A recent decision in the matter of National Insurance Co. Ltd., Haryana & Another v/s Lalita Goyal & Others., by the National Consumer Disputes Redressal Commission (NCDRC) highlights the delicate balance between upholding contractual agreements and safeguarding consumer rights in insurance disputes. This case, originating from a complaint allowed by the District Consumer Disputes Redressal Commission (DCDRC) Bathinda, Punjab, and affirmed by the State Consumer Disputes Redressal Commission (SCDRC) Punjab, centered on the interpretation and application of a policy cancellation clause. The Insurance Company challenged these rulings, arguing that the lower fora erred by ignoring the clear terms of the policy.

The dispute revolved around a group insurance policy held by the State Bank of India Staff Association (SBISA), where individual members were beneficiaries. The policy contained a clause (condition no. 5) allowing the insurer to cancel the policy by providing written notice to the insured and refunding the proportionate premium. The Insurance Company cancelled the policy, providing notice through newspaper publication and refunding the premium to the SBISA.

The DCDRC and SCDRC, however, ruled in favor of the complainants (legal representatives of a deceased member), arguing that individual notice and refund to beneficiaries were required, despite the policy naming the SBISA as the insured.

The NCDRC, in its revisional jurisdiction, scrutinized the lower fora’s decisions. The Commission emphasized the binding nature of contractual terms, particularly when they are clear and unambiguous. It noted that the DCDRC itself acknowledged the Insurance Company's compliance with condition no. 5, rendering its subsequent conclusion of "insufficient communication" contradictory.

A significant aspect of the case was the pendency of a writ petition filed by the SBISA before the Punjab and Haryana High Court, challenging the validity of condition no. 5. The NCDRC acknowledged the writ petition but emphasized that its mere pendency, without any interim or final orders, did not preclude the Commission from adjudicating the matter. The Commission drew on established legal principles, including Order 41 Rule 5 of the Code of Civil Procedure, stating that a mere filing of a case does not operate as a stay.

The NCDRC addressed the application of the rule of contra proferentem, which states that ambiguous policy terms should be construed against the insurer. However, the Commission clarified that this rule applies only when genuine ambiguity exists. In this case, condition no. 5 was deemed clear and unambiguous, leaving no room for alternative interpretations.

Drawing upon Apex Court precedents, the NCDRC emphasized that courts should interpret contracts as expressed by the parties, rather than creating new contracts. The Commission found that the lower fora had effectively rewritten the contract by imposing obligations not specified in condition no. 5.

The NCDRC’s decision underscores the importance of adhering to the clear terms of insurance contracts. While consumer protection remains paramount, it cannot justify disregarding unambiguous contractual obligations. The Commission's ruling reaffirms the principle that contractual clarity must prevail, ensuring fairness and predictability in insurance transactions.