Allowed

The Director,Kerala State Insurance Department, v. the Kerala State Human Rights Commission

Kerala HC9 Mar 2020WP(C)/15044/2019

Case brief

AI extract

What is this about?

A writ petition challenged the Kerala State Human Rights Commission order directing payment of life insurance claims. The Court held that policies lapsed due to non-payment of premiums after the insured resumed duty from medical leave and before her death. Post-death premium payments could not revive the claim, quashing the Commission order.

What did the court decide?

The Writ Petition was allowed and the order of the Kerala State Human Rights Commission bearing Ext.P9 dated 04.07.2016 was quashed.

The Director,Kerala State Insurance Department, Vs the… — Consumer Protection | Kerala HC (2020)

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IN THE HIGH COURT OF KERALA AT ERNAKULAM

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PRESENT

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THE HONOURABLE THE CHIEF JUSTICE MR.S.MANIKUMAR

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THE HONOURABLE MR. JUSTICE SHAJI P.CHALY

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MONDAY, THE 09TH DAY OF MARCH 2020 / 19TH PHALGUNA, 1941

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WP(C).No.15044 OF 2019(E)

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PETITIONER/S:

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THE DIRECTOR, KERALA STATE INSURANCE DEPARTMENT, DIRECTORATE OF INSURANCE, TRANS TOWERS, VAZHUTHACAUD, THYCAUD PO, THIRUVANANTHAPURAM.

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BY SRI.S.KANNAN, GOVERNMENT PLEADER

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RESPONDENT/S:

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1 THE KERALA STATE HUMAN RIGHTS COMMISSION,, TURBO PLUS TOWERS, PMG JUNCTION, VIKAS BHAVAN PO, THIRUVANANTHAPURAM.

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2 JAMES G.KURIAN, PEDIYIL GILEAD, PRAYAR, PANDANAD NORTH P.O, KALLISSERRY, CHANGANNUR, ALAPPUZHA.

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R2 BY ADV. SRI.KALEESWARAM RAJ R2 BY ADV. THULASI K. RAJ R2 BY ADV. SMT.RIYA RAYMOL IYPE R2 BY ADV. SMT.MAITREYI SACHIDANANDA HEGDE

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THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 27-02-2020, THE COURT ON 09-03-2020 DELIVERED THE FOLLOWING:

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JUDGMENT

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SHAJI P. CHALY, J

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This writ petition is filed by the Director of Kerala State Insurance Department seeking to quash Ext.P9 order passed by the Kerala State Human Rights Commission in HRMP No. 283 of 2016 dated 04.07.2016, whereby the Insurance Officer of the State Insurance Department, Alappuzha was directed to take immediate steps to grant full assured amount due under the Life Insurance Policies in favour of the late Mini M. Ani, wife of the second respondent, who was the complainant before the Commission.

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The basic contention advanced by the petitioner is that the directions so issued by the Commission cannot be sustained, since the policies have elapsed due to the nonpayment of monthly premium by the deceased, after rejoining duty on expiry of leave without allowance.

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The basic material facts for the disposal of the writ petition are as follows:

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Petitioner is the respondent and the second

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respondent was the petitioner in the above specified proceedings before the Kerala State Human Rights Commission i.e., the first respondent herein. Late Smt. Sini M. Ani, wife of the second respondent, Headmistress of Thalappanangad LP School, Chengannur, Alappuzha District passed away on 23.10.2013, while in service. Late Sini M. Ani had subscribed 3 Life Insurance Policies with the Kerala State Insurance Department, Thiruvananthapuram, namely KSID/L1/10104043898, KSID/L1/1010407533 and KSID/L1/10104124791. In the policies, the second respondent was nominated to receive the assured amounts, evident from Exts.P1 to P3.

