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Synopsis

The Madras High Court recently observed that in cases of ambiguity regarding the terms of policies such as Pradhan Mantri Jeevan Jyoti Bima Yojana, the provisions of the policy must be interpreted so as to benefit the policyholder.

A widow of a member of the Life Insurance Corporation Limited Pradhan Mantri Jeevan Jyoti Bima Yojana (LIC PMJJBY) scheme moved the high court challenging the award passed by the Office of the Insurance Ombudsman, State of Tamil Nadu & Puducherry in 2020. The widow alleged the Ombudsman's order was illegal. 

The petitioner sought direction to the officials of the Life Insurance Corporation of India to pay the death benefits claim to the Nominee as per death benefit clause of the scheme. 

The petitioner's husband Murugan had a Savings Bank account with City Union Bank. Murugan passed away on 01.06.2018. He had enrolled himself in the said policy on 01.06.2015 and the policy annual renewal date was on 31.05.2018. On this date, there was no deduction from his Savings Bank account and payment of the premium amount.

Subsequently, the petitioner applied for payment under the death benefit clause. To this, the Senior Divisional Manager, Life Insurance Corporation of India, Divisional Office informed the Bank that since the premium of Rs. 330 was not deducted due to insufficient funds in Murugan's account, the claim could not be admitted or honoured.

Assailing the stand taken by the LIC officer, the petitioner filed an appeal before the Insurance ombudsmen. The ombudsmen rejected the petitioner's complaint on the ground that the Scheme does not provide for any “grace period” for payment of premium by the members of the Scheme, as claimed by the complainant (the petitioner). The ombudsmen held the benefit of grace period could not be invoked by the petitioner as it was available only to the designated branch office of the master policy holder for payment of premium. Therefore, he held that the assurance stood terminated on the annual renewal date, viz. 01/06/18, due to non-payment of premium.

Challenging the award of the insurance ombudsman, the petitioner moved the high court. 

The bench of Justice GR Swaminathan referred to Rules 6, 8, and 15 of the Pradhan Mantri Jeevan Jyoti Bima Yojana defining 'premium', benefits on death prior to terminal date', 'grace period' respectively and opined that all were to be read together. 

Court observed that there was no fresh policy each year rather a policy issued in favour of the petitioner's husband in the year 2015 was being renewed every year for which renewal premium had to be paid on or before 31st of May every year.

If such payment could not be made, grace period of 30 days is given, court pointed out. 

Court referred to Clause 1A-m of the Insurance Regulatory and Development Authority (Linked Insurance Products) Regulations, 2013 issued by IRDA and held that it provided that till the expiry of the grace period, the policy must be considered to be in force with the risk cover without any interruption as per the terms of the policy.

"Therefore, the policy issued in favour of the petitioner's husband must be deemed to have been in force for a period of 30 days from 31.05.2018. Since before expiry of the said period, Murugan had passed away, the claimant is entitled to the benefit available under the policy," court held. 

Court asserted that the respondents had proceeded on the erroneous premise that the benefit of grace period was only for the designated branch of the master policy holder. 

Therefore, court set aside the impugned award and directed the LIC respondent to pay the policy amount to the petitioner. 

Case Title: M.Chellammal v. Office of the Insurance Ombudsman, State of Tamil Nadu & Puducherry and Another