JACOB PUNNEN & ANR. versus UNITED INDIA INSURANCE CO. LTD.

[2021] 9 S.C.R. 787

JACOB PUNNEN & ANR.

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 – Non-disclosure by Insurer – Deficiency in service – Appellants had anannual medical insurance policy with the respondent-insurer – Policywas renewed successively by paying appropriate premium — Policycontaining fresh terms was issued after receipt of the premium forthe year 2008-09 – Introduction of the cap on the coverage by theinsurer on certain types of surgical procedures – Second appellantunderwent angioplasty in June 2008 – Appellants submitted claimto the insurer who accepted the claim but, paid the partial amount –District Forum allowed the appellants’ complaint – Findings upsetby State Commission – Order upheld by NCDRC – On appeal, held:Per S. Ravindra Bhat, J. Appellants were kept in the dark and askedto renew policy, the terms of which had undergone significantchange as its cover was radically different and imposed limitationson the insurer’s liability – Appellants were not informed that theyhad paid premium for new policy, but were led to believe that theyhad in fact renewed pre-existing policy on the same terms, withonly difference being the removal of their son as beneficiary anda higher coverage – Insurer was under duty to inform the appellantabout 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 non-disclosure by the Insurer about the introduction of limitation clausewhich constituted deficiency in service – Orders of NCDRC andState Commission set aside and that of the District Forum restored –Contract Act, 1872 – s.22 – Principle of uberrima fides – Constitutionof India – Part IV – Arts.38, 39, 42, 47 – Insurance Regulatory andDevelopment Authority, 1999 – Insurance Act, 1938 – IRDA (HealthInsurance) Regulations, 2016 – Chapter III – Regulations 11, 13 -

AUniversal Declaration of Human Rights 1948 – Article 25 –International Covenant on Economic, Social and Cultural Rights,1976.

Insurance – Renewed contract – Held: renewed contractof insurance may provide terms which are different from the termsBof the original contract of insurance – If the renewed contract isagreed in all respects by both parties, the fresh terms (withrestrictions) 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 thatthe same emanates only from law or contract – The term “orotherwise” in s.2(g) clearly provides for circumstances where acertain level of service is expected from provider.

DDoctrines/Principles – Insurance – Principle of uberrimafides – Applicability of – Discussed.

Insurance – Standard Form Contracts – Unfair contractualterms – Refusal for enforcement of – Power of Courts – Discussed.

Insurance – Role of insurance agents – Failure to dischargeEthe duties – Vicarious liability of the insurer – Discussed.

Words & Expressions – Contracts d’ adhesion – Held: Mostpolicies- health and medical insurance policies being no exception,are in standard form – One who seeks coverage of life policy/apersonal risk, such as accident or health policy has little choiceFbut to accept the offer of certain standard term contracts termed ascontracts d’ adhesion, 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 ‘new’ one, and not renewal, which wasavailable with the appellants, before the second appellant’ssurgery took place. There can be said to be no consensus adidem on the introduction of the cap on the coverage by the insurer,Has the appellants were not informed that they had paid premium

for new policy, but were led to believe that they had in factrenewed pre-existing policy on the same terms, with onlydifference being the removal of their son as beneficiary and ahigher coverage (from Rupees 6 lakhs to Rupees 8 lakhs in total)for the appellants, which was accepted by the insurer. The generalrule of acceptance of an insurance proposal by the assuredinvolves unconditional acceptance of all the terms. Thus the capon the coverage placed by the insurer without prior intimation tothe assured and without providing an opportunity to the assuredto seek alternate insurance policies that were more favourableto their needs was restrictive, and thus not enforceable.[Paras 16, 18][802-B-C, F-H]

LIC v. Raja Vasireddy Komalavalli Kamba, (1984) 2 SCC719 : [1984] 3 SCR 350 – relied on.

Biman Krishna Bose v. United India Insurance Co. Ltd.(2001) 6 SCC 477 : [2001] 1 Suppl. SCR 255 – referredto.

1.2 If the renewed contract is agreed, in all respects, byboth parties, undoubtedly the fresh terms (with restrictions) wouldbe binding. However, that would not be the case when newterm is introduced unilaterally about which the policy holder is inthe dark. Further, the allusion to continuation of the terms of theGold policy in respect of senior citizens (who were not to becompelled to migrate to another policy) but were to be subject tothe same terms, upon payment of different rate of premia,reinforces the conclusion that there was in fact, renewal of theexisting terms. If parties are not agreed on the terms, one of thelikely results would be its avoidance. “Mistake” is not defined,under the Contracts Act, 1872; however, Section 22 of the Actenacts that unilateral mistake of fact, does not result in its nullity.The law in India is that unless the unilateral mistake about theterms of contract is so serious as to adversely undermine theentire bargain, it does not result in automatic avoidance of acontract. Applied to the facts of this case, it is evident that theappellants could insist on the old insurance policy, on the premisethat it renewed the pre-existing policy. The other conclusion

Awould be cold comfort to the party seeking insurance cover, asthe choice would be to avoid it altogether- too drastic as toconstitute choice. The first point is answered accordingly,in favour of the appellants. [Paras 19, 21, 22][803-A-C, E;805-B-C]

BCanara Bank v. United India Insurance Co. Ltd (2020)3 SCC 455 : 2020 (3 ) SCALE 228; Satwant KaurSandhu v. New India Assurance Co. Ltd. (2009) 8 SCC316 : [2009] 10 SCR 560; Tarsem Singh v. SukhminderSingh (1998) 3 SCC 471 : [1998] 1 SCR 456 – reliedon.C2.1 Duty of Insurers:A striking feature of insurance law, isthe principle of uberrima fide (duty of utmost good faith) whichapplies to both the insured as well as one who seeks indemnityand cover. The insurer was under duty to disclose any alterationin the terms of the contract of insurance, at the formation stageD(or as in this case, at the stage of renewal), the respondent cannotbe heard to now say that the insured were under an obligation tosatisfy themselves, if new term had been introduced. The insurerhad caused renewal reminder, which was acted upon and therenewal cheque, issued by the appellant. At that stage, or justEbefore the renewal premium was furnished the insurer, or its agentwas under duty to alert the appellants that the change in terms,was likely to impact their decision, and if so required, offer abetter or fuller coverage. Most policies- health and medicalinsurance policies being no exception, are in standard form. Onewho seeks coverage of life policy/a personal risk, such asFaccident or health policy has little choice but to accept the offerof certain standard term contracts – which are termed as contractsd’ adhesion, French legal term. term introduced in standardform contract can be unfair, as to constitute an unfair trade practiceunder the Consumer Protection Act, 1986. Contracts of adhesionG(as contracts d’ adhesion are also called) leave little or no choiceto the customer; in this case, the policy holders were left with noroom to bargain and negotiate. In the present case, the standardform contract, renewed year after year, left the appellants onlywith the choice of raising the insurance cover. For that reason,

the “informational blackout”, on the part of the insurer, was acrucial 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 UrbanLand & Infrastructure Ltd v Govindan Raghavan 2019(5) SCC 525; Modern Insulators Ltd.v OrientalInsurance Co. Ltd 2000 (2) SCC 734: [2000 ] 1 SCR1076 – 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, onewas to accept the submissions of the insurer which is that theiragent should have informed the appellant policy holders, theabsence of any evidence that he did or any evidence adduced bythe insurer that despite information the appellants chose to acceptthe policy in the terms which they eventually were furnished, theonly consequence would be that as principal the insurer is liable.Such failure assumes importance even from the perspective ofconsumer protection law. The Consumer Protection Act, 1986states the definition of ‘deficiency’ in service under Section 2(g)as “[A]ny fault, imperfection, shortcoming or inadequacy in thequality, nature and manner of performance which is required to bemaintained by or under any law for the time being in force or hasbeen undertaken to be performed by person in pursuance of acontract or otherwise in relation to any service”. In order todemonstrate deficiency, it is not necessary that the same emanatesonly from law or contract. The term “or otherwise” clearlyprovides for circumstances where certain level of service isexpected from provider. The principle of uberrima fides involvesprior intimation of change in terms in insurance contracts. Thedeficiency of service assumes even more significance in thepresent case, as it pertains to senior citizens. The special statusof senior citizens in general was taken cognizance of by the insureras well, when it relied on guidelines (applicable for new insurance