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Late Sini being a Drawing and Disbursing Officer, used to debit the premium amount pertaining to the aforesaid policies at Sub Treasury, Chengannur. The passbooks pertaining to Exts.P1 to P3 policies are produced as Ext.P4 series. While so, late Sini entered on leave without allowances on medical ground for a period of 7 months, commencing from September, 2012 to March, 2013. Nevertheless, according to the petitioner, it was not intimated to the Insurance Department. During the tenure of the leave, late Sini committed default in payment of premiums pertaining to the afore policies. Therefore,

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according to the petitioner, by virtue of Rule 20.3 of the Kerala State Life Insurance Rules, 1988 (for short 'Rules, 1988) promulgated by virtue of the Government Order dated 16.11.1988, in the event of non-recovery or nonpayment of premium for a period of six months, the policy will lapse as from the due date of defaulted premium, and all claims to the policy moneys thereunder are forfeited subject to Rule 20.4 of Rules, 1988. That apart, it is submitted that as is evident from the conditions and privileges, condition No.1(c) attached to Exts.P1 to P3 policies is relevant, which stipulates, whenever the insured is on leave without allowances or under suspension, it is to be ensured that the monthly premium is paid in time either by way of chalan or Demand Draft or by remittance in cash in the concerned District Insurance Office or in the Directorate of Insurance. Further, as per condition No. 1(d) if the leave without allowance is on medical ground, the recovery of premium shall commence only with effect from the month in which the insured resumes duty after leave. The arrears of premia in such cases shall be recovered with interest at the rate as prescribed by the Government from time to time from the pay of the insured in ten instalments, commencing from the month in which

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he/she resumes duty after such leave. So much so, as per condition No.1(f) of the policies, the policy shall be treated as lapse on non-payment of premium for a period of six months and all claims to the policy moneys thereunder shall be forfeited, subject to the conditions enumerated in condition No.1(g). It is also pointed out that similar conditions were incorporated in Ext.P4 series of passbooks also. Conditions are contained under the policy as well as Ext.P5 revised Kerala State Life Insurance Rules dated 16.11.1988. Therefore, it is submitted that late Sini has subscribed Exts.P1 to P3 polices bearing in mind the conditions of Insurance policies, the Rules by which the conditions are incorporated in the contract of Insurance, and the beneficiary and the nominee were well aware that they are bound by the terms and conditions of the policies.

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Though late Sini resumed duty during March, 2013, she has not remitted the defaulted premiums in terms of the condition No.1(d), in spite of the fact that she was the Drawing and Disbursing Officer. Nevertheless, on resumption of duty, late Sini has remitted the subsequent premiums as well. Therefore, going by the rules of Ext.P5 Rules, remittance of subsequent premiums without remitting the defaulted premiums will not revive the

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policies which had lapsed. That apart, there is no provision for automatic revival of lapsed policy as well.

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The sum and substance of the contention in the backdrop of the facts discussed above is that the nominee of the insured is therefore, entitled only for surrender claim as per Exts.P1 to P3 policies. Accordingly, an amount of Rs.47,626/- has been sanctioned to the nominee ie., the second respondent. Matters being so, the second respondent has raised a claim inter alia that he is entitled for the sum assured in terms of Exts.P1 to P3 policies. Thereupon, Ext.P6 communication dated 16.10.2015 was issued by the Department to the second respondent stating that since the policies had elapsed, the nominee is entitled only for the surrender value. Anyhow, dissatisfied with the amounts so sanctioned, second respondent approached the Commission by filing Ext.P7 complaint. Eventhough Ext.P8 comprehensive reply was preferred by the petitioner pointing out legal and factual aspects discussed above, Commission has passed Ext.P9 order holding that since on resumption of duty, the insured had remitted the balance premium and it was accepted by the Department, the policy has to be treated as renewed and thereby, directed to dispose of the assured amount to the second respondent.

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Eventhough review of the order was sought for evident from Ext.P10 communication dated 06.10.2017, it was declined as per Ext.P11 order dated 06.06.2018. It is thus seeking to quash the aforesaid orders, this writ petition is filed.

