The discharge voucher is not a bar in filing a complaint before the Consumer fora. The mere execution of the discharge voucher would not always deprive the consumer from preferring claim with respect to the deficiency in service or consequential benefits arising out of the amount paid in default of the service rendered. Despite execution of the discharge voucher, the consumer may be in position to satisfy the Tribunal or the Commission that such discharge voucher or receipt had been obtained under the circumstances which can be termed as fraudulent or exercise of undue influence or by mis-representation. If in a given case the consumer satisfies the authority under the Act that the discharge voucher was obtained by fraud, mis-representation, under influence or the like, coercive bargaining compelled by circumstances, the authority before whom the complaint is made would be justified in granting appropriate relief. However, where such discharge voucher is proved to have been obtained under any of the suspicious circumstances noted hereinabove, the Tribunal or the Commission would be justified in granting the appropriate relief under the circumstances of each case. The mere execution of the discharge voucher and acceptance of the insurance claim would not estopple insured from making further claim from the insurer but only under the circumstances as noticed earlier. The Consumer Disputes Redressal Forums and Commissions constituted under the Consumer Protection Act, 1986 shall also have the power to fasten liability against the Insurance Companies notwithstanding the insurance of the discharge voucher. Such a claim cannot be termed to be fastening the liability against the Insurance Companies over and above the liabilities payable under the contract of insurance envisaged in the policy of insurance. The claim preferred regarding the deficiency of service shall be deemed to be based upon the insurance policy being covered by the provisions of Section 14 of the Act.
If the complainant signed the discharge voucher, the burden lies on the complainant to prove that he only signed discharge voucher in blank form and never consented to give his consent for settlement. It is well settled that an offer may be accepted by conduct. But conduct would only amount to acceptance if it is clear that the offeree did the act with the intention (actual or apparent) of accepting the offer. Each case must rest on its own facts. The Courts must examine the evidence to find out whether in the facts and circumstances of the case the conduct of the ‘offeree’ was such as amounted to an unequivocal acceptance of the offer made. If the fact of the case discloses that there was no reservation in signifying acceptance by conduct, it must follow that the offer has been accepted by the conduct. On the other hand, if the evidence discloses that the ‘offeree’ had reservation in accepting the offer, his conduct may not amount to acceptance of the offer in terms of section 8 of the Contract Act. The conclusion is that a claim cannot be rejected for breach of a policy condition unless such breach is the cause of the loss. When there is no nexus between the breach and the loss, the claim has to be settled on a non-standard basis. The purpose of insurance is defeated if the insured’s undisputed claim is not settled in order to pressurise him. Insurance companies must be fair and not resort to coercive tactics. Section 8 of the Contract Act provides for acceptance by performing conditions of a proposal. What, however is significant is that the protest and non- acceptance must be conveyed before the cheques are encashed. If the cheques are encashed without protest, then it must be held that the offer stood be unequivocally accepted. An “offeree” cannot be permitted to change his mind after the unequivocal acceptance of the offer.
COERCION AND UNDUE INFLUENCE:
The Delhi High Court directed all insurance companies not to insist on discharge vouchers for releasing admitted claims, saying it amounts to coercion, undue influence, deficiency in service and unfair trade practice. All the insurance companies should not any longer insist on discharge vouchers for releasing the admitted claim amounts in view of a September 2015 circular of Insurance Regulatory and Development Authority (IRDA). The insistence of the insurance company to sign a discharge voucher of full and final settlement before release of admitted claim amounts to coercion and undue influence as defined in Contract Act and such contracts are voidable. The withholding of the admitted amount by the insurance companies unless complete discharge is given, amounts to deficiency in service within the Consumer Protection Act, 1986 as the insurance companies are not expected to withhold the admitted claim amount till the insured gives receipt of full and final settlement. Despite well settled position of law, insurance companies are indulging in unfair trade practices. There is no clause in the insurance policy that the amount assessed by the insurance company shall not be paid unless complete discharge is given. No law permits the insurance company to withhold the payment of the admitted amount unless the receipt of full and final settlement is issued by the insured. In view of IRDA circular “the pending and future claims will no longer consume the court time for deciding this issue and to this extent, the court’s time will be saved and the claims on this account shall not be delayed or denied.”
