# JACOB PUNNEN & ANR v. UNITED INDIA INSURANCE CO. LTD

- **Citation:** [2021] 9 S.C.R. 787
- **Court:** Supreme Court of India
- **Decided:** 2021-12-09
- **Case number:** Civil Appeal No. 6778 of 2013
- **Bench:** K. M. Joseph, S. Ravindra Bhat
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/jacob-punnen-anr-v-united-india-insurance-co-ltd-35346
- **Pages:** 34

## Headnote

Consumer Protection Act, 1986 - s.2(g) - Insurance policy -
Renewal of - Limitations imposed on Insurer's liability - Nondisclosure by Insurer - Deficiency in service - Appellants had an
annual medical insurance policy with the respondent-insurer - Policy
was renewed successively by paying appropriate premium - Policy
containing fresh terms was issued after receipt of the premium for
the year 2008-09 - Introduction of the cap on the coverage by the
insurer on certain types of surgical procedures - Second appellant
underwent angioplasty in June 2008 - Appellants submitted claim
to the insurer who accepted the claim but, paid the partial amount -
District Forum allowed the appellants' complaint - Findings upset
by State Commission - Order upheld by NCDRC - On appeal, held:
Per S. Ravindra Bhat, J. Appellants were kept in the dark and asked
to renew a policy, the terms of which had undergone a significant
change as its cover was radically different and imposed limitations
on the insurer's liability - Appellants were not informed that they
had paid premium for a new policy, but were led to believe that they
had in fact renewed a pre-existing policy on the same terms, with
only difference being the removal of their son as a beneficiary and
a higher coverage - Insurer was under a duty to inform the appellant
about the limitations which it was imposing in the renewed policy -
Failure to inform the policy holders resulted in deficiency of service
- Per K.M. Joseph, J. (Supplementing) There was unjustifiable nondisclosure by the Insurer about the introduction of limitation clause
which constituted a deficiency in service - Orders of NCDRC and
State Commission set aside and that of the District Forum restored -
Contract Act, 1872 - s.22 - Principle of uberrima fides - Constitution
of India - Part IV - Arts.38, 39, 42, 47 - Insurance Regulatory and
Development Authority, 1999 - Insurance Act, 1938 - IRDA (Health
Insurance) Regulations, 2016 - Chapter III - Regulations 11, 13 -
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Universal Declaration of Human Rights 1948 - Article 25 -
International Covenant on Economic, Social and Cultural Rights,
1976.
Insurance - Renewed contract - Held: A renewed contract
of insurance may provide terms which are different from the terms
of the original contract of insurance - If the renewed contract is
agreed in all respects by both parties, the fresh terms (with
restrictions) would be binding.
Insurance - Renewal of existing policy - Duty of insurers -
Discussed.
Consumer Protection Act, 1986 - s.2(g) - Deficiency in service
- Held: In order to demonstrate deficiency, it is not necessary that
the same emanates only from a law or a contract - The term "or
otherwise" in s.2(g) clearly provides for circumstances where a
certain level of service is expected from a provider.
Doctrines/Principles - Insurance - Principle of uberrima
fides - Applicability of - Discussed.
Insurance - Standard Form Contracts - Unfair contractual
terms - Refusal for enforcement of - Power of Courts - Discussed.
Insurance - Role of insurance agents - Failure to discharge
the duties - Vicarious liability of the insurer - Discussed.
Words & Expressions - Contracts d' adhesion - Held: Most
policies- health and medical insurance policies being no exception,
are in standard form - 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 contracts termed as
contracts d' adhesion, a French legal term.
Allowing the appeal, the Court
HELD: Per S. RAVINDRA BHAT, J.
1.1 Renewal: 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 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
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787
 [2021] 9 S.C.R. 787
787
JACOB PUNNEN & ANR.
v.
UNITED INDIA INSURANCE CO. LTD.
(Civil Appeal No. 6778 of 2013)
DECEMBER 09, 2021
[ K. M. JOSEPH AND S. RAVINDRA BHAT , JJ.]