DEF

Aproducts, with effect from 28.1.2017). The insurer’s argumenthere was that no existing senior citizen policy holder could becompelled to migrate to new Scheme. However, in the presentcase, the Mediclaim holders were kept in the dark, and asked torenew policy, the terms of which had undergone significantchange in that its cover was radically different, and imposedBlimitations on the insurer’s liability. The argument of the insurerhas 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; LifeCInsurance Corporation of India v Rajiv Kumar Bhaskar2005 (6) SCC 188 : [2005] 1 Suppl. SCR 867 – reliedon.

2.3 The insurer was clearly under duty to inform theappellant policy holders about the limitations which it wasDimposing in the policy renewed for 2008-2009. Its failure to informthe policy holders resulted in deficiency of service. The impugnedorder of the NCDRC as well as the order of the State Commissionare set aside. The order of the District Forum is restored.[Para 40][817-D-E]

EUnited India Insurance Co. Ltd. v. ManubhaiDharmasinhbhai Gajera (2008) 10 SCC 404 : [2008]9 SCR 778; Reliance Life Insurance Co. Ltd. vsRekhaben Nareshbhai Rathod 2019 (6) SCC 175 :[2019] 6 SCR 733; Life Insurance Corporation of IndiaFvs Asha Goel 2001 (2) SCC 160 : [ 2000] 5 Suppl.SCR 646; P.C. Chacko vs Chairman, Life InsuranceCorporation of India 2008 (1) SCC 321 : [2007] 12SCR 352; Central Inland Water v Brojo NathGanguly&Anr 1986 (3) SCC 156 : [1986] 2 SCR 278;Life Insurance Corporation of India v ConsumerGEducation and Research Centre & Ors 1995 (5) SCC482 – referred to.

Per K.M. JOSEPH, J. (Supplementing)

1. renewal of the contract would ordinarily, undoubtedlyinvolve the expectation of replication of the terms of the originalH

contract and what is more, the actual continuation of the terms.However, the actual contract may provide otherwise. The termsof the renewed contract of insurance may be located in the actualcontract of insurance. renewed contract of insurance mayprovide terms which are different from the terms of the originalcontract of insurance. However, the claim under the ConsumerProtection Act, 1986 must be allowed on the ground that therehas been deficiency on the part of the Insurer. The Insurerbrought about change in the policy. This change introduced acumbersome limitation. It kept the Insured in the dark about thelimitation at the time when the renewal notice was issued, andwhat is more, the premium was accepted. The Insurer had dutyto inform the appellants that change regarding the limitation onits liability was being introduced. There was unjustifiable non-disclosure by the Insurer about the introduction of clause oflimitation and, in this case, it constituted 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[2008] 9 SCR 778 [1984] 3 SCR 350[2009] 10 SCR 560[1998] 1 SCR 456[1996] 5 Suppl. SCR 20[2019] 6 SCR 733[2000] 5 Suppl. SCR 646[2007] 12 SCR 352[2000 ] 1 SCR 1076[1986] 2 SCR 278

explainedreferred torelied onrelied onrelied onrelied onreferred toreferred toreferred torelied onreferred to

Para 6

Para 18

Para 21

Para 22

Para 24Para 24Para 24Para 24Para 24Para 28

BCIVIL APPELLATE JURISDICTION : Civil Appeal No.6778of 2013.

From the Judgment and Order dated 11.07.2012 of the NationalConsumer Disputes Redressal Commission in Revision Petition No.2743of 2011.CMs. Arundhati Katju, Mrs. Priya Puri, Ms. Eysha Marysha, YatiSharma, 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.D

The Judgments of the Court were delivered by

S. RAVINDRA BHAT, J.

1. The appellants challenge the order of the National ConsumerDisputes Redressal Commission (“the NCDRC”)[1] which upheld theEconcurrent rejection of their application seeking relief.

2. The undisputed facts are that the appellants contracted withthe respondent (hereinafter referred to as “the insurer”), and secured amedical insurance policy (hereinafter referred to as “Mediclaim”), forthe first time in 1982. The policy was annual and was renewedFsuccessively, each year by the appellants by paying the appropriatepremium - the last renewal policy forming the subject matter of thepresent appeal. The policy renewed by the appellants on 28.03.2007was in force for year i.e., till 27.03.2008. Before the date of expiry ofthe Mediclaim (on 27.03.2008), the insurer sent reminder to theGappellants to renew their policy, if they so wished, annually. The reminderalso intimated the appellants that the premium was ` 17,705/- and had tobe paid by 27.03.2008. The appellants paid the requisite amount bycheque (issued on 26.03.2008) and in this regard the receipt was receivedfrom the insurer on 30.03.2008. This receipt indicated that the insurance

H1Order dated 11.07.2012 in Revision Petition No.2743 of 2011.

policy period would be operative from 28.03.2008 to 27.03.2009. Themonetary coverage of the policy was (` 8,00,000/- (` 4,25,000/- for thefirst appellant and ` 3,75,000/- for the second appellant). The secondappellant had to undergo angioplasty in June (09.06.2008 to 12.06.2008)at Chennai. The appellants submitted claim for ` 3,82,705.27/- to theinsurer, as amounts due under the contract of insurance policy, towardsthe expenses incurred by them. The insurer, however, accepted the claimand 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 balanceamount. Exhausted, the appellants filed complaint before the DistrictConsumer Disputes Redressal Forum (hereafter “the District Forum”),Kottayam for 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 theterms and conditions of Mediclaim policy changed periodically. The policyfor the relevant year indicated that in respect of procedures (such asangioplasty), 70% of the policy limit could be claimed subject to an overalllimit of ` 2,00,000/- for any one surgery or procedure. The insurer alsoargued that having been issued with the policy document which wasaccepted by the appellants, the latter could not then complain that theywere any amounts over and above the terms agreed upon.