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A detailed counter affidavit is filed by the second respondent refuting the contentions advanced by the petitioner. It is pointed out therein that in one out of the 3 policies i.e., policy No. KSID/L1/10104043898, the nominee is the son of the deceased namely Jickson James. According to the second respondent, the insurance policies subscribed by the deceased were compulsory insurance schemes for Government employees in the State and therefore, the employer i.e., the State Government was liable to periodically debit the insurance premium from the salary of the insured. It is admitted that the insured availed leave without allowance for a period of 7 months from September, 2012 to March, 2013 for medical treatment, since she was a cancer patient undergoing treatment at Vellore Medical College, Tamil Nadu. It is further submitted that the stand adopted by the petitioner that the policies lapsed is erroneous and illegal. In view of the fact that the premiums were debited and accepted by the

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petitioner even after the alleged period of lapse, it is an admitted fact that the petitioner rejoined duty during March, 2013 and the premiums are seen debited from the account of the insured from June, 2013 only and further that as is evident from the entries in Exts.P4, P4(a) and P4(b), premiums were debited even after she resumed duty. Therefore, it is submitted that the contention put forth by the petitioner that the policies are lapsed, cannot be sustained under law. That apart, the second respondent has relied upon various judgments in order to contend and canvass that the stand adopted by the Commission is in accordance with law, and therefore, the petitioner has not made out any case justifying interference with the order passed.

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A reply affidavit is filed by the petitioner reiterating the stand adopted in the writ petition . That apart, it is submitted that on rejoining duty, the insured committed default in payments of premiums and she died on 23.10.2013. But, it is evident from Exts.P4 to P4(b) passbooks that premiums on the basis of Exts.P1 to P3 policies were remitted only after the demise of the insured. Therefore, no premium can be said to be paid during the

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life time of the insured, when the policy lapsed due to the

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default on the part of the insured. It is also evident from Exts.P4 to P4(b) passbooks that the insured prior to availing of leave without allowances, had remitted the monthly premium on 24.08.2012. However, it is evident from Exts.P4 to P4(b), the remittance of subsequent premiums were made only on 17.06.2014 ie., much after the demise of the insured on 23.10.2013 which is not permissible as per the contract of insurance and the Rules.

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We have heard learned Government Pleader, Sri. S. Kannan appearing for the petitioner and Adv. Tulasi K.Raj for the second respondent and perused the pleadings and documents on record.

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The question that emerges for consideration is as to whether the instalments paid against the premium due under a policy after the death of the insured can be taken into account and direct payment of the assured sum amount?

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In order to understand the intrinsic effect of the policies, it is better that the preamble and relevant conditions are discussed. The conditions of policies are typical in nature. The preamble to the Life Insurance Policy of the Kerala State Insurance Department states thus:

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“It is hereby declared that in consideration of and subject to

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the due payment of the subsequent premia as set out in the schedule till the date of maturity of the policy as specified in the schedule of the death of the insured whichever shall first occur, in the manner prescribed in the Rules framed by the Government in that behalf, the State Insurance Department to the Government of Kerala do by this policy agree to pay the sum assured (together with such sum or sums as may be allocated by way of bonus) on behalf of the Government of Kerala to the insured on the date of maturity or in the event of the insured's death before the date of maturity, to the nominee and failing such nominees, to the assignees or other legal representatives after surrender of the policy and production of satisfactory evidence of the death of the insured.”

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On a reading of the preamble, it is explicit and clear that the due payment of premiums till the date of maturity of the policies or the death of the insured, whichever shall first occur is a mandatory requirement.

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The said payment is to be effected in the manner prescribed in the Rules framed by the Government, which is produced as Ext.P5 in the writ petition . The conditions and privileges of the Insurance policy read thus:

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1(a) The monthly premium will be payable in advance and be recovered by deduction from the pay of the insured. The insured person is responsible to see that the premium which is due on the first day of each month is deducted from his/her pay for the preceding month.

