, renewed year after
year, left the appellants only with the choice of raising the insurance
cover. The last renewal, of course, resulted in the deletion of their son as
a beneficiary. However, even with this little choice, the result of their
being kept in the dark about the new terms which placed limi ts on
individual surgical procedures meant that had any other information with
respect to the increased coverage which could have resulted in the higher
individual limits (for surgical procedures) from they might have benefitted
was denied to them. For that reason, the “informational blackout”, so to
say, on the part of the insurer, was a crucial omission.
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 t he 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. T his
Court has spelt out, in the context of insurance business the r ole 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 Devi20 the
insurer, Life Insurance Corporation, had floated a ‘Salary Savings Scheme’
20 (1999) 8 SCC 229
811
in which the employer deducted premium from its employees’ salaries
and paid them to LIC on the employees’ behalf. The premium f or a
period of time was not deducted from an employee’s salar y. On the
death of the employee, his legal representatives claimed the insured
amount. LIC rejected the claim on the grounds of lapse of the policy due
to non-payment of premium, and that the actions of the employer did not
bind LIC given that it was not an ‘agent’ of LIC. This Court turned
down the argument, and held that
“11. In the present case we are not concerned with the
insurance agent. It is not the case of LIC that DESU could be
permitted as an insurance agent within the meaning of the
Insurance Act and the regulations. DESU is not procuring or
soliciting any business for LIC. DESU is certainly not an
insurance agent within the meaning of the aforesaid
Insurance Act and the regulations but DESU is certain ly an
agent as defined in Section 182 of the Contract Act. The mo de
of collection of premium has been indicated in the S cheme
itself and the employer has been assigned the role of coll ecting
premium and remitting the same to LIC. As far as the employee
as such is concerned, the employer will be an agent of LIC. It
is a matter of common knowledge that insurance compani es
employ agents. When there is no insurance agent as def ined
in the regulations and the Insurance Act, the general principles
of the law of agency as contained in the Contract Act are to
be applied.
12. Agent in Section 182 means a person employed to do any
act for another, or to represent another in dealings with third
persons and the person for whom such act is done, or who is
so represented, is called the principal. Under Section 185 no
consideration is necessary to create an agency. As far as Bhim
Singh is concerned, there was no obligation cast on him to
pay premium direct to LIC. Under the agreement between LI C
and DESU, premium was payable to DESU who was to deduct
every month from the salary of Bhim Singh and to tran smit
the same to LIC. DESU had, therefore, implied authori ty to
collect premium from Bhim Singh on behalf of LIC. There was,
thus, valid payment of premium by Bhim Singh. The authority
of DESU to collect premium on behalf of LIC is implie d. In
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE
CO. LTD. [S. RAVINDRA BHAT, J.]
any case, DESU had ostensible authority to collect pr emium
from Bhim Singh on behalf of LIC. So far as Bhim Sing h 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 21. It would be useful, in the present
context to extract the relevant terms of the notification, 22 [especially
Clauses 3 (2) and 4 (1)] issued by the IRDA:
“3(2) An insurer or its agents or other intermediator y shall
provide all material information in respect of a proposed cove r
to the prospect to enable the prospect to decide on t he best
cover that would be in his or her interest.”
************** *************** **************
4(1) Except in cases of a marine Insurance cover, w here
current market practices do not insist on a written pr oposal
form in all cases, a proposal for grant of a cover, eithe r for
life business or for general business, must be evid ent 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 their a gent should
have informed the appellant policy holders, the absence of any evidence
that he did or any evidence adduced by the insurer that despite information
the appellants chose to accept the policy in the terms which they eventually
were furnished, the only consequence would be that as principal the
insurer is liable.
34. Such a failure assumes importance even from the perspective
of consumer protection law. The Consumer Protection Act, 1986 states
the definition of ‘deficiency’ in service under Section 2(g) as “[A]ny
fault, imperfection, shortcoming or inadequacy in the qualit y, nature
and manner of performance which is required to be maintain ed by
or under any law for the time being in force or has been undert aken
to be performed by a person in pursuance of a contract or otherwise
in relation to any service”. In order to demonstrate deficiency, it is not
21 2005 (6) SCC 188
22 Dated 16 October 2002
813
necessary that the same emanates only from a law or a c ontract. The
term “or otherwise” clearly provides for circumstances where a certain
level of service is expected from a provider. As stated above in the
judgment, the principle of uberrima fides involves prior intimation of
change in terms in insurance contracts. The deficiency of service assumes
even more significance in the present case, as it pertains to senior citizens.