The court directed IRDA to ensure that the insurance companies do not indulge in unfair trade practice anymore and asked the authority to convene a meeting of all the insurance companies to record their undertaking to abide by the circular. The court’s direction came on a plea by Worldfa Exports Pvt Ltd, which had raised a claim of Rs 12,69,51,063 for loss caused due to a fire in October 2012 in its factory insured by United India Insurance (UII) Co. Ltd. The high court further said that there was no effective regulatory regime to keep a check on insurance companies and to ensure that the rights of the insured are not jeopardised during the process of claim assessment. Resultantly, insurance companies have developed an unfair trade practice of insisting on discharge voucher/ no claim certificate as a pre-condition of payment of the assessed amount to the insured. The necessary safeguards, which are prevalent in other foreign jurisdictions with regard to the enforcement of strict time lines, payment of amount within a prescribed time period, payment of interim amount, are in fact, practically non-existent. In developed countries, there are strict provisions and safeguards to protect the right of the insured and to ensure transparency in the manner of processing claims due under insurance policy. There are strict time lines which are binding on the insurance companies, the process for assessment of claims is subject to strict regulatory provisions which are designed to protect the insured against harassment, unreasonableness and arbitrariness. No insurance company is allowed to avoid payment of the legitimate amount due to the insured and take shelter behind a so-called discharge voucher.
FULL AND FINAL SETTLEMENT:
A Discharge Voucher gives the reimbursing party a full and final discharge of the claimant’s claim A Discharge Voucher is issued after the matter is finalised/parties have agreed on the terms of settlement. The Discharge Voucher will reflect the final quantum settled, and it would be suitably worded to give the reimbursing party a full and final discharge of the claimant’s claim. In other words, a suitably worded Discharge Voucher would have the effect of barring /preventing the same claimant to return at a later date to claim on the same matter. General Insurance companies always insist on a receipt from the insured. This gives them full and final discharge to coerce an insured into unconditionally accepting whatever is offered to him. Is such a receipt legally binding? Or, can it be disputed under certain circumstances? This issue was dealt with by the supreme court in the case of National Insurance Co Ltd v/s Boghara Polyfab Pvt Ltd in civil appeal no. 5733, decided on September 18, 2008 [2009 (1) SCC 267].
Boghara Polyfab, the insured, had a standard fire and special perils policy issued by National Insurance. It was a floater policy for a sum insured of Rs 6 crore, which was temporarily enhanced to Rs 12 later, for a period of 69 days. It also covered goods in the insured’s godowns at Surat. When the incident occurred, the value of goods in the godown stood at Rs 8.15 crore. Of this, those worth Rs 5.22 crore were damaged due to floods, for which the insured lodged a claim. The surveyor computed the loss on the basis of the sum insured of Rs 12 crore, which adequately covered the goods, and assessed the claim at Rs 3.18 crore after deducting the value of the salvage. The insurance company contended that at the time of the incident, coverage was only to the extent of Rs 6 crore, less than the value of the goods stored, so there was under-insurance. Hence, the claim amount was proportionately reduced to Rs 2.34 crore. The insured protested. The insurance company refused to release the sanctioned amount unless the insured executed a discharge voucher in the prescribed form, accepting the offered amount of Rs 2.34 crore as full and final settlement.