Consumer Protection Act, 1986 - s.2(g) - Insurance policy -
Renewal of - Limitations imposed on Insurer's liability - Nondisclosure by Insurer - Deficiency in service - Appellants had an
annual medical insurance policy with the respondent-insurer - Policy
was renewed successively by paying appropriate premium - Policy
containing fresh terms was issued after receipt of the premium for
the year 2008-09 - Introduction of the cap on the coverage by the
insurer on certain types of surgical procedures - Second appellant
underwent angioplasty in June 2008 - Appellants submitted claim
to the insurer who accepted the claim but, paid the partial amount -
District Forum allowed the appellants' complaint - Findings upset
by State Commission - Order upheld by NCDRC - On appeal, held:
Per S. Ravindra Bhat, J. Appellants were kept in the dark and asked
to renew a policy, the terms of which had undergone a significant
change as its cover was radically different and imposed limitations
on the insurer's liability - Appellants were not informed that they
had paid premium for a new policy, but were led to believe that they
had in fact renewed a pre-existing policy on the same terms, with
only difference being the removal of their son as a beneficiary and
a higher coverage - Insurer was under a duty to inform the appellant
about the limitations which it was imposing in the renewed policy -
Failure to inform the policy holders resulted in deficiency of service
- Per K.M. Joseph, J. (Supplementing) There was unjustifiable nondisclosure by the Insurer about the introduction of limitation clause
which constituted a deficiency in service - Orders of NCDRC and
State Commission set aside and that of the District Forum restored -
Contract Act, 1872 - s.22 - Principle of uberrima fides - Constitution
of India - Part IV - Arts.38, 39, 42, 47 - Insurance Regulatory and
Development Authority, 1999 - Insurance Act, 1938 - IRDA (Health
Insurance) Regulations, 2016 - Chapter III - Regulations 11, 13 -
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Universal Declaration of Human Rights 1948 - Article 25 -
International Covenant on Economic, Social and Cultural Rights,
1976.
Insurance - Renewed contract - Held: A renewed contract
of insurance may provide terms which are different from the terms
of the original contract of insurance - If the renewed contract is
agreed in all respects by both parties, the fresh terms (with
restrictions) would be binding.
Insurance - Renewal of existing policy - Duty of insurers -
Discussed.
Consumer Protection Act, 1986 - s.2(g) - Deficiency in service
- Held: In order to demonstrate deficiency, it is not necessary that
the same emanates only from a law or a contract - The term "or
otherwise" in s.2(g) clearly provides for circumstances where a
certain level of service is expected from a provider.
Doctrines/Principles - Insurance - Principle of uberrima
fides - Applicability of - Discussed.
Insurance - Standard Form Contracts - Unfair contractual
terms - Refusal for enforcement of - Power of Courts - Discussed.
Insurance - Role of insurance agents - Failure to discharge
the duties - Vicarious liability of the insurer - Discussed.
Words & Expressions - Contracts d' adhesion - Held: Most
policies- health and medical insurance policies being no exception,
are in standard form - 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 contracts termed as
contracts d' adhesion, a French legal term.
Allowing the appeal, the Court
HELD: Per S. RAVINDRA BHAT, J.
1.1 Renewal: 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 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
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for a new policy, but were led to believe that they had in fact
renewed 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 Rupees 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. 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 their needs was restrictive, and thus not enforceable.
[Paras 16, 18][802-B-C, F-H]
LIC v. Raja Vasireddy Komalavalli Kamba, (1984) 2 SCC
719 : [1984] 3 SCR 350 - relied on.
Biman Krishna Bose v. United India Insurance Co. Ltd.
(2001) 6 SCC 477 : [2001] 1 Suppl. SCR 255 - referred
to.
1.2 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 which 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 subject 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. If parties are not agreed on the terms, one of the
likely results would be its avoidance. "Mistake" is not defined,
under the Contracts Act, 1872; however, Section 22 of the Act
enacts that a unilateral mistake of fact, does not result in its nullity.
The law in India is that unless the unilateral mistake 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 old insurance policy, on the premise
that it renewed the pre-existing policy. The other conclusion
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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 point is answered accordingly,
in favour of the appellants. [Paras 19, 21, 22][803-A-C, E;
805-B-C]
Canara Bank v. United India Insurance Co. Ltd (2020)
3 SCC 455 : 2020 (3 ) SCALE 228; Satwant Kaur
Sandhu v. New India Assurance Co. Ltd. (2009) 8 SCC
316 : [2009] 10 SCR 560; Tarsem Singh v. Sukhminder
Singh (1998) 3 SCC 471 : [1998] 1 SCR 456 - relied
on.