35. The special status of senior citizens in general was t aken
cognizance of by the insurer as well, when it relie d on guidelines
(applicable for new insurance products, with effect from 28.1.2017) which
inter alia, stated that
“In respect of Senior Citizens who are our existing
policyholders, they will be allowed to renew the po licy on
existing terms and conditions but at revised rates of premium
under Gold Policy. They should not be compelled to migrate
to the new Scheme. If they so desire to enter the new Sche me,
the same may be allowed on collection of fresh proposal. ”
The insurer’s argument here was that no existing senior ci tizen
policy holder could be compelled to migrate to a new Scheme. However,
in the present case, the Mediclaim holders were kept in the dark, and
asked to renew a policy, the terms of which had undergone a significant
change in that its cover was radically different, and imposed limitations
on the insurer’s liability. The argument of the insurer has no merit and is
not acceptable.
36. Worldwide, nations are seeking viable answers to the question
of how to offer health care to their citizens. The World Health
Organization (WHO) defines health as a dynamic state of com plete
physical, mental, spiritual and social well-being and not merely the absence
of disease or infirmity.23 Healthy living conditions and good quality health
23 The Constitution of the WHO in its preamble says as much:
“Health is a state of complete physical, mental and social well-being and not
merely the absence of disease or infirmity. The enjoyment of the highest attainable
standard of health is one of the fundamental rights of every human being without
distinction of race, religion, political belief, economic or social condition.”
In Calcutta Electric Supply Corporation Ltd. v. Subhash Chandra Bose, (1992) 1 SCC
441 this court, quoting from various international covenants, observed that,
“the term ‘health’ implies more than an absence of sickness. Medical care and
health facilities not only project against sickness but also ensure stable man
power for economic development. Facilities of health and medical care generate
devotion and dedication to give the workers’ best, physically as well as mentally
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE
CO. LTD. [S. RAVINDRA BHAT, J.]
is not only a necessary requirement it is also recognized as a fundamental
right. Article 25 of the Universal Declaration of Human Rights 194824
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 Covenan t on
Economic, Social and Cultural Rights, 1976, too recognizes the right to
health, of citizens of every nation.25
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 sta te that state
secure a social order for the promotion of welfare of the people. Without
an overall viable framework of public health, the state c annot achieve
this obligation, in a meaningful manner. Article 39(e) relates to workers
and enjoins the state to protect their health. Article 41 imposes the duty
in productivity. It enables the worker to enjoy the fruit of his labour, to keep him
physically fit and mentally alert for leading a successful, economic, social and
cultural life. The medical facilities, are therefore, part of social security and like
gilt edged security, it would yield immediate return in the increased production
or at any 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”.
24 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 l ack of livelihood in circumstances
beyond his control.
(2) Motherhood and childhood are entitled to specia l care and assistance. All
children, whether born in or t of wedlock, shall enjoy the same social protection.
25 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 mortality
and for the healthy development of the child;
(b) The improvement of all aspects of environmental and industrial hygiene;
(c) The prevention, treatment and control of epidemic, endemic, occupational
and other diseases;
(d) The creation of conditions which would assure t o all medical service and
medical attention in the event of sickness.”
815
on the state to public assistance essentially for those w ho are sick and
disabled. Article 42 casts primary responsibility upon the state to protect
the health of infants and mother through maternity benefit. Arti cle 47
spells out the duty of the state to raise the level of nutrition and standard
of living of its people. Other provisions relating to health fall in this Part
of the Constitution. The state is asked in particular, to direct its policies
towards securing health of workers.