As the claim was pending since long, the insured was compelled to sign an undated discharge voucher. After the cheque for the claim was released, the insured complained to the Insurance Regulatory Development Authority (IRDA). Since no action was taken, the insured requested for arbitration, to which the insurance company did not agree. The insured filed an arbitration petition in the Bombay High Court, which appointed a arbitrator to decide the dispute. This order was challenged by the insurance company before the Supreme Court, claiming that no proceedings were maintainable in view of the insured having signed the discharge voucher. The apex court observed that a mere execution of the discharge voucher would not always deprive the consumer of preferring a claim regarding deficiency in service. If a consumer can satisfy the consumer forum or tribunal that the voucher or receipt was obtained by fraud, undue influence, misrepresentation or coercive bargaining compelled by circumstances, the authority before whom the complaint is made would be justified in granting appropriate relief. The Supreme Court expressed concerns about the routine insistence of the insurance companies on obtaining undated “full and final settlement” vouchers, acknowledging the receipt of an amount which was lesser than the claim, as a condition precedent for releasing even the admitted dues. It held that the procedure was unfair, irregular and illegal and required deprecation. The court also observed that when the discharge voucher was signed, stating the claim had been received as full and final settlement, absolving the insurance company from further liability, the amount had actually not been paid, and hence the discharge voucher appeared to be false and not supported by consideration. Accordingly, the court held the dispute would have to be adjudicated and the parties would have to establish whether the discharge voucher was valid or void.
EXECUTION OF DISCHARGE VOUCHER:
At the time of settling claims, policyholders have to sign the voucher. In many cases, insurance companies refuse to pay a claim if policyholders do not sign the voucher. So, often policyholders sign thinking that they can get at least some money. Due to this policyholders used to find it difficult to go to court once they signed the voucher. But now following IRDAI’s clarification, they can pursue the case if they are not happy with the claim amount. A discharge voucher or settlement intimation voucher is a signed form the insurer takes from the insured. Such a voucher is taken at the time of claim settlement. The form states the amount that will be payable to the customer and he/she has to acknowledge the amount by signing the form. If this form is not taken by the insurer, though the claim would be paid, it would remain open in the books of the insurer. If customers feel something is wrong or if they are not satisfied with the claim amount, they can raise a complaint even if they have signed the voucher. In most cases, once customers sign the discharge voucher, they don’t come back for additional claims. But that has to be done within three years of settling the claim. After three years, the policyholder cannot ask for additional claims.
Imagine this: your car was involved in an accident and you claimed Rs 1 lakh as total loss under your motor insurance. More often than not, the insurance company would say that you are eligible for only Rs 75,000 due to some deductibles. Instead of wasting time over arguing over the amount, you decide to accept Rs 75,000 and sign the ‘discharge voucher’ or ‘settlement intimation voucher’ hoping to lodge a complaint later or go to court, if required. However, when the matter reaches court, the insurance company says that since you have signed the voucher, the claim has been settled in full and you have agreed to it, thereby giving up your right to contest the claim. All this has changed now. Recently, the Insurance Regulatory Authority of India (IRDAI) has said that the execution of such vouchers does not foreclose the rights of policy holder to seek higher compensation before any judicial fora or any other fora established by law. While technically, vouchers have to be issued in all kinds of policies, usually complaints arise more in fire and motor policies, especially in third party claims, because there is scope for negotiation in such cases. It is a good move to protect policyholders.
DISPUTING CLAIM AMOUNT:
A contract of insurance requires both the parties to maintain utmost good faith. Once a policy is issued, the terms and conditions cannot be varied, unless such variation is expressly consented to by the insured. If the terms are unilaterally changed, would the claim have to be settled in accordance with the original terms of the policy or would it be on the basis of the revised terms? Some Insurance companies mislead consumers, saying a mediclaim policy is a year to year contract, so the terms can be varied at the time of each renewal; you either take it or leave it. This is not legally permissible. A consumer has the right to insist the renewal be on the original terms and conditions and nothing detrimental to his interest can be unilaterally incorporated by the company. In a recent ruling, the South Mumbai Consumer Forum has held that unilaterally changed terms could be disputed by the insured and the claim would have to be settled on the basis of the original policy conditions.