2.1 Duty of Insurers: 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. The insurer was under a duty to disclose any alteration
in the terms of the contract of insurance, at the formation stage
(or as in this case, at the stage of renewal), the respondent cannot
be heard to now say that the insured were under an obligation to
satisfy themselves, if a new term had been introduced. The insurer
had caused a renewal reminder, which was acted upon and the
renewal cheque, issued by the appellant. At that stage, or just
before the renewal premium was furnished the insurer, or its agent
was 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. Most policies- health and medical
insurance policies being no exception, are in standard form. 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 contracts - which are termed as contracts
d' adhesion, a French legal term. A term introduced in a standard
form contract can be unfair, as to constitute an unfair trade practice
under the Consumer Protection Act, 1986. Contracts of adhesion
(as contracts d' adhesion are also called) 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. For that reason,
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the "informational blackout", on the part of the insurer, was a
crucial omission. [Paras 24, 26, 28 and 29][805-E; 808-B-C,
D-E; 809-C; 810-B-C, D]
United India Insurance Co. Ltd. v. M.K.J. Corpn 1996
(6) SCC 428; [1996] 5 Suppl. SCR 20; Pioneer Urban
Land & Infrastructure Ltd v Govindan Raghavan 2019
(5) SCC 525; Modern Insulators Ltd.v Oriental
Insurance Co. Ltd 2000 (2) SCC 734: [2000 ] 1 SCR
1076 - relied on.
Sherdley v Nordea Life and Pension [2012] 2 All ER
(Comm) 725; SA [2012] EWCA Civ 88 - referred to.
Law Commission's Report- 'Unfair (Procedural &
Substantive) Terms in Contract' - referred to.
2.2 In the present case, even if, for arguments' sake, one
was to accept the submissions of the insurer which is that their
agent 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.
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
quality, nature and manner of performance which is required to be
maintained by or under any law for the time being in force or has
been undertaken 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 necessary that the same emanates
only from a law or a contract. The term "or otherwise" clearly
provides for circumstances where a certain level of service is
expected from a provider. 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. The special status
of senior citizens in general was taken cognizance of by the insurer
as well, when it relied on guidelines (applicable for new insurance
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products, with effect from 28.1.2017). The insurer's argument
here was that no existing senior citizen 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. [Paras 33-35][812-E-H;
813-A-B, D-E]
Delhi Electric Supply Undertaking v. Basanti Devi
(1999) 8 SCC 229 : [1999] 3 Suppl. SCR 219; Life
Insurance Corporation of India v Rajiv Kumar Bhaskar
2005 (6) SCC 188 : [2005] 1 Suppl. SCR 867 - relied
on.
2.3 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 set aside. The order of the District Forum is restored.
[Para 40][817-D-E]
United India Insurance Co. Ltd. v. Manubhai
Dharmasinhbhai Gajera (2008) 10 SCC 404 : [2008]
9 SCR 778; Reliance Life Insurance Co. Ltd. vs
Rekhaben Nareshbhai Rathod 2019 (6) SCC 175 :
[2019] 6 SCR 733; Life Insurance Corporation of India
vs Asha Goel 2001 (2) SCC 160 : [ 2000] 5 Suppl.
SCR 646; P.C. Chacko vs Chairman, Life Insurance
Corporation of India 2008 (1) SCC 321 : [2007] 12
SCR 352; Central Inland Water v Brojo Nath
Ganguly&Anr 1986 (3) SCC 156 : [1986] 2 SCR 278;
Life Insurance Corporation of India v Consumer
Education and Research Centre & Ors 1995 (5) SCC
482 - referred to.
Per K.M. JOSEPH, J. (Supplementing)
1. A renewal of the contract would ordinarily, undoubtedly
involve the expectation of replication of the terms of the original
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contract and what is more, the actual continuation of the terms.