5. The District Forum allowed the appellants’ complaint holdingfirstly that an insurance contract evidences commercial transaction,and is to be construed like any other agreement, on its own terms subjectto fulfillment of the conditions of uberrima fides i.e., utmost good faithby the parties and secondly that the insurer was under duty to intimateto be insured with respect to change in terms before the renewal of thepolicy. On the basis of these findings, the District Forum directed theinsurer to pay the appellants, `1,75,000/- as the balance amount and alsoawarded ` 5,000/- as compensation. Aggrieved, the insurer approachedthe State Consumer Redressal Commission which by its order upset thefindings of the Consumer Forum, holding that the terms of the policywere known to the appellants who were bound by it. In thesecircumstances, the appellants approached the NCDRC with revisionpetition. The NCDRC upheld the insurer’s contention that the insurancepolicy renewed by the appellants on 28.03.2008 was fresh contractentered into between the parties which reflected changes compared

Awith the previous terms. These conditions – the NCDRC held – wereknown to the appellants or were presumed to be known since they hadclaimed under that policy and that it was not open to them to claimignorance of the terms under the fresh policy which had placedpercentage and monetary cap on certain types of surgical procedures.B6. It is argued by the counsel for the appellants Ms. ArundhatiKatju that the State Forum and the NCDRC fell into error in holding thatthe appellants were aware and were deemed to have been aware of theterms of the policy. It was emphasized that the appellants had not appliedand obtained fresh policy but had rather renewed an existing policy –as they did earlier from time to time annually. Placing reliance on BimanCKrishna Bose v. United India Insurance Co. Ltd.[2], and United IndiaInsurance Co. Ltd. v. Manubhai Dharmasinhbhai Gajera[3], it wasargued that the renewal of an insurance policy would imply that theexisting terms would bind the parties. As consequence, the insurerbeing party cannot impose unilateral changes, either at the point ofDtime 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 policyin question (for the period March 2008 to March 2009) and submittedthat the overall limit of coverage was changed by the appellants asEcompared to the previous year. It was also stated that the previous policycovered health risks of three individuals i.e., the appellants and their sonwhereas the policy in question covered only the appellants. Counselsubmitted furthermore that the insurer had undeniably issued noticepursuant to which policy was renewed on 26.03.2008. In thecircumstances, it was duty of the insurer to inform the insured of theFlikely change in coverage to enable them to explore an alternative i.e., toopt for policy that would cover all risks more comprehensively, even ifit were to cost them more. Counsel urged that in these circumstances,the insurer was clearly guilty of deficiency of service in as much as theinsurer was in the dark about the nature of the limited coverage.G8. Learned counsel on behalf of the insurer Mr. Amit Kumar urgedthis court to uphold the finding of the NCDRC submitting that there wasno deficiency in service by the respondents. It was submitted that theappellants never disputed that in fact the policy was dispatched pursuant

2 (2001) 6 SCC 477.H3 (2008) 10 SCC 404.

to the renewal. careful reading of the policy for the year 2008-2009would have indicated that it differed radically from the policy from theprevious year because of term indicating monetary limit on thereimbursable expenditure, by the insurer. In these circumstances, theappellants could not place any blame upon the insurer.

9. It was submitted that the insurer was under no obligation toindicate or to intimidate to the appellants about the likely changes underits policies. In other words, there was no duty in law which obliged theinsurer to intimate the policy holder – at the point of time of renewal thatthe terms of the new policy would be different from those of the earlier,lapsed/expired policy. It was submitted that the term “renewal” has nospecial significance given that the contract of insurance i.e., policy inthis case is the first annual one. Therefore, the policy for 2008-09 is adifferent contract of insurance from the one which preceded it. Learnedcounsel submitted that the very circumstance that higher coveragelimit was indicated in respect of two individuals only as compared tothree insured under the previous policy showed that the insurer hadcomplied with the offer of the insured, who desired such coverage.

10. Learned counsel for the insurer brought to the notice of thisCourt that the obligation of intimating the insured, has been spelt out inthe Standardized General Terms and Clauses in Health Insurance PolicyContracts by the Insurance Regulatory and Development Authority ofIndia (IRDA), in 2020. He submitted that the obligation to intimate stemsout of Clause 14 which deals with the possibility of revision of terms ofa policy including the premium rates. This clearly indicates that only theexisting policy holder has to be notified. However, in renewal of samepolicy does not place any such obligation upon the insurer to intimateinsured 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 merelycomplied the IRDA’s directions. In this regard, the learned counselsubmitted that insurer acted upon the IRDA’s direction, which werecommunicated to its offices and branches by way of internal guidelines.Learned counsel also submitted that at the point of time of renewal, noimplied obligation on the part of the insurer can be inferred given thateach transaction signifies fresh contract of Insurance. In other words,it is up to the insured to inquire, if the terms of the renewed policy wouldbe in any way would be different from the previous one.

AAnalysis and Conclusions

12. The previous policy[4] indicated limit of ` 3 lakhs each for theappellants, and ` 1 lakh cover to Ajay Punnen Jacob (their son). Thepolicy 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 secondBappellant, his wife). copy of the policy which has been producedindicates that the premium (including service tax) paid was ` 17,705/.The period of insurance was from 00.00 hrs of 28.03.2008 to midnightof 27.03.2009. Clause 1.2 of the policy in question for 2008-09indisputably introduced the following restrictive condition:C“1.2 In the event of any claim(s) becoming admissible under

C“1.2 In the event of any claim(s) becoming admissible underthis scheme, the company will pay through TPA to the Hospital/Nursing Home or the insured person the amount of suchexpenses as would fall under different heads mentioned below,and as are reasonably and necessarily incurred thereof by oron behalf of such Insured Person, but not exceeding the SumDInsured in aggregate mentioned in the schedule hereto.

A) Room, Boarding Expenses as provided by the Hospital/nursing home

B) Nursing ExpensesEC) Surgeon, Anaesthetist, Medical Practitioner, Consultants,Specialists Fees

D) Anaesthetist, Blood, Oxygen, Operation Theatre Charges,surgical appliances, Medicines & Drugs, DiagnosticMaterials and X-ray, Dialysis, Chemotherapy, Radiotherapy,FCost of Pacemaker, Artificial Limbs & Cost of organs andsimilar expenses

Expenses in respect of the following specified illnesses willbe restricted as detailed below:

H4 Effective for 2006-2007

(N.B: Company’s Liability in respect of all claims admittedduring the period of insurance shall not exceed the SumInsured per person as mentioned in the schedule)”

13. In the previous policy[5] the stipulation, limiting for medicalexpenditure under various heads, were as follows:

“1 In the event of any claim/s becoming admissible under thisscheme, the company will pay through TPA to the Hospital/Nursing Home or the insured person the amount of suchexpenses as would fall under different heads mentioned below,and as are reasonably and necessarily incurred thereof by oron behalf of such Insured Person, but not exceeding the SumInsured 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, DiagnosticMaterials 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 admittedduring the period of insurance shall not exceed the SumInsured per person as mentioned in the schedule)”

14. What is apparent from the record is that upon receipt of therenewed notice, sometime in March 2008, the appellants issued chequedated 26.03.2008 which was duly received. That the cheque wasencashed and policy document issued by the insurer is not in dispute.Both parties, i.e., the first appellant and the Divisional Manager of theinsurer have filed affidavits in evidence. However, the pleadings as wellas these affidavits are unclear as to when the policy document wasactually despatched and received by the insurer and on which date itwas received by the appellants. Clearly, the policy containing the fresh

Aterms was issued after receipt of the premium for the year 2008-09. Inthis regard, interestingly, the affidavit evidence of the insurer states asfollows:

“3. That it is stated that the petitioners renewed their policyNo.100505/48/07/00002034 for the period 28.03.2008 toB27.03.2009 and received the terms of the policy which hasbeen 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/- forthe petitioner No.2. The petitioner received no claim discountof Rs.3184.7 when renewing the same.CXXXXXXXX XXXXXXXX XXXXXXX

5. That it is stated that the petitioners made representationvide letter dated 10.10.2008, to the respondent claiming theentire amount of treatment from the respondent and in replyDdated 04.11.2008, it was stated that the insurance companyin terms of the United India health insurance policy Goldwas liable to pay to the insured 70% of the sum insured orRs.2,00,000/- whichever was less in case of angioplasty.”