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(b) If the insured is working on deputation, the premium shall be

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recovered monthly and remitted in the treasury by the respective Drawing and Disbursing Officers. The original chalan receipt thereof together with recovery schedule shall be sent to the concerned District Insurance Officer. The premium recovered as above may also be remitted by way of Demand draft drawn in favour of the Insurance Department.

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(c) When the insured is on leave without allowances or under suspension, it is to be ensured that the monthly premium is paid in time either by way of chalan or Demand Draft or by remittance in cash in the concerned District Insurance Office or in the Directorate of Insurance.

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(d) In case the leave without allowance is on medical ground, the recovery of premium shall commence only with effect from the month in which the insured resumes duty after leave. The arrears of premia in such cases shall be recovered with interest at the rate as prescribed by the Government from time to time from the pay of the insured in ten instalments, commencing from the month in which he/she resumes duty after such leave.

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(e) If the insured dies while on leave without allowances on medical ground, the arrears of premia due shall be recovered with interest at the rate as prescribed by the Government from time to time from the payments admissible.

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(f) In every other case of non-recovery or non-payment of premium for a period of six months, the policy shall lapse as from the due date of defaulted premium and all claims to the policy moneys thereunder forfeited subject to the condition 1(g) below.

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(g) A lapsed policy on which at least three years' premia have been duly paid before the date of lapse shall automatically secure a fully paid up assurance for a reduced sum which will bear the same proportion to the original sum assured as the total amount of premium paid bears to the amount payable if the original policy

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continued in force until the date of maturity of the policy.

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(h) A lapsed policy on which three years' premia have not been paid before the date of lapse, shall be void and no claim on it will be recognized.”

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Condition No.3 deals with revival of lapsed policy,

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which reads thus:

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“A lapsed policy may be revived on payment of all arrears of premia with compound interest at the rate of interest as prescribed by Government from time to time, calculated from the first due date to the date of payment.”

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On a reading of condition No.1(a), it is unequivocal that the monthly premium was payable in advance and be recovered by deduction from the payment of the insured and insured persons are responsible to see that the premium which due on the first day of each month is deducted from his/her pay for the preceding month. Clause (d) thereof deals with the situation in case a leave without allowance is availed by the insured on medical grounds, wherein the recovery of premium will commence

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only with effect from the month in which the insured resumes duty after leave. The arrears of premia in such cases shall be recovered with interest at the rate as prescribed by the Government from time to time from the pay of the insured in ten instalments commencing from the

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month in which he/she resumes duty after such leave. Therefore, there can be no doubt that the recovery of premium against a person who had availed leave on medical ground is to be resumed only when the insured resumes duty after leave in 10 equal monthly instalments with interest at the rate prescribed by the Government commencing from the month in which she resumes duty.

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It is an admitted fact that the insured was on medical leave without allowance upto March, 2013 and rejoined duty during April, 2013. Admittedly, the premium was not recovered from the pay of the insured. However, fact remains that as per condition No.1(a), it is the duty and responsibility of the insured person to ensure that the premium is deducted from his/her pay from the preceding month, and thus is more so in the case of the insured she being the Drawing and Disbursing Officer.

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The above discussed are the conditions in respect of the recovery of premium and by virtue of clause (f) thereto in every other case of non-recovery or non-payment of premium for a period of six months, the policy shall lapse as from the due date of defaulted premium and all claims to the policy moneys thereunder forfeited subject to the condition 1(g). A lapsed policy on which at least three

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years' premia have been duly paid before the date of lapse shall automatically secure a fully paid up assurance for a reduced sum which will bear the same proportion to the original sum assured as the total amount of premium paid bears to the amount payable, if the original policy continued in force until the date of maturity of the policy. Clause (h) stipulates that a lapsed policy on which three years' premia have not been paid before the date of lapse, shall be void and no claim on it will be recognised. It thus means that in order to have the benefit of proportionate payment of the sum assured the policy should continue till the date of maturity; but in the case on hand, it did continue till maturity since the insured died before the date of maturity.