38. For a long time, state policy in this country was to involve only
public sector entities in the insurance sector. All this changed, with the
opening up of the economy and entry of private sector insurers. To regulate
entities in the insurance business, the Insurance R egulatory and
Development Authority Act, 1999 (“the IRDA Act”) was enact ed. Its
provisions, together with that of the Insurance Act, 1938, and regulations
framed under both enactments, regulate all insurance related activities
(except marine and certain kinds of insurance) in India. Section 2 (6C)
of the Insurance Act defines “health insurance business” and defines it
as follows:
“(6C) “health insurance business” means the effecti ng of
contracts which provide for sickness benefits or me dical,
surgical or hospital expense benefits, whether in-p atient or
out-patient travel cover and personal accident cover;]
The IRDA (Health Insurance) Regulations, 2016, (which replaced
the previously applicable regulations of 2013- which were preceded by
guidelines regulating health insurance products contains regulations which
are relevant for the purpose of this case. Chapter III of these regulations
contains general provisions relating to Health Insurance. The relevant
part of Regulation 11 reads as follows:
“11. Designing of Health Insurance Policies
a. Subject to Regulation 3 as applicable, Health in surance
product may be designed to offer various covers;
i. For specific age or gender groups
ii. For different age groups
iii. For treatment in all hospitals throughout the country,
provided the hospitals comply with the definition speci fied
iv. For treatment in specific hospitals only, provi ded the
morbidity rates used are representative
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE
CO. LTD. [S. RAVINDRA BHAT, J.]
v. For treatment in specific geographies only, provi ded 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 serv ice
without any insurance element.
********** ********** **********
c. Insurer shall not compel the insured to migrate t o other
health insurance products. In case of migration fro m a
withdrawn product, the insurer shall offer the poli cyholder
an alternative available product subject to portabi lity
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 doc ument
wordings and premium rates inclusive and exclusive of Servic e
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 General Insu rers
and Health Insurers (not applicable for travel and personal
accident policies)
i. A health insurance policy shall ordinarily be re newable
except on grounds of fraud, moral hazard or misrepresentation
or non-cooperation by the insured, provided the policy is not
withdrawn.
ii. An insurer shall not deny the renewal of a health in surance
policy on the ground that the insured had made a cla im or
claims in the preceding policy years, except for benefit bas ed
policies where the policy terminates following payment of the
benefit covered under the policy like critical illness po licy.
iii. The insurer shall provide for a mechanism to con done a
delay in renewal up to 30 days from the due date of renewal
817
without deeming such condonation as a break in poli cy.
However, coverage need not be available for such per iod. 8
[Provided the renewal premium shall not be accepted more
than 90 days in advance of the due date of the prem ium
payment.]
iv. The promotion material and the policy document shall
explicitly state the conditions under which a policy terminates ,
such as on the payment of the benefit in case of critica l illness
benefits policies.”
39. These regulations only underline expressly what was implicit,
i.e., the insurer’s obligation to inform every policy holder, a bout any
important changes that would affect her or his choice of product. These
have been given statutory shape. Yet, the obligation of the i nsurer to
provide information to existing and policy holders, for them to exercise
choice, meaningfully, and choose products suited to their needs, existed.
In this case, that obligation was breached.
40. In view of the above discussion, 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 of service. The impugned order of the NCDRC as well as
the order of the State Commission are hereby set aside. Th e order of
the District Forum is accordingly restored. Consequently, the appeal is
allowed; in the circumstances of this case, the respondent shal l bear
additionalcosts, quantified at ` 50,000/-.
K. M. JOSEPH, J.
1. I have gone through the draft Judgment authored by my learned
Brother Justice S. Ravindra Bhat.
2. While I would agree with the relief proposed, I feel it is necessary
to articulate my reasons by a separate opinion.