Soli Ardeshir Modi, who is over 80 years old, had a Mediclaim policy issued by New India Assurance. The policy had been in existence for several years and was renewed without break. He was insured for Rs 1 lakh and had accumulated a cumulative bonus of Rs 50,000, taking the total coverage to Rs 1.5 lakh. In March 2012 he was operated for inguinal hernia at Breach Candy Hospital, for which the total expenses came to Rs 1,83,219. He lodged a claim through M D India Healthcare Service (TPA). Though the available coverage was Rs 1.5 lakh, the insurance company sanctioned only Rs 62,814, stating the claim was computed according to the revised policy conditions. The president of the Forum, in an order dated August 28, 2014, noted that the original policy was called “Mediclaim Insurance Policy (01/09/1996)” and the renewed policy was termed “Mediclaim Policy (2007)”. It contained revised terms and conditions which had been incorporated without Modi’s consent. Under the revised policy, sub-limits were imposed for room charges and other medical expenses, which did not exist earlier.
The Forum noted that the judgement of the Supreme Court in the case of Biman Krishna Bose v/s United India Insurance Co Ltd [(III) 2001 CPJ 10 (SC)], where it had been laid down that a renewal of a policy merely extends the policy period on identical terms and conditions as embodied in the original one. The Forum accordingly held that a revision in the policy conditions was not permissible and directed the insurance company to renew it on the same terms and conditions incorporated in the original policy. The Forum also directed the insurance company to pay the remaining amount of Rs 87,186, along with nine per cent interest from May 11, 2012 till payment. Additionally, compensation of Rs 8,000 and costs of Rs 3,000 were awarded to Modi.
DULY SIGNED RECEIPT IS NOT SURRENDER OF RIGHTS:
National Consumer Disputes Redressal Commission in M/s Bhukker Electricals versus The Oriental Insurance Company decided on 3rd July, 2012 observed that petitioner was the complainant before the District Forum with the allegation of deficiency in service against the respondent/opposite party – OP, in that the latter had settled the insurance claim of the complainant/petitioner at Rs.1,58,000/- though its claim for indemnification of the loss of its insured goods damaged in a fire that occurred in the night of 20.10.2006 was for a much higher amount. The complainant prayed for award of Rs.6 lakh, including Rs.4 lakh towards the insurance claim. The complaint was opposed by the insurance company mainly on the ground that the duly appointed surveyor had assessed the loss at Rs.1,93,000/- and after deducting the value of salvage (Rs.35,000/-), the net payable amount came to Rs.1,53,000/-. The insured accepted the payment of Rs.1,58,000/- “in full and final settlement” under a signed Discharge Receipt. He was, therefore, not entitled to any higher amount, much less claim compensation for the alleged deficiency in service on the part of the respondent/OP.
The main ground on which the District Forum partly allowed the complaint was that the surveyor had failed to give convincing reasons to disbelieve the value of stocks reflected by the stock statement which was Rs.3,74,929/- and which, in the opinion of the District Forum, was duly supported by purchase bills. Accordingly, the District Forum passed the order as excerpted above. In appeal, before the State Commission, the OP/respondent insurance company primarily argued that the complainant/insured was not entitled to any claim higher than Rs.1,58,000/- for which he had issued a signed Discharge Receipt in full and final settlement. The insurance company further pointed out that after receiving this amount, the insured did not protest nor did it file any complaint before the Insurance Ombudsman. After due consideration, the State Commission allowed the appeal relying on the ratio of the Supreme Court’s decision in the case of United India Insurance v Ajmer Singh Cotton and General Mills and Others and United India Insurance Co. Ltd. v ASA Singh Cotton Factory and Others [(1999) 6 SCC 400].
A photocopy of the Discharge Receipt signed by the proprietor of the firm, according to which he accepted Rs.1,58,000/- as full and final settlement of his insurance claim has been produced before us. Learned counsel for the petitioner has not been able to show that the petitioner produced any document before the District Forum (or, the State Commission) to demonstrate that he had, soon after signing the Discharge Receipt, protested against the amount of settlement or alleged that he was coerced into signing the said Discharge Receipt. The only statement in the revision petition, totally unsupported by any documents produced before the District Forum, is that the respondent insurance company had played a “game of calculated fraud, misrepresentation and under coercion made the petitioner to receive the cheque of Rs.1,58,000/- without settling the entire claim of the petitioner and the said amount was received by the petitioner under protest and without prejudice and only as part claim amount”. Learned counsel has also not been able to show us the petitioner’s version, if any, filed before the State Commission in response to the appeal filed by the respondent insurance company.