15. The insurer’s counsel had, during the course of the hearing,Erelied upon document titled ‘Guidelines on Standardization ofGeneral Terms and Clauses in Health Insurance Policy Contracts’dated 11.06.2020 highlighting clauses 10 and 14 of the document. Theyare extracted below:

“10 Renewal of PolicyFThe policy shall ordinarily be renewable except on groundsof 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 anynotice for renewal.

Gii. Renewal shall not be denied on the ground that the insuredperson had made aclaim or claims in the preceding policyyears.

iii. Request for renewal along with requisite premium shall bereceived by the Company before the end of the policy period.H

iv. At the end of the policy period, the policy shall terminateand can be renewed within the Grace Period of ...... days(Note to insurers: Insurer to specify grace period as perproduct design) to maintain continuity of benefits withoutbreak in policy.

Coverage is not available during the grace period.

V. No loading shall apply on renewals based on individualclaims experience”

XXXXXXXX XXXXXXXX XXXXXXX

14. Possibility of Revision of Terms of the Policy includingthe Premium Rates

The company, with prior approval of IRDAI, may revise ormodify the terms of the policy including the premium rates.The insured person shall be notified three months before thechanges are effected.”

The insurer had also relied upon copy of the United IndiaInsurance Company administrative guidelines for the new insuranceproducts 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 ason the date of introduction of this Product will be allowed torenew the Policy as Platinum. All other Policyholders will bebrought under the Gold Policy.

An entrant into the Platinum Policy will be allowed to continueunder the Policy even after he crosses 35 years. As on datethe table is available upto the age of 45 years. This will beexpanded based on the claims experience of the next twoyears.

In respect of Senior Citizens who are our existingpolicyholders, they will be allowed to renew the policy onexisting terms and conditions but at revised rates of premiumunder Gold Policy. They should not be compelled to migrateto the new Scheme. If they so desire to enter the new Scheme,the same may be allowed on collection of fresh proposal.

APersons above the age of 60 years and taking Health Policyfor the first time can be granted the Senior Citizens Policyonly.”

-Analysis:

The first point: on renewalB

16. In the facts of the present appeal, the insurer insisted that the2008-09 ‘Gold’ policy was in fact ‘new’ one, and not renewal, whichwas available with the appellants, before the second appellant’s surgerytook place. There is some dispute on this aspect; the appellants contendedthat the amended terms of the 2008-09 Gold policy were received onlyCafter three months of the payment of the renewal premium, and thusthere was no scope for them to have read and given consent to the capon 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 thatDthe 2008-09 Gold policy was new insurance product, and not renewalof 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 andconditions but at revised rates of premium under Gold policy”. TheEclause further stated that, “They should not be compelled to migrateto 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 situation, there can be said to be no consensus adidem on the introduction of the cap on the coverage by the insurer, asFthe appellants were not informed that they had paid premium for newpolicy, but were led to believe that they had in fact renewed pre-existing policy on the same terms, with only difference being the removalof their son as beneficiary and higher coverage (from Rupees 6lakhs to Rupees 8 lakhs in total) for the appellants, which was acceptedby the insurer. The general rule of acceptance of an insurance proposalGby the assured involves unconditional acceptance of all the terms.[6] Thusthe cap on the coverage placed by the insurer without prior intimation tothe assured and without providing an opportunity to the assured to seekalternate insurance policies that were more favourable to their needswas restrictive, and thus not enforceable.

H6 LIC v. Raja Vasireddy Komalavalli Kamba, (1984) 2 SCC 719 (para 15).

19. In these circumstances, this Court is of the opinion that theeventuality contemplated in Biman Krishna Bose (supra), i.e.,inapplicability of old terms, in the cases of renewal, when the contractsprovide “or otherwise”, has to be applied contextually. If the renewedcontract is agreed, in all respects, by both parties, undoubtedly the freshterms (with restrictions) would be binding. However, that would not bethe case when new term is introduced unilaterally about which thepolicy holder is in the dark. Further, the allusion to continuation of theterms of the Gold policy in respect of senior citizens (who were not to becompelled to migrate to another policy) but were to be subject to thesame terms, upon payment of different rate of premia, reinforces theconclusion that there was in fact, renewal of the existing terms.

20. Arguendo, assuming the appellants had received the policydocuments on time, i.e., requisite disclosure had been made, and thenthe appellants had in fact misunderstood the terms and mistaken thenew Gold policy for the previous policy, the question is, post payment ofpremium, were they in position to protest, or do anything about it.Irrespective of the answer to the question of whether the renewal of aninsurance contract results in new contract or otherwise, the issue whicharises is whether the appellants, as beneficiaries of the policy, couldcomplain about mistake in its terms, and the possible consequences ofsuch mistake.21. There cannot be any gainsaying to the fact that if parties arenot agreed on the terms, one of the likely results would be its avoidance.“Mistake” is not defined, under the Contract Act, 1872; however, Section22 of the Act[7] enacts that unilateral mistake of fact, does not result inits nullity. The general law on avoidance of contract was explained bythis court in Canara Bank v. United India Insurance Co. Ltd.[8 ]in thefollowing terms:

“[T]o make contract void, the non-disclosure should be ofsome very material fact.No doubt, it would have been betterif 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.

— contract is not voidable merely because it was caused by one of the parties to itbeing under mistake as to matter of fact.”

8 (2020) 3 SCC 455

Aagreement to the Insurance Company but, in our view, in thepeculiar facts of this case, not disclosing the tripartiteagreement or the names of the owners cannot be said to besuch material fact as to make the policy void or voidable.We are clearly of the view that there is no fraudulent claimmade. There is no false declaration made and neither is theBloss and damage occasioned by any wilful act or connivanceof the insured”. [Para. 45, emphasis supplied]

What is “material fact” was explained in Satwant Kaur Sandhuv. New India Assurance Co. Ltd.[9], as follows:

C“The term “material fact” is not defined in the Act and,therefore, it has been understood and explained by the courtsin general terms to mean as any fact which would influencethe judgment of prudent insurer in fixing the premium ordetermining whether he would like to accept the risk. AnyDfact which goes to the root of the contract of insurance andhas bearing on the risk involved would be “material”.[Para 22].

22. In Tarsem Singh v. Sukhminder Singh[10], this court clarifiedthat unilateral mistake would not render contract void under Indiancontract law:E

“20. Section 20 of the Act lays down as under:

“20. Agreement void where both parties are under mistakeas to matter of fact.—Where both the parties to anagreement are under mistake as to matter of factFessential to the agreement, the agreement is void.

Explanation. —An erroneous opinion as to the value ofthe thing which forms the subject-matter of the agreement,is not to be deemed mistake as to matter of fact.”

