Bank Cannot Deny Insurance Benefits By Reversing Premium After Borrower's Death: Kupwara Consumer Commission
The District Consumer Disputes Redressal Commission, Baramulla/Bandipora , comprising President Peerzada Qousar Hussain and Member Ms. Nyla Yaseen, has held Jammu & Kashmir Bank and PNB MetLife India Insurance Co. Ltd. liable for denying loan-linked insurance benefits after reversing the insurance premium following the borrower's death. The Commission observed that once a premium...
The District Consumer Disputes Redressal Commission, Baramulla/Bandipora , comprising President Peerzada Qousar Hussain and Member Ms. Nyla Yaseen, has held Jammu & Kashmir Bank and PNB MetLife India Insurance Co. Ltd. liable for denying loan-linked insurance benefits after reversing the insurance premium following the borrower's death.
The Commission observed that once a premium is deducted from a borrower's account for obtaining insurance coverage, the resulting rights cannot be defeated merely by reversing the premium after the borrower's death, and consumers cannot be made to suffer due to internal lapses between the bank and the insurer.
Brief facts
The complainants, comprising the widow and children of a deceased borrower, approached the District Consumer Disputes Redressal Commission, Baramulla/Bandipora, alleging deficiency in service against Jammu & Kashmir Bank and PNB MetLife India Insurance Co.
They contended that the deceased had availed a cash credit loan from J&K Bank for his garment business, and an amount of ₹16,000 was deducted from his loan account towards a loan-linked life insurance cover before the loan was disbursed.
After the borrower died on 1 June 2022, the bank allegedly reversed the insurance premium to his account and denied the existence of any insurance cover, thereafter initiating recovery proceedings against the legal heirs.
Alleging that the bank and insurer illegally deprived them of the insurance benefits despite having deducted the premium, the complainants approached the Consumer Commission seeking insurance benefits, compensation for deficiency in service, mental agony, and litigation costs.
Contentions of the Opposite Parties
The opposite parties contested the complaint and led evidence in support of their defence. However, they failed to satisfactorily explain how a validly deducted insurance premium could be reversed after the death of the borrower or justify the denial of insurance benefits despite the premium having initially been retained for obtaining insurance coverage.
Observation and decision
The Commission observed that the bank had admittedly deducted ₹16,000 from the deceased borrower's loan account towards the insurance premium. It held that once the premium was deducted for obtaining loan-linked insurance, the bank could not reverse it after the borrower's death and deny insurance benefits.
The Commission found that such conduct amounted to deficiency in service and unfair trade practice, adding that consumers cannot be made to suffer due to internal lapses between the bank and the insurer.
Allowing the complaint, the Commission directed the opposite parties to treat the deceased borrower as covered under the loan-linked insurance scheme.
It ordered PNB MetLife to pay the insured amount after adjusting the deducted premium of ₹16,000, with 5% interest from the date of filing of the complaint. It also awarded ₹2 lakh as compensation and ₹30,000 as litigation costs, and directed compliance within four weeks, failing which the awarded amount would carry 7% interest.
Case Title: Shahzada Begum & Ors. v. Chairman, Jammu & Kashmir Bank & Ors.
Case No: 110/2024.