VIEIWS OF APEX COURT ON DISCHARGE VOUCHER:
The law settled by the Supreme Court in the above-mentioned cases is summarised in following of the Court’s decision which are reproduced below:
We have heard learned counsel for the parties and perused the record. It is true that the award of interest is not specifically authorised under the Consumer Protection Act, 1986 but in view of our judgment in Sovintorg (India) Ltd. vs. State Bank of India we are of the opinion that in appropriate cases the forum and the commissions under the Act are authorised to grant reasonable interest under the facts and circumstances of each case. The mere execution of the discharge voucher would not always deprive the consumer from preferring claim with respect to the deficiency in service or consequential benefits arising out of the amount paid in default of the service rendered. Despite execution of the discharge voucher, the consumer may be in a position to satisfy the Tribunal or the Commission under the Act that such discharge voucher or receipt had been obtained from him under the circumstances which can be termed as fraudulent or exercise of undue influence or by mis-representation or the like. If the consumer satisfies the authority under the Act that the discharge voucher was obtained by fraud, mis-representation, under influence or the like, coercive bargaining compelled by circumstances, the authority before whom the complaint is made would be justified in granting appropriate relief. The claim preferred regarding the deficiency of service shall be deemed to be based upon the insurance policy, being covered by the provisions of Section 14 of the Act. In the instant cases the discharge vouchers were admittedly executed voluntarily and the complainants had not alleged their execution under fraud, undue influence, mis-representation or the like. In the absence of pleadings and evidence the State Commission was justified in dismissing their complaints. The National Commission however granted relief solely on the ground of delay in the settlement of claim under the policies. The mere delay of a couple of months would not have authorised the National Commission to grant relief particularly when the insurer had not complained of such a delay at the time of acceptance of the insurance amount under the policy. As a result, we find no reason to interfere with the impugned order and dismiss the revision petition in limine.
At the time of settling claims, the policyholder has to sign the voucher. In many cases insurance companies refuse to pay any claim if the policyholder did not sign the voucher. So, often the policyholder would sign thinking that he can get at least some money. A distressed insured person, who has lost all means of earning his livelihood, has no other choice but to accept any amount as an initial payment in the first instance. Despite execution of the discharge voucher, the consumer may be in a position to satisfy the Tribunal or the Commission under the Act that such discharge voucher or receipt had been obtained from him under the circumstances which can be termed as fraudulent or exercise of undue influence or by mis-representation or the like. If the consumer satisfies the authority under the Act that the discharge voucher was obtained by fraud, mis-representation, under influence or the like, coercive bargaining compelled by circumstances, the authority before whom the complaint is made would be justified in granting appropriate relief. When there is a dispute between a consumer and a financial institution, it becomes difficult to quantify the loss, since interest, delayed payment charges and penalties keep changing. And, there is a considerable time lag between the date of the dispute and the decision on the complaint. In such a case, the only remedy is to correct the disputed entry and make the consequential changes. The customer has to sign the voucher in order to get the claim amount, as part of the claim process. But if someone feels something is wrong, he can raise a complaint even if he signs the voucher.
About the Author
JAGENDRA KUMAR
Ex. CEO, Pearl Insurance Brokers
71/143, “Ramashram” Paramhans Marg,
Mansarovar, JAIPUR-302020
References:
- https://www.irda.gov.in
- http://economictimes.indiatimes.com/opinion/interviews/industry
- IRDA Annual Report 2014-15
- http://www.policyholder.gov.in/warnings_and_penalties.aspx
- http://www.business-standard.com/article/finance/open-architecture
- http://www.business-standard.com/article/finance/organised-crime-touches-new-high-in-insurance
- Newspapers & Journals
