Bank Bound To Personally Notify Discontinuation Of Policy: NCDRC Holds SBI Liable For Deficiency In Service

The National Consumer Disputes Redressal Commission, presided by AVM J. Rajendra held that a bank is bound to personally notify the customer upon discontinuation of an insurance policy entered through them. Brief Facts of the Case The complainant filed a complaint regarding a claim under a Personal Accident Insurance cover linked to a home loan her late husband took from State Bank of India in 2007. The deceased had paid all loan installments until October 2015, but he died in a fatal accident in November 2015. The complainant requested the insurance cover to settle the remaining loan balance, but the Bank continued demanding payment. The Bank later informed her that the insurance cover had been discontinued in 2013, which she was never told about. She argued that it was the Bank's responsibility to notify borrowers of such changes, especially since the insurance was promoted as a benefit of the loan. The complainant filed a complaint before the District Commission seeking a waiver of the outstanding loan balance of Rs. 14,30,756.74. The District Commission dismissed the complaint, prompting the complainant to appeal before the State Commission of Maharashtra. The State Commission allowed the appeal and directed the bank to waive the outstanding loan amount, pay Rs. 50,000 as compensation and Rs. 25,000 as litigation costs. Consequently, the bank filed a revision petition before the National Commission. Contentions of the Bank The bank argued that there was no deficiency in service, as the discontinuation of the insurance policy was communicated through notice boards and websites. They stated that the loan repayments were still due, as the insurance was valid only for one year and not extended after 2013. OP-3 (New India Assurance) claimed their involvement ended when the policy was discontinued in 2012, before the accident. OP-4 (SBI General Insurance) also stated that since the bank did not renew the policy after 2013, there was no active insurance coverage at the time of the accident in 2015. Observations by the National Commission The National Commission observed that the case revolves around whether the insured was a consumer, whether the bank failed to inform about the policy discontinuation, and whether this failure constitutes deficiency in service. The complainant argued that the bank did not inform her about the policy discontinuation, leading her husband to believe the policy was still valid. The bank denied any deficiency, stating it had no obligation to notify personally as the policy was free and limited-term. However, the commission referred to a previous case, where it was held that the bank should have informed the insured before discontinuing the insurance policy. The bank was bound to notify the insured by personal notice, not just by posting on the website. The policy was part of the loan agreement, and the insured's payment of interest on the loan served as consideration for the insurance. The bank's failure to notify the insured about the discontinuation of the policy led to a deficiency in service. The commission upheld the State Commission's decision and dismissed the appeal. Case Title: State Bank of India Vs. Sheetal Navnath Vaidya Case Number: R.P. No. 1222/2023 Click Here To Read/Download The Order

Bank Bound To Personally Notify Discontinuation Of Policy: NCDRC Holds SBI Liable For Deficiency In Service

Ayushi Rani

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