Vague and Unclear Terms and Conditions of an Insurance Policy

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  • 7/31/2019 Vague and Unclear Terms and Conditions of an Insurance Policy

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    Vague and Unclear Terms and Conditions of an Insurance Policy-: An Instrument For

    Insurance Company

    It has often been found that at the time of claim of insurance made by the insured, theinsurance company manipulates that your claim is in violation of the insurance policy or

    your claim is not maintainable as it comes within the purview of Exclusion clause of the

    policy. The insurance companies always try to make an effort to repudiate the claim onvarious grounds. The one and most significant and popular ground is of ambiguous and

    vague terms and conditions of the insurance policy.

    On the same apex Court has given several decisions held that in case the terms and

    conditions of an insurance policy is vague, it would be the duty and liability of the insurerto make it clear that the claim filed before it falls within the purview of the exclusion

    clause of the policy. Means if any kind of ambiguity is found in the terms and conditions of

    an insurance policy, the same shall be understood for the benefit of insured and the contractof insurance shall be construed in favor of the insured.

    In the matter ofLife Insurance Corporation of India vs. Ram Singh Tanwar, 2007 CTJ (CP)(NCDRC) the apex court has held that in the matter of repudiation of a policy by insurance

    company, the approach followed by the company should be based on extreme care andcaution. It must not look like in a routine way.

    In the above said matter the complainant took an endowment insurance policy with profit

    from Life Insurance Company. The complainant was an illiterate person and was a driver.

    When the complainant was driving the truck from Pali to Jaipur, an accident took place andthe complainant got an injury in his right leg. The amputations and surgical operation was

    required for the complainant for his survival. Complainant moved an application before the

    LIC for the same. The insurance Company refused the claim of complainant on the only

    ground that the surgical operation of one leg is not sufficient to pay the sum assured.

    Complainant made a complaint before the District Forum and got an order in his favourstating that the LIC is liable to pay the insured sum of Rs. 25,000/-. Against this order the

    LIC went before the State Consumer Dispute Redressal Commission. The State

    Commission affirmed the decision passed by the District Forum and made a reference to

    the decision of the Supreme Court in United India Insurance Company Ltd. vs Puspalayaprinters 2004 (3) SCC 649 that if there is an ambiguity, or a term is capable of two possible

    interpretations, the one beneficial to the insured should be accepted consistent with the

    purpose for which the policy is taken, namely to cover the risk on the happening of certainevent.

    Aggrieved by the judgment passed by the State Commission; the LIC moved a revision

    petition before the National Consumer Dispute Redressal Commission.

    The issues considered by the NCDRC:

    1. Whether the LIC is liable for deficiency in services under the Consumer Protection Act,

    1986.

    2. Whether the order passed by the State Commission in favour of complainant isjustifiable or against the principle of natural Justice.

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