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The paramount contention advanced by the learned counsel for the respondent is on the basis of Rule 20.3 of Rules, 1988, which reads thus:

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“In every other case of non-recovery or non-payment of premium for a period of 6 months, the policy shall lapse, as from the due date of defaulted premium and all claims to the policy moneys thereunder forfeited subject to the relevant rules 20.4 below.”

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Rules 20.4 of Rules, 1988 reads thus:

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“A lapsed policy on which at least three years' premia have been duly paid before the date of lapse shall automatically

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secure a fully paid up assurance for a reduced sum which will bear the same proportion to the original sum assured as the total amount of premium paid bears to the amount payable, if the original policy continued in force until the assured attained his fifty fifth year of age. A claim arising within six months from the date of lapse of such policy, will however, be treated as good and will be paid in full subject to the deduction of ordinary revival charges specified in rule 21.1 below.”

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Rules 19 and 20 dealing with 'the manner of

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realising premia and subsequent premia' are relevant to the context, which read thus:

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“19. Manner of realising premia

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i. The first premia on each policy may be paid either in any treasury under the head of account “8011 Insurance and Pension Funds-105 State Government Insurance Fund -03 State Life Insurance Fund” or any other head of account to be specified from time to time.

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ii. As demand draft in favour of the Director of Insurance payable at Trivandrum; or iii. In cash in the offices of the Director of Insurance.

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Subsequent premia will be payable in advance and be recovered monthly by deduction from the pay of the insured. The insured person is responsible to see that the amount of the premium which is due on the first day of each month is deducted from his/her pay for the preceding month. If the premium due for any month is omitted to be deducted from the salary bill of the insured person, or from the establishment bill of the office in which his pay is drawn (by oversight or otherwise) whether such omission was on the part of the insured or on the part of the officer whose duty is to draw and disburse his pay, the insured should pay the premium in cash into the nearest treasury within the period of grace period

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of one month from the date of receipt of pay without deduction of premium. Drawing Officers concerned shall give every facility for such a remittance. A deduction statement in the schedule appended to these rules, indicating therein, particulars of individual deduction, may be attached to the salary bill. These schedules should reach the Directorate of Insurance, after their correctness is checked by the Accountant General (A &E), with reference to the gross and net amounts of the bills.”

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Revival of a lapsed policy is taken care of under Rule 21 of Rules, 1988, which reads thus:

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“21. How a lapsed policy revived

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21.1 A lapsed policy may be revived on payment of all arrears of premia with compound interest calculated from the first due date to the date of payment at 9% per annum. Such revival should be done with a period of three years from the date of lapse of policy.”

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Therefore, on a reading of the rules and the conditions of policy quoted above jointly and harmoniously, it is clear that the contract of policy is on the basis of the rules constituted for the purpose. It is also clear that the payment of premium of an insured who availed leave without allowance on medical grounds is taken care of under condition No. 1(d) of the policy. It is an admitted fact that the premium was not paid/recovered from the insured till her death and it was after her death that the premiums were paid. Further, if the amounts were not recovered in accordance with condition 1(d) of the policy conditions, the

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insured had the duty to pay the same as per Rule 20 of the Rules in cash into the nearest treasury.

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In our considered opinion, it is clear from the preamble of the life insurance policy discussed above that in order to have entitlement of the matured amount, the premium had to be paid till the date of maturity or till the death of the insured, whichever shall first occur in the manner prescribed in the rule framed by the Government in that behalf. The insured had not paid the premium after rejoining duty and therefore, in terms of the policy conditions and the Rules, the policy lapsed. It is also clear that the premia payment was done stealthily after the death of the insured, by some interested person as an attempt to secure the assured amount to the nominee/legal heir of the deceased/insured.