21. This section provides that an agreement would be void ifGboth the parties to the agreement were under mistake as toa matter of fact essential to the agreement. The mistake has tobe mutual and in order that the agreement be treated as void,

9 (2009) 8 SCC 316H10 (1998) 3 SCC 471

both the parties must be shown to be suffering from mistakeof fact. Unilateral mistake is outside the scope of this section.”

[emphasis supplied]

Therefore, the law in India is that unless the unilateral mistakeabout the terms of contract is so serious as to adversely undermine theentire bargain, it does not result in automatic avoidance of contract.Applied to the facts of this case, it is evident that the appellants couldinsist on the oldinsurance policy, on the premise that it renewed the pre-existing policy. The other conclusion would be cold comfort to the partyseeking insurance cover, as the choice would be to avoid it altogether-too drastic as to constitute choice. The first point is answeredaccordingly, in favour of the appellants.

The second point: duty of insurers

23. This court next proceeds to address itself to the secondquestion, namely what are the duties of an insurer, when policy holderseeks renewal of an existing policy. The insurer here contends that theconsumer was under an obligation to inquire about the terms of the policy,and any changes that might have been introduced, in the standard terms.It was urged that the appellants, in the facts of this case, should haveinquired from the concerned agent; since they omitted to do so, theywere bound by the terms of the policy.

24. striking feature of insurance law, is the principle of uberrimafide (duty of utmost good faith) which applies to both the insured as wellas one who seeks indemnity and cover. In United India Insurance Co.Ltd. v. M.K.J. Corpn.[11] this court underlined the importance of thisprinciple, and its application to the insurer, in the following terms:

“It is fundamental principle of Insurance law that utmostgood faith must be observed by the contracting parties. Goodfaith forbids either party from concealing (non-disclosure)what he privately knows, to draw the other into bargain,from his ignorance of that fact and his believing the contrary.Just as the insured has duty to disclose, similarly, it is theduty of the insurers and their agents to disclose all materialfacts within their knowledge, since obligation of good faithapplies to them equally with the assured. The duty of good

Afaith is of continuing nature. After the completion of thecontract, no material alteration can be made in its termsexcept by mutual consent. The materiality of fact is judgedby the circumstances existing at the time when the contract isconcluded.”

BOther decisions too have expressed the same view.[12] In ModernInsulators Ltd. v Oriental Insurance Co. Ltd[13] this court observed

that:

“It is the fundamental principle of insurance law that utmostgood faith must be observed by the contracting parties andCgood faith forbids either party from non-disclosure of thefacts which the parties know. The insured has duty to discloseand similarly it is the duty of the insurance company and itsagents to disclose all material facts in their knowledge sincethe obligation of good faith applies to both equally.”D25. The universal applicability of the principle of uberrima fidesto both parties to contract of insurance- and in the context of omissionof one of them (the insurer) to notify the other, about material changein the terms, at the stage of pre-contract, was highlighted in Sherdley vNordea Life and Pension[14]. The insured invested in two individual unit-linked life insurance contracts with Nordea Life and Pensions SAE(“Nordea”). The contracts were designed to enhance the tax efficientgrowth of capital assurance plan. At the relevant time, the insuredwere living in both Wales and Spain and were British nationals. At thetime of contract, they were habitually resident in the jurisdiction ofEngland and Wales; when they commenced proceedings, they had becomeFhabitually resident in Spain. Their investments went “disastrously wrong”;when they sued Nordea in England, the company argued that there wasno jurisdiction in England under the “Judgments Regulation” (EC No 44/2001) and claimed that proper jurisdiction were courts in Spain, orLuxembourg. The contractual documents referred to than three law andjurisdiction agreements: for England, for Luxembourg, and for Spain.GThe plaintiff-insured, however, argued that there was an initial agreement12 Reliance Life Insurance Co. Ltd. vs Rekhaben Nareshbhai Rathod 2019 (6) SCC 175;Life Insurance Corporation of India vs Asha Goel 2001 (2) SCC 160; P.C. Chacko vsChairman, Life Insurance Corporation of India 2008 (1) SCC 321 and Satwant KaurSandhu vs New India Assurance Company Limited 2009 (8) SCC 316132000 (2) SCC 734H14 [2012] 2 All ER (Comm) 725; SA [2012] EWCA Civ 88

in favour of jurisdiction in England, as the country of their habitualresidence at the time of contract, and that that agreement was neverdisplaced. The Court of Appeal rejected the insurer’s objection, andheld as follows:

“Against the background of these principles, which in theabsence of relevant submission from the parties I am contentto adopt, then, the argument was to be conducted purely interms of the judge’s own analysis, I would regard his decision,that there was an albeit inchoate consensus in favour ofEnglish law and jurisdiction at time prior to the submissionand acceptance of Nordea’s proposal, as critical finding,raising the question whether that consensus had ever beendisplaced. It is true that the application forms are at stagepre-contract: however, in my judgment they constitute, on thejudge’s finding, an agreement that if contract is ultimatelymade it will be on the terms agreed in the application forms.It seems to me that on that basis there would be strongargument that that finding never had been displaced. Thatwould be because, although the Sherdleys had signed theproposal acceptance forms, Nordea had not brought to theSherdleys’ attention that, on page 6 of the proposal, anapplicable law and jurisdiction clause was now proposed ina form which departed from the earlier consensus. Aninsurance contract is contract of the utmost good faith,and I do not think it is consistent with that required goodfaith that an insurer should present to an insured an alterationin the previously agreed law and jurisdiction provisions oftheir proposed contract without making that clear to theinsured. That is consistent with the Directive’s requirementsthat the applicable law of the parties’ insurance contractshould be communicated to the insured before the conclusionof the contract “in clear and accurate manner, in writing,in an official language of the Member State of thecommitment”. If, however, there had been no prior agreementon English law and jurisdiction, then I think that astraightforward proposal, in writing, which the insured wasasked to read carefully, as the Sherdleys were asked to readNordea’s proposal, before indicating their consent on aproposal acceptance form, would satisfy the requirements ofarticle 23.”

A26. In view of the state of law, which is, that the insurer wasunder duty to disclose any alteration in the terms of the contract ofinsurance, at the formation stage (or as in this case, at the stage ofrenewal), the respondent cannot be heard to now say that the insuredwere under an obligation to satisfy themselves, if new term had beenintroduced. If one considers the facts of this case, it is evident that theBinsurer had caused renewal reminder, which was acted upon and therenewal cheque, issued by the appellant. At that stage, or just before therenewal premium was furnished the insurer, or its agent was under aduty to alert the appellants that the change in terms, was likely to impacttheir decision, and if so required, offer better or fuller coverage. OneCcannot be oblivious to two circumstances here. The first, is that medicalor health insurance cover becomes crucial with advancing age; the policyholder is more likely to need cover; therefore, if there are freshlyintroduced limitations of liability, the insured may, if advised properly,and in position to afford it, seek greater coverage, or seek differentkindof policy. The second, is that most policies – health and medicalDinsurance policies being no exception, are in standard form. It would beworthwhile to notice at this stage that one who seeks coverage of lifepolicy/a personal risk, such as accident or health policy has little choicebut to accept the offer of certain standard term contracts – which aretermed as contracts d’ adhesion, French legal term. This has beenEdefined as[15]“A standard-form contract prepared by one party, to be signedby the party in weaker position, usually consumer, whohas little choice about the terms. Also termed Contract ofadhesion; adhesory contract; adhesionary contract; take itFor leave it contract; leonire contract.Some sets of trade and professional forms are extremely one-sided, grossly favouring one interest group against others,and are commonly referred to as contracts of adhesion. Fromweakness in bargaining position, ignorance or indifference,Gunfavoured parties are willing to enter transactions controlledby these lopsided legal documents”

27. The Law Commission[16] has addressed this issue in the reporttitled ‘Unfair (Procedural & Substantive) Terms in Contract’. The

15 Black’s Law Dictionary, 9th edn., p. 368H16 The Law Commission of India in its 199th Report

commission recommended enactment of law to counter such unfairterms in contracts. The draft legislation suggested by the report, definedan unfair contract as follows:

“A contract or term thereof is substantively unfair if suchcontract or the term thereof is in itself harsh, oppressive orunconscionable to one of the parties.”