However, the actual contract may provide otherwise. The terms
of the renewed contract of insurance may be located in the actual
contract of insurance. A renewed contract of insurance may
provide terms which are different from the terms of the original
contract of insurance. However, the claim under the Consumer
Protection Act, 1986 must be 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 introduced 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 more, 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. There was unjustifiable nondisclosure by the Insurer about the introduction of clause of
limitation and, in this case, it constituted a deficiency in service.
[Paras 5, 6][819-C-F; 820-A]
Biman Krishna Bose v. United India Insurance Co.Ltd.
(2001) 6 SCC 477: [2001] 1 Suppl. SCR 255 -
referred to.
Case Law Reference
In the judgment of S. RAVINDRA BHAT, J.
[2001] 1 Suppl. SCR 255
explained
Para 6
[2008] 9 SCR 778
referred to
Para 6
 [1984] 3 SCR 350
relied on
Para 18
[2009] 10 SCR 560
relied on
Para 21
[1998] 1 SCR 456
relied on
Para 22
[1996] 5 Suppl. SCR 20
relied on
Para 24
[2019] 6 SCR 733
referred to
Para 24
[2000] 5 Suppl. SCR 646
referred to
Para 24
[2007] 12 SCR 352
referred to
Para 24
[2000 ] 1 SCR 1076
relied on
Para 24
[1986] 2 SCR 278
referred to
Para 28
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[1999] 3 Suppl. SCR 219
relied on
Para 32
[2005] 1 Suppl. SCR 867
relied on
Para 33
In the judgment of K.M. JOSEPH, J.
[2001] 1 Suppl. SCR 255
explained
Para 4
CIVIL APPELLATE JURISDICTION : Civil Appeal No.6778
of 2013.
From the Judgment and Order dated 11.07.2012 of the National
Consumer Disputes Redressal Commission in Revision Petition No.2743
of 2011.
Ms. Arundhati Katju, Mrs. Priya Puri, Ms. Eysha Marysha, Yati
Sharma, Ranjay Dubey, Advs. for the Appellants.
Amit Kumar, Ms. Priyanka Das, Jawaharlal, Mukesh Chandra,
Binay Kumar Das, Mrs. K. Enatoli Sema, Ms. Chubalemla Chang, Advs.
for the Respondent.
The Judgments of the Court were delivered by
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 "Mediclaim"), for
the first time in 1982. The policy was annual and was renewed
successively, each year by the appellants by paying the appropriate
premium - the last renewal policy forming the subject matter 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 reminder 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 by
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.
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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 insurer,
repeatedly and unavailingly to the insurer to make good the balance
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 that the
terms and conditions of Mediclaim policy changed periodically. The policy
for the relevant year indicated that in respect of procedures (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 was
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 Forum 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 policy
were known to the appellants who were bound by it. In these
circumstances, the appellants approached the NCDRC with a revision
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 compared
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with the previous terms. These conditions - the NCDRC held - were
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. Arundhati
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 Gajera3, 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 the point of
time when the policy is renewed or during its currency.
7. Learned counsel compared the terms of the previous policy
(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 appellants 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 notice
pursuant to which a policy was renewed on 26.03.2008. In the
circumstances, it was duty of the insurer to inform the insured 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 circumstances,
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 submitted that the
appellants never disputed that in fact the policy was dispatched pursuant
2 (2001) 6 SCC 477.
3 (2008) 10 SCC 404.
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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 limit on the
reimbursable expenditure, by the insurer. In these circumstances, the
appellants could not place any blame upon the insurer.
9. It was submitted that the insurer was under no obligation 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, which merely
complied the IRDA's directions. In this regard, the learned counsel
submitted that insurer acted upon the IRDA's direction, which 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.
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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 produced
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 under
this scheme, the company will pay through TPA to the Hospital/
Nursing Home or the insured person the amount of such
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 Sum
Insured in aggregate mentioned in the schedule hereto.
