Victory for Policyholders: Consumer Commission Sets Aside Insurance Settlement, Orders Full Payment.


18 November 2024 Consumer Law >> Civil & Consumer Law   |   Insurance >> Personal Law  

A recent ruling by the National Consumer Disputes Redressal Commission (NCDRC) has brought clarity to the contentious issue of insurance claim settlements and discharge vouchers. The case involved a car owner, Mr. Mohd. Mulkhtar, whose vehicle, insured for Rs. 4,43,800/-, was involved in a significant accident. Despite the vehicle sustaining substantial damage, the insurance company, Bajaj Allianz General Assurance Company, settled the claim for a mere Rs. 2,00,000/-, citing a consent letter signed by the complainant.

The crux of the dispute lay in the validity of this consent letter. Mr. Mulkhtar argued that he was coerced into accepting the reduced amount under duress, and that the letter itself lacked essential details, rendering it legally unsound. He further presented a repair estimate of Rs. 8,31,102.85/-, significantly exceeding the insured declared value (IDV), indicating a total loss of the vehicle.


 

 

The District Consumer Disputes Redressal Forum initially ruled in favor of the complainant, directing the insurance company to pay the remaining balance of the insured amount, Rs. 2,43,800/-, along with interest and costs. However, the State Consumer Disputes Redressal Commission overturned this decision, siding with the insurance company's argument that the signed consent letter constituted a full and final settlement.

The NCDRC, upon hearing the revision petition, critically examined the circumstances surrounding the consent letter and the insurance company's settlement process. The Commission highlighted the Insurance Regulatory Development Authority of India (IRDA) Circular No. IRDA/L/CIR/Misc/173/09/2015, which explicitly states that a discharge voucher does not preclude a policyholder from seeking higher compensation in judicial forums. This circular effectively nullifies the insurance company's argument that the signed consent letter absolved them of further liability.

Furthermore, the NCDRC found that the insurance company failed to provide a transparent and justifiable basis for arriving at the settlement amount of Rs. 2,00,000/-. Given the uncontested repair estimate exceeding the IDV, the Commission concluded that the complainant's vehicle suffered a total loss, entitling him to the full insured value.

The NCDRC, therefore, allowed the revision petition, setting aside the State Commission's order and reinstating the District Forum's ruling. The insurance company was directed to pay the remaining balance of Rs. 2,43,800/- with 8% interest from the date of filing the complaint, along with Rs. 5,000/- as litigation costs, within six weeks.

This ruling underscores the importance of the IRDA guidelines in protecting consumer rights and clarifies that discharge vouchers should not be used as a means of estoppel against policyholders seeking fair compensation. It also highlights the need for insurance companies to maintain transparency and provide clear justifications for their settlement amounts.


Section 21, Consumer Protection Act - 1986  

Consumer Protection Act, 1986