28. The courts’ remedial power, to refuse enforcement of suchcontracts, or contractual terms, finds support in few decisions of thisCourt.[17] Recently, while deciding consumer dispute, this Court appliedthe principle that unfair terms in contract, cannot be enforced, if thereis absence of free choice, on the part of consumer, in Pioneer UrbanLand & Infrastructure Ltd v Govindan Raghavan[18]. It was held thata term introduced in standard form contract can be unfair, as toconstitute an unfair trade practice[19]under the Consumer Protection Act,1986, and observed as follows:

“A term of contract will not be final and binding if it isshown that the flat purchasers had no option but to sign onthe dotted line, on contract framed by the builder. Thecontractual terms of the Agreement dated 08.05.2012 are ex-

17 Central Inland Water v Brojo Nath Ganguly&Anr 1986 (3) SCC 156; Life InsuranceCorporation of India v Consumer Education and Research Centre &Ors 1995 (5) SCC482, where it was observed that:

“ The appellants or any person or authority in the field of insurance owe public dutyto evolve their policies subject to such reasonable, just and fair terms and conditionsaccessible to all the segments of the society for insuring the lives of eligible persons. Theeligibility conditions must be conformable to the Preamble, fundamental rights and thedirective principles of the Constitution. The term policy under Table 58 is declared to beaccessible and beneficial to the large segments of the Indian society. The rates of premiummust also be reasonable and accessible.”18 2019 (5) SCC 525

19 Defined by Section 2 (r) of the Act as follows:

(r) “unfair trade practice” means trade practice which, for the purpose ofpromoting the sale, use or supply of any goods or for the provision of anyservice, adopts any unfair method or unfair or deceptive practice including anyof the following practices, namely-

------------------------- ------------------------

(vi) makes false or misleading representation concerning the need for, or theusefulness of, any goods or services;

(vii) gives to the public any warranty or guarantee of the performance, efficacyor length of life of product or of any goods that is not based on an adequate orproper test thereof:…”

810SUPREME COURT REPORTS

Afacie one-sided, unfair, and unreasonable. The incorporationof such one-sided clauses in an agreement constitutes anunfair trade practice as per Section 2 (r) of the ConsumerProtection Act, 1986 since it adopts unfair methods orpractices for the purpose of selling the flats by the Builder.”

B29. Contracts of adhesion (as contracts d’ adhesion are also called),as discussed previously, leave little or no choice to the customer; in thiscase, the policy holders were left with no room to bargain and negotiate.In the present case, the standard form contract, renewed year afteryear, left the appellants only with the choice of raising the insurancecover. The last renewal, of course, resulted in the deletion of their son asCa beneficiary. However, even with this little choice, the result of theirbeing kept in the dark about the new terms which placed limits onindividual surgical procedures meant that had any other information withrespect to the increased coverage which could have resulted in the higherindividual limits (for surgical procedures) from they might have benefittedDwas denied to them. For that reason, the “informational blackout”, so tosay, on the part of the insurer, was crucial omission.

30. During the hearings, it was urged on behalf of the insurer thatthe agent would have ordinarily informed the policy holder as she or hewas in touch with them. The insurer did not lead evidence in this regard.EIts agent was not asked to affirm any affidavit. In these circumstances,the inference to be drawn is that the agent did not inform – at the time ofrenewal of the policy, in 2008, about the limits in regard to coverage ofindividual procedures but also omitted them any information that therecould have been possibility of higher coverage by payment of higherpremium which might have resulted in higher limit for the variousFsurgeries or procedures covered by the policy.

31. There is no doubt that insurance business is run through brokersand agents. The role of an agent in this regard is to be examined. ThisCourt has spelt out, in the context of insurance business the role ofinsurance agents and the liability or responsibility of insurance companiesGin the event of failure to discharge the duties cast upon agents, and thelikely vicarious responsibility or liability of the insurer.

32. In Delhi Electric Supply Undertaking v. Basanti Devi[20] theinsurer, Life Insurance Corporation, had floated ‘Salary Savings Scheme’

in which the employer deducted premium from its employees’ salariesand paid them to LIC on the employees’ behalf. The premium for aperiod of time was not deducted from an employee’s salary. On thedeath of the employee, his legal representatives claimed the insuredamount. LIC rejected the claim on the grounds of lapse of the policy dueto non-payment of premium, and that the actions of the employer did notbind LIC given that it was not an ‘agent’ of LIC. This Court turneddown the argument, and held that

“11. In the present case we are not concerned with theinsurance agent. It is not the case of LIC that DESU could bepermitted as an insurance agent within the meaning of theInsurance Act and the regulations. DESU is not procuring orsoliciting any business for LIC. DESU is certainly not aninsurance agent within the meaning of the aforesaidInsurance Act and the regulations but DESU is certainly anagent as defined in Section 182 of the Contract Act. The modeof collection of premium has been indicated in the Schemeitself and the employer has been assigned the role of collectingpremium and remitting the same to LIC. As far as the employeeas such is concerned, the employer will be an agent of LIC. Itis matter of common knowledge that insurance companiesemploy agents. When there is no insurance agent as definedin the regulations and the Insurance Act, the general principlesof the law of agency as contained in the Contract Act are tobe applied.12. Agent in Section 182 means person employed to do anyact for another, or to represent another in dealings with thirdpersons and the person for whom such act is done, or who isso represented, is called the principal. Under Section 185 noconsideration is necessary to create an agency. As far as BhimSingh is concerned, there was no obligation cast on him topay premium direct to LIC. Under the agreement between LICand DESU, premium was payable to DESU who was to deductevery month from the salary of Bhim Singh and to transmitthe same to LIC. DESU had, therefore, implied authority tocollect premium from Bhim Singh on behalf of LIC. There was,thus, valid payment of premium by Bhim Singh. The authorityof DESU to collect premium on behalf of LIC is implied. In

Aany case, DESU had ostensible authority to collect premiumfrom Bhim Singh on behalf of LIC. So far as Bhim Singh isconcerned DESU was an agent of LIC to collect premium onits behalf.”

33. This reasoning was applied in Life Insurance CorporationBof India v Rajiv Kumar Bhaskar[21]. It would be useful, in the presentcontext to extract the relevant terms of the notification,[22 ][especiallyClauses 3 (2) and 4 (1)] issued by the IRDA:

“3(2) An insurer or its agents or other intermediatory shallprovide all material information in respect of proposed coverCto the prospect to enable the prospect to decide on the bestcover that would be in his or her interest.”

