Know Your Rights: Insurance Companies Can’t Change Policy Coverage Without Your Consent [Court Order]
In a recent ruling by the National Consumer Disputes Redressal Commission, led by Justice Ram Surat Maurya and Mr. Bharatkumar Pandya, it was confirmed that insurance companies cannot alter policy coverage during renewal without the policyholder’s agreement. This ruling highlights an important protection for consumers when dealing with insurance claims.
The Case Overview
Here’s a breakdown of what happened in this particular case:
- The Business: Aaditya International, a partnership firm specializing in fabric dyeing and printing, had two insurance policies with New India Assurance. One policy covered their stock and fixtures, and the other covered their plant, machinery, and goods.
- The Incident: A fire caused by an electrical short circuit devastated their premises, destroying machinery, stock, and items held in trust. Aaditya International claimed Rs. 75,61,748 for the damages.
- The Claim Settlement: New India Assurance paid only Rs. 16,59,635 for the plant and machinery, leaving Rs. 15,21,825 unpaid. Additionally, they refused to cover the stock held in trust, which led to a loss of Rs. 41,12,113.
- Initial Resolution: Aaditya International tried to resolve the issue directly with the insurer but was unsuccessful. They then took the matter to the State Commission of Haryana. Unfortunately, the State Commission ruled in favor of the insurer, finding no fault in their service. Unsatisfied, Aaditya International appealed to the National Commission.
Insurer’s Argument
New India Assurance argued that the renewed policy did not cover stock held in trust, which was why they did not include these losses in their payment. They claimed to have settled the remaining amount as per the policy terms and sought dismissal of the complaint, stating there was no service deficiency.
The National Commission’s Ruling
The National Commission carefully reviewed the case, focusing on whether the policyholder was entitled to compensation for the loss of stock held in trust. Aaditya International argued that the renewed policy should have continued to cover this stock, as it was included in the previous policy.
The insurer countered that the policy terms could not be altered by the court. However, the National Commission emphasized that insurance companies cannot unilaterally change the terms of a policy at renewal without the policyholder’s consent. This principle is well-established, as confirmed by the Supreme Court in previous cases.
As a result, the National Commission overturned the State Commission’s decision. They ordered New India Assurance to pay Rs. 30,93,021, as assessed by the surveyor, with interest at 9% from the date the claim was approved.
Key Takeaways for Policyholders
This ruling underscores a crucial right for insurance policyholders:
- Consent Required for Changes: Insurers must obtain your consent before changing policy terms during renewal.
- Know Your Policy: Always review the renewal terms carefully to ensure that coverage remains as expected.
If you find yourself in a situation where an insurer has altered your policy without your consent, this ruling provides a clear precedent to challenge such changes and seek fair compensation.
