Deepak Kothari had taken an 11-year LIC
Jeevan Saral policy
from March 28, 2004, with an annual premium of Rs 1.24 lakh, with benefits of Rs 25 lakh as maturity value, Rs 3.94 lakh as death benefit, and Rs 15 lakh as accident benefit. A premium of Rs 13.65 lakh was paid over 11 years.
When the term ended, Deepak protested as
LIC
did not pay the maturity amount but paid only Rs 3.94 lakh along with profit/loyalty addition of Rs 1.67 lakh. LIC said the maturity and death benefit values had got interchanged due to a typographical error, and the amount paid was correct. It issued a circular on July 27, 2015, directing its offices to retrospectively correct Jeevan Saral policies issued since 2003.
Deepak approached
Maharashtra state commission, which rejected LIC's contentions. It observed that LIC never mentioned any mistake in policy during its tenure. No error was pointed out even when the policy was sent for change in nomination. Only on maturity, after the claim was made, LIC tried to back out of its contractual obligation, claiming an error in mentioning the sum assured.
The commission said the circular indicated it was not a typographical error, but a case of massive irregularities in policies issued countrywide. The commission relied on a Supreme Court decision in the United India Insurance v/s MKJ Corporation case that a contract of insurance would prevail over internal circulars and statutory guidelines. It said LIC cannot violate the sanctity of the contract and avoid its contractual liability after 11 years of issuing the policy. LIC was directed to pay Rs 25 lakh along with profit/loyalty of Rs 1.67 lakh, totalling Rs 26.67 lakh, with 9% interest from the date of maturity. Also awarded was Rs 25,000 as compensation and Rs 25,000 towards litigation costs.
LIC challenged the order but the national commission concurred with state commission member Usha Thakare. In its December 11 order by Prem Narain, the national commission said there was no apparent typographical error. The table under which the policy was issued did not form part of the policy. It held that the law was well settled that a contract of insurance would have to be construed strictly.
(The author is a consumer activist and has won Govt of India's National Youth Award for Consumer Protection. His email is jehangir.gai.columnist@outlook.in)