************** *************** **************

4(1) Except in cases of marine Insurance cover, wherecurrent market practices do not insist on written proposalDform in all cases, proposal for grant of cover, either forlife business or for general business, must be evident by awritten document. It is the duty of an insure to furnish to theinsured free of charge, within 30 days of the acceptance of aproposal, copy of the proposal form.”

EIn the present case, even if, for arguments’ sake, one was toaccept the submissions of the insurer which is that their agent shouldhave informed the appellant policy holders, the absence of any evidencethat he did or any evidence adduced by the insurer that despite informationthe appellants chose to accept the policy in the terms which they eventuallyFwere furnished, the only consequence would be that as principal theinsurer is liable.

34. Such failure assumes importance even from the perspectiveof consumer protection law. The Consumer Protection Act, 1986 statesthe definition of ‘deficiency’ in service under Section 2(g) as “[A]nyfault, imperfection, shortcoming or inadequacy in the quality, natureGand manner of performance which is required to be maintained byor under any law for the time being in force or has been undertakento be performed by person in pursuance of contract or otherwisein relation to any service”. In order to demonstrate deficiency, it is not21 2005 (6) SCC 188H22 Dated 16 October 2002

necessary that the same emanates only from law or contract. Theterm “or otherwise” clearly provides for circumstances where certainlevel of service is expected from provider. As stated above in thejudgment, the principle of uberrima fides involves prior intimation ofchange in terms in insurance contracts. The deficiency of service assumeseven more significance in the present case, as it pertains to senior citizens.

35. The special status of senior citizens in general was takencognizance of by the insurer as well, when it relied on guidelines(applicable for new insurance products, with effect from 28.1.2017) whichinter alia, stated that

“In respect of Senior Citizens who are our existingpolicyholders, they will be allowed to renew the policy onexisting terms and conditions but at revised rates of premiumunder Gold Policy. They should not be compelled to migrateto the new Scheme. If they so desire to enter the new Scheme,the same may be allowed on collection of fresh proposal.”

The insurer’s argument here was that no existing senior citizenpolicy holder could be compelled to migrate to new Scheme. However,in the present case, the Mediclaim holders were kept in the dark, andasked to renew policy, the terms of which had undergone significantchange in that its cover was radically different, and imposed limitationson the insurer’s liability. The argument of the insurer has no merit and isnot acceptable.

36. Worldwide, nations are seeking viable answers to the questionof how to offer health care to their citizens. The World HealthOrganization (WHO) defines health as dynamic state of completephysical, mental, spiritual and social well-being and not merely the absenceof disease or infirmity.[23] Healthy living conditions and good quality health

23 The Constitution of the WHO in its preamble says as much:

“Health is state of complete physical, mental and social well-being and notmerely the absence of disease or infirmity. The enjoyment of the highest attainablestandard of health is one of the fundamental rights of every human being withoutdistinction of race, religion, political belief, economic or social condition.”In Calcutta Electric Supply Corporation Ltd. v. Subhash Chandra Bose, (1992) 1 SCC441 this court, quoting from various international covenants, observed that,

“the term ‘health’ implies more than an absence of sickness. Medical care andhealth facilities not only project against sickness but also ensure stable manpower for economic development. Facilities of health and medical care generatedevotion and dedication to give the workers’ best, physically as well as mentally

Ais not only necessary requirement it is also recognized as fundamentalright. Article 25 of the Universal Declaration of Human Rights 1948[24]lays down that everyone has the right to standard of living, adequatefor the health and well-being of himself and of his family, including food,clothing, housing and medical care. The International Covenant onEconomic, Social and Cultural Rights, 1976, too recognizes the right toBhealth, of citizens of every nation.[25]

37. Part IV of the Indian Constitution which contain the DirectivePrinciples of State Policy imposes duties on the state. Some of itsprovisions directly or indirectly are associated with public health. Theseprinciples direct the state to take measures to improve the condition ofChealth care of the people. Articles 38 imposes duty on state that statesecure social order for the promotion of welfare of the people. Withoutan overall viable framework of public health, the state cannot achievethis obligation, in meaningful manner. Article 39(e) relates to workersand enjoins the state to protect their health. Article 41 imposes the dutyDin productivity. It enables the worker to enjoy the fruit of his labour, to keep himphysically fit and mentally alert for leading successful, economic, social andcultural life. The medical facilities, are therefore, part of social security and likegilt edged security, it would yield immediate return in the increased productionor at any rate reduce absenteeism on grounds of sickness, etc. health is thus astate of complete physical, menial and social well-being and nut merely theEabsence of disease or infirmity”.24 Article 25 reads as follows:(1) Everyone has the right to standard of living adequate for the health andwell-being of himself and of his family, including food, clothing, housing and medicalcare and necessary social services, and the right to security in the event of unemployment,sickness, disability, widowhood, old age or other lack of livelihood in circumstancesbeyond his control.F(2) Motherhood and childhood are entitled to special care and assistance. Allchildren, whether born in or t of wedlock, shall enjoy the same social protection.25 Article 12 (of the Covenant, of 1976, reads as follows:

“1. The States Parties to the present Covenant recognize the right of everyoneto the enjoyment of the highest attainable standard of physical and mental health.

2. The steps to be taken by the States Parties to the present Covenant to achievethe full realization of this right shall include those necessary for:G(a) The provision for the reduction of the stillbirth-rate and of infant mortalityand for the healthy development of the child;

(b) The improvement of all aspects of environmental and industrial hygiene;

(c) The prevention, treatment and control of epidemic, endemic, occupationaland other diseases;

(d) The creation of conditions which would assure to all medical service andmedical attention in the event of sickness.”H

on the state to public assistance essentially for those who are sick anddisabled. Article 42 casts primary responsibility upon the state to protectthe health of infants and mother through maternity benefit. Article 47spells out the duty of the state to raise the level of nutrition and standardof living of its people. Other provisions relating to health fall in this Partof the Constitution. The state is asked in particular, to direct its policiestowards securing health of workers.

38. For long time, state policy in this country was to involve onlypublic sector entities in the insurance sector. All this changed, with theopening up of the economy and entry of private sector insurers. To regulateentities in the insurance business, the Insurance Regulatory andDevelopment Authority Act, 1999 (“the IRDA Act”) was enacted. Itsprovisions, together with that of the Insurance Act, 1938, and regulationsframed under both enactments, regulate all insurance related activities(except marine and certain kinds of insurance) in India. Section 2 (6C)of the Insurance Act defines “health insurance business” and defines itas follows:

“(6C) “health insurance business” means the effecting ofcontracts which provide for sickness benefits or medical,surgical or hospital expense benefits, whether in-patient orout-patient travel cover and personal accident cover;]

The IRDA (Health Insurance) Regulations, 2016, (which replacedthe previously applicable regulations of 2013- which were preceded byguidelines regulating health insurance products contains regulations whichare relevant for the purpose of this case. Chapter III of these regulationscontains general provisions relating to Health Insurance. The relevantpart of Regulation 11 reads as follows:

“11. Designing of Health Insurance Policies

a. Subject to Regulation 3 as applicable, Health insuranceproduct may be designed to offer various covers;

i. For specific age or gender groups

ii. For different age groups

iii. For treatment in all hospitals throughout the country,provided the hospitals comply with the definition specified

iv. For treatment in specific hospitals only, provided themorbidity rates used are representative

v. For treatment in specific geographies only, provided themorbidity rates used are representative

Provided, such specifications are disclosed clearly upfrontin the product prospectus, documents and during sale process.And provided that no insurer shall offer any benefit or serviceBwithout any insurance element.