3. The facts have been set out by my learned brother. I would
avoid elaborate repetition. Suffice it to say that the appellants are husband
and wife and along with their son obtained an insurancepolicy in the
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE
CO. LTD. [K. M. JOSEPH, J.]
year 2006 with certain conditions attached. In fact, they have a case
that they had a policy of insurance for several years with the respondent
insurer. They obtained the policy in question for the year 2008, however,
wherein the son was not included and there was also change in the
amount of the insurance. The period of insurance was opera tive from
28.03.2008 to 27.03.2009. It is while this policy was in force that the
second appellant went for angioplasty in June 2008 and a claim f or
Rs.3,82,705.27 was submitted. The insurer paid a sum of Rupees Two
Lakhs only. The reduction in the claim was based on the express provisions
which was in force in the policy in issue. Under the earlier policy for
previous year such a clause was conspicuous by its absence. It is also
true that a notice was issued by the respondent Insurer for renewal and
the appellants issued a cheque towards renewal on 26.3.200 8. It is
thereafter that the policy in question for the period in question (28.3.2008
to 27.3.2009) came to be issued.
4. In Biman Krishna Bose v. United India Insurance Co.Ltd. 26
this Court inter alia held as follows:
“5. A renewal of an insurance policy means repetition of the original
policy. When renewed, the policy is extended and the renewed
policy in identical terms from a different date of its expiration
comes into force. In common parlance, by renewal, the old policy
is revived and it is sort of a substitution of obligations under the
old policy unless such policy provides otherwise. It may be that
on renewal, a new contract comes into being, but the said contract
is on the same terms and conditions as that of the original policy.
Where an insurance company which has exclusive privilege t o
carry on insurance business has refused to renew the mediclaim
policy of an insured on extraneous and irrelevant considerations,
any disease which an insured had contacted during the period
when the policy was not renewed, such disease cannot be covered
under a fresh insurance policy in view of the exclusion clause.
The exclusion clause provides that the pre-existing diseases would
not be covered under the fresh insurance policy. If we take the
view that the mediclaim policy cannot be renewed wi th
retrospective effect, it would give handle to the I nsurance
Company to refuse the renewal of the policy on extrane ous
26 (2001) 6 SCC 477
819
consideration thereby deprive the claim of the insured for treatment
of diseases which have appeared during the relevant time and
further deprive the insured for all time to come to cover t hose
diseases under an insurance policy by virtue of the exclusion
clause. This being the disastrous effect of wrongful refu sal of
renewal of the insurance policy, the mischief and harm d one to
the insured must be remedied. We are, therefore, of the view that
once it is found that the act of an insurance company was arbitrary
in refusing to renew the policy, the policy is required to be renewed
with effect from the date when it fell due for its renewal.”
(Emphasis supplied)
5. Proceeding on the basis of the principles enunciated thereunder,
a renewal of the contract would ordinarily, undoubtedly involve the
expectation of replication of the terms of the original contract and what
is more, the actual continuation of the terms. However, as noted, the
actual contract may provide otherwise. The terms of the renewed contract
of insurance may be located in the actual contract of i nsurance. A
renewed contract of insurance may provide terms which are di fferent
from the terms of the original contract of insurance.
6. However, I am in agreement with my learned brother that the
claim under the Consumer Protection Act must allowed on the ground
that there has been a deficiency on the part of the Insurer . The Insurer
brought about a change in the policy. This change i ntroduced a
cumbersome limitation. It kept the Insured in the dark about the limitation
at the time when the renewal notice was issued, and what is m ore, the
premium was accepted. The Insurer had a duty to inform the appellants
that a change regarding the limitation on its liability was being introduced.
This duty to take the insured into confidence was breached. T his was
the deficiency in service. Even proceeding on the basis that the policy
incorporates the terms of the contract, insofar as the respondent insurer
unilaterally purported to incorporate a clearly cumbersome limitation
involving a breach of the duty to take the appellants into confidence, the
court would not be powerless to undo the wrong. Be it that the policy
purported to incorporate the substantive limitation, the appellant can be
relieved of the result of the deficiency in service by the insured. This
can be done by restoring the position, the appellants woul d occupy if
there was no breach. I would, therefore, agree with my learned Brother
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE
CO. LTD. [K. M. JOSEPH, J.]
that the appeal be allowed on the basis that there was unjustifiable non-
disclosure by the Insurer about the introduction of clause of limitation
and, in this case, it constituted a deficiency in service and resultantly the
appellants are entitled to relief. I, therefore, agree that the appeal be
allowed.
Divya Pandey Appeal allowed.