Mere Insurance Proposal Does Not Amount To Acceptance Even If Initial Premium Is Paid, Solan District Commission Dismisses Complaint Against PNB Metlife LIC Ltd.

Brief Facts:

Mrs Manjeet Kaur, the daughter-in-law of the Complainant, held a Savings Account with Punjab National Bank. PNB also served as an agent for PNB Metlife LIC Ltd. (“Insurance Company”), facilitating the sale of insurance policies on its behalf. At the behest of PNB, Mrs Kaur agreed to purchase a policy from the insurance company, with a premium of Rs. 8,579/- deducted from her account. The policy insured a sum of Rs. 11 Lakh. Notably, the policy included double accidental benefits and a Rs. 22 Lakh payout in case of unnatural death during the account holder's subsistence. Upon Mrs Kaur's demise due to a snake bite, the Complainant, her sole legal heir, filed a claim with the insurance company and informed PNB. Despite completing all requisite formalities, the claim was denied, with PNB stating that the premium amount was refunded to Mrs Kaur's account instead of processing the claim. Feeling aggrieved, the Complainant approached the District Consumer Disputes Redressal Commission, Solan (“District Commission”) and filed a consumer complaint against PNB and the insurance company.

In response, the bank contended that, according to bank records, the premium was remitted to the insurance company's account as per Mrs. Kaur's instructions. The insurance company admitted that Mrs Kaur approached it to purchase the policy. However, it argued that the proposal form lacked the necessary documents for policy issuance which led to its non-processing and conversion to 'not take up status'. The premium amount was consequently refunded to the customer's account. It argued that since no complete contract existed between the parties, it was under no obligation to issue a policy certificate.

Observations by the District Commission:

The District Commission referred to the decision of the Supreme Court in Life Insurance Corporation of India Versus Raja Vasai Reddy Komalavalli Kamba and Ors [1984(2) SCC 719], where SC held that the insurance policy is the contract between the insured and insurer and proposal of insured must be accepted by the insurer. It held that in the case of an insurance proposal, silence does not denote consent and no binding contract arises until the person to whom the offer is made says or does something to signify his acceptance. Acceptance must be conveyed to the offeror and mere delay in answering cannot be construed as acceptance.

Therefore, the District Commission held that mere receipt and retention of the premium or preparation of the policy document did not constitute acceptance. Despite the premium being received by the insurance company, since acceptance was not conveyed to the deceased nor was an insurance policy issued, the District Commission held that no contract was completed between the parties. Without evidence presented by the complainant to counter this interpretation, the District Commission held that there was no deficiency in service on the part of the insurance company and PNB. Consequently, the complaint was dismissed.