********** ********************

c. Insurer shall not compel the insured to migrate to otherhealth insurance products. In case of migration from awithdrawn product, the insurer shall offer the policyholderCan alternative available product subject to portabilityconditions.

d. Insurers shall ensure adequate dissemination of productinformation on all their health insurance products on theirwebsites. This information shall include description of theDproduct, copies of the prospectus as approved under theProduct Filing Guidelines, proposal form, policy documentwordings and premium rates inclusive and exclusive of ServiceTax as applicable….”

Regulation 13 is relevant for the purposes of this appeal; it dealsEwith renewal of policies, and reads as follows:

“13. Renewal of Health Policies issued by General Insurersand Health Insurers (not applicable for travel and personalaccident policies)

i. health insurance policy shall ordinarily be renewableexcept on grounds of fraud, moral hazard or misrepresentationor non-cooperation by the insured, provided the policy is notwithdrawn.

ii. An insurer shall not deny the renewal of health insurancepolicy on the ground that the insured had made claim orclaims in the preceding policy years, except for benefit basedpolicies where the policy terminates following payment of thebenefit covered under the policy like critical illness policy.

iii. The insurer shall provide for mechanism to condone adelay in renewal up to 30 days from the due date of renewal

without deeming such condonation as break in policy.However, coverage need not be available for such period. 8[Provided the renewal premium shall not be accepted morethan 90 days in advance of the due date of the premiumpayment.]

iv. The promotion material and the policy document shallexplicitly state the conditions under which policy terminates,such as on the payment of the benefit in case of critical illnessbenefits policies.”

39. These regulations only underline expressly what was implicit,i.e., the insurer’s obligation to inform every policy holder, about anyimportant changes that would affect her or his choice of product. Thesehave been given statutory shape. Yet, the obligation of the insurer toprovide information to existing and policy holders, for them to exercisechoice, meaningfully, and choose products suited to their needs, existed.In this case, that obligation was breached.

40. In view of the above discussion, this Court is of the opinionthat the findings of the State Commission and the NCDRC cannot besustained. The insurer was clearly under duty to inform the appellantpolicy holders about the limitations which it was imposing in the policyrenewed for 2008-2009. Its failure to inform the policy holders resultedin deficiency of service. The impugned order of the NCDRC as well asthe order of the State Commission are hereby set aside. The order ofthe District Forum is accordingly restored. Consequently, the appeal isallowed; in the circumstances of this case, the respondent shall bearadditionalcosts, quantified at ` 50,000/-.

K. M. JOSEPH, J.

1. I have gone through the draft Judgment authored by my learnedBrother Justice S. Ravindra Bhat.

2. While I would agree with the relief proposed, I feel it is necessaryto articulate my reasons by separate opinion.

3. The facts have been set out by my learned brother. I wouldavoid elaborate repetition. Suffice it to say that the appellants are husbandand wife and along with their son obtained an insurancepolicy in the

Ayear 2006 with certain conditions attached. In fact, they have casethat they had policy of insurance for several years with the respondentinsurer. They obtained the policy in question for the year 2008, however,wherein the son was not included and there was also change in theamount of the insurance. The period of insurance was operative from28.03.2008 to 27.03.2009. It is while this policy was in force that theBsecond appellant went for angioplasty in June 2008 and claim forRs.3,82,705.27 was submitted. The insurer paid sum of Rupees TwoLakhs only. The reduction in the claim was based on the express provisionswhich was in force in the policy in issue. Under the earlier policy forprevious year such clause was conspicuous by its absence. It is alsoCtrue that notice was issued by the respondent Insurer for renewal andthe appellants issued cheque towards renewal on 26.3.2008. It isthereafter that the policy in question for the period in question (28.3.2008to 27.3.2009) came to be issued.

4. In Biman Krishna Bose v. United India Insurance Co.Ltd.26Dthis Court inter alia held as follows:

“5. renewal of an insurance policy means repetition of the originalpolicy. When renewed, the policy is extended and the renewedpolicy in identical terms from different date of its expirationcomes into force. In common parlance, by renewal, the old policyEis revived and it is sort of substitution of obligations under theold policy unless such policy provides otherwise. It may be thaton renewal, new contract comes into being, but the said contractis on the same terms and conditions as that of the original policy.Where an insurance company which has exclusive privilege toFcarry on insurance business has refused to renew the mediclaimpolicy of an insured on extraneous and irrelevant considerations,any disease which an insured had contacted during the periodwhen the policy was not renewed, such disease cannot be coveredunder fresh insurance policy in view of the exclusion clause.The exclusion clause provides that the pre-existing diseases wouldGnot be covered under the fresh insurance policy. If we take theview that the mediclaim policy cannot be renewed withretrospective effect, it would give handle to the InsuranceCompany to refuse the renewal of the policy on extraneous

consideration thereby deprive the claim of the insured for treatmentof diseases which have appeared during the relevant time andfurther deprive the insured for all time to come to cover thosediseases under an insurance policy by virtue of the exclusionclause. This being the disastrous effect of wrongful refusal ofrenewal of the insurance policy, the mischief and harm done tothe insured must be remedied. We are, therefore, of the view thatonce it is found that the act of an insurance company was arbitraryin refusing to renew the policy, the policy is required to be renewedwith effect from the date when it fell due for its renewal.”

(Emphasis supplied)

5. Proceeding on the basis of the principles enunciated thereunder,a renewal of the contract would ordinarily, undoubtedly involve theexpectation of replication of the terms of the original contract and whatis more, the actual continuation of the terms. However, as noted, theactual contract may provide otherwise. The terms of the renewed contractof insurance may be located in the actual contract of insurance. Arenewed contract of insurance may provide terms which are differentfrom the terms of the original contract of insurance.6. However, I am in agreement with my learned brother that theclaim under the Consumer Protection Act must allowed on the groundthat there has been deficiency on the part of the Insurer. The Insurerbrought about change in the policy. This change introduced acumbersome limitation. It kept the Insured in the dark about the limitationat the time when the renewal notice was issued, and what is more, thepremium was accepted. The Insurer had duty to inform the appellantsthat change regarding the limitation on its liability was being introduced.This duty to take the insured into confidence was breached. This wasthe deficiency in service. Even proceeding on the basis that the policyincorporates the terms of the contract, insofar as the respondent insurerunilaterally purported to incorporate clearly cumbersome limitationinvolving breach of the duty to take the appellants into confidence, thecourt would not be powerless to undo the wrong. Be it that the policypurported to incorporate the substantive limitation, the appellant can berelieved of the result of the deficiency in service by the insured. Thiscan be done by restoring the position, the appellants would occupy ifthere was no breach. I would, therefore, agree with my learned Brother

Athat the appeal be allowed on the basis that there was unjustifiable non-disclosure by the Insurer about the introduction of clause of limitationand, in this case, it constituted deficiency in service and resultantly theappellants are entitled to relief. I, therefore, agree that the appeal beallowed.

Divya Pandey

Appeal allowed.