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Going by the conditions of policy and the Rules, we could not gather any enabling provision so as to protect the interest of the insured consequent to the lapse of policies due to the non-payment of the premium before the death of the insured person. To put it otherwise, the policy lapsed in the case of insured consequent to non-payment on rejoining duty after leave on medical grounds, which omission continued until her death.

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Having regard to the facts and circumstances of the case and conditions of policy and the Rules thereto, we are of the considered opinion that the Kerala State Human Rights Commission was not legally correct, directing the Insurance Department to pay the sum assured to the nominee of the insured, eventhough the insured has failed to pay the premium on re-joining duty after the medical leave without allowance, from April, 2013, and revival of the same before her death on 23.10.2013. Therefore, we quash Ext.P9 order of the Kerala Human Rights Commission in HRMP No. 283 of 2016 dated 04.07.2016. However, it is evident that interim stay of the proceedings was granted on condition that the petitioner disburses an amount of Rs.47,626/- towards the surrender claim, and we are informed by counsel on either side that the said amount was paid. This is recorded.

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Accordingly, this writ petition is allowed.

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sd/- S. MANIKUMAR, CHIEF JUSTICE.

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sd/-

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SHAJI P. CHALY, JUDGE.

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APPENDIX

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PETITIONER'S EXHIBITS:

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EXHIBIT P1	A TRUE COPY OF THE STATE LIFE INSURANCE POLICY BEARING NO.KSID/L1/10104043898.
EXHIBIT P2	A TRUE COPY OF THE STATE LIFE INSURANCE POLICY BEARING NO.KSID/L1/1010407533.
EXHIBIT P3	TRUE COPY OF THE STATE LIFE INSURANCE POLICY BEARING NO.KSID/L1/10104124791.
EXHIBIT P4 (a)	A TRUE COPY OF THE PASS BOOK PERTAINING TO EXHIBIT P2 POLICY OF THE LATE WIFE OF THE 2ND RESPONDENT.
EXHIBIT P4 (b)	A TRUE COPY OF THE PASS BOOK PERTAINING TO EXHIBIT P2 POLICY OF THE LATE WIFE OF THE 2ND RESPONDENT.
EXHIBIT P5	A TRUE COPY OF THE KERALA STATE LIFE INSURANCE RULES, 1988.
EXHIBIT P6	A TRUE COPY OF THE COMMUNICATION DATED 16.10.2015 ISSUED TO THE 2ND RESPONDENT BY THE INSURANCE OFFICER, ALAPPUZHA DISTRICT ALONG WITH ITS FREE ENGLISH TRANSLATION.
EXHIBIT P7	A TRUE COPY OF THE PETITION SUBMITTED BY THE 2ND RESPONDENT BEFORE THE 1ST RESPONDENT WHICH WAS NUMBERED AS HRMP NO.283/16 ALONG WITH ITS FREE ENGLISH TRANSLATION.
EXHIBIT P8	A TRUE COPY OF THE REPLY DATED 27.05.2016 SUBMITTED BY THE PETITIONER IN EXHIBIT P7 ALONG WITH ITS FREE ENGLISH TRANSLATION.
EXHIBIT P9	A TRUE COPY OF THE ORDER DATED 04.07.2016 IN HRMP NO.283/2016 PASSED BY THE 1ST RESPONDENT ALONG WITH ITS FREE ENGLISH TRANSLATION.
EXHIBIT P10	A TRUE COPY OF THE COMMUNICATION DATED 06.10.2017 SUBMITTED BY THE PETITIONER BEFORE THE 1ST RESPONDENT ALONG WITH FREE ENGLISH TRANSLATION.
EXHIBIT P11	A TRUE COPY OF THE ORDER DATED 06.06.2018 PASSED BY THE 1ST RESPONDENT.