A) Room, Boarding Expenses as provided by the Hospital/
nursing home
B) Nursing Expenses
C) Surgeon, Anaesthetist, Medical Practitioner, Consultants,
Specialists Fees
D) Anaesthetist, Blood, Oxygen, Operation Theatre Charges,
surgical appliances, Medicines & Drugs, Diagnostic
Materials and X-ray, Dialysis, Chemotherapy, Radiotherapy,
Cost of Pacemaker, Artificial Limbs & Cost of organs and
similar expenses
Expenses in respect of the following specified illnesses will
be restricted as detailed below:
4 Effective for 2006-2007
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(N.B: Company's Liability in respect of all claims admitted
during the period of insurance shall not exceed the Sum
Insured per person as mentioned in the schedule)"
13. In the previous policy5 the stipulation, limiting for medical
expenditure under various heads, were as follows:
"1 In the event of any claim/s becoming admissible under this
scheme, the company will pay through TPA to the Hospital/
Nursing Home or the insured person the amount of such
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 Sum
Insured in aggregate mentioned in the schedule herein.
A) Room, Boarding Expenses as provided by the Hospital/
nursing home
B) Nursing Expenses
C) Surgeon, Anesthetist, Medical Practitioner, Consultants,
Specialists Fees
D) Anesthesia, Blood, Oxygen, Operation Theatre Charges,
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 admitted
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 cheque 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 document was
actually despatched and received by the insurer and on which date 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.]
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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 policy
No.100505/48/07/00002034 for the period 28.03.2008 to
27.03.2009 and received the terms of the policy which has
been renamed as "United India Health Insurance Policy
(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/- for
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 representation
vide letter dated 10.10.2008, to the respondent claiming the
entire amount of treatment from the respondent and in reply
dated 04.11.2008, it was stated that the insurance company
in terms of the United India health insurance policy Gold
was liable to pay to the insured 70% of the sum insured or
Rs.2,00,000/- whichever was less in case of angioplasty."
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 Contracts'
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 grounds
of fraud, misrepresentation by the insured person.
i. The Company shall endeavor to give notice for renewal.
However, the Company is not under obligation to give 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 policy
years.
iii. Request for renewal along with requisite premium shall be
received by the Company before the end of the policy period.
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iv. At the end of the policy period, the policy shall terminate
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 individual
claims experience"
XXXXXXXX
 XXXXXXXX XXXXXXX
14. Possibility of Revision of Terms of the Policy including
the Premium Rates
The company, with prior approval of IRDAI, may revise or
modify the terms of the policy including the premium rates.
The insured person shall be notified three months before the
changes are effected."
The insurer had also relied upon a copy of the United India
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 allowed 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 policy 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 Scheme,
the same may be allowed on collection of fresh proposal.
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE
CO. LTD. [S. RAVINDRA BHAT, J.]
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Persons above the age of 60 years and taking a Health Policy
for the first time can be granted the Senior Citizens 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 policy holders,
they will be allowed to renew the policy on existing 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 renewed a preexisting policy on the same terms, with only difference being the removal
of their son as a beneficiary and a higher coverage (from Rupees 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 their needs
was restrictive, and thus not enforceable.
6 LIC v. Raja Vasireddy Komalavalli Kamba, (1984) 2 SCC 719 (para 15).
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19. In these circumstances, this Court is of the opinion that 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 which 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 subject 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 then
the appellants had in fact misunderstood the terms and mistaken 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 about 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 tripartite
7 Extracted below:
"Section 22. Contract caused by mistake of one party 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
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agreement to the Insurance Company but, in our view, in the
peculiar facts of this case, not disclosing the tripartite
agreement or the names of the owners cannot be said to be
such a material fact as to make the policy void or voidable.
We are clearly of the view that there is no fraudulent claim
made. There is no false declaration made and neither is 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 influence
the judgment of a prudent insurer in fixing the premium or
determining whether he would like to accept the risk. Any
fact which goes to the root of the contract of insurance and
has a bearing on the risk involved would be "material".
[Para 22].
22. In Tarsem Singh v. Sukhminder Singh10, 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 fact
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 to
a matter of fact essential to the agreement. The mistake has to
be mutual and in order that the agreement be treated as void,
9 (2009) 8 SCC 316
10 (1998) 3 SCC 471
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both the parties must be shown to be suffering from mistake
of fact. Unilateral mistake is outside the scope of this section."
[emphasis supplied]
Therefore, the law in India is that unless the unilateral mistake
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 preexisting policy. The other conclusion would be cold comfort to the party
seeking insurance cover, as the choice would be to avoid it altogethertoo drastic as to constitute a choice. The first point 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.