Holding

The insurer’s non‑disclosure of the limitation clause at renewal was a deficiency in service, and the District Forum’s order directing payment of the balance claim was restored.

Summary

The appellants held an annual medical insurance policy with United India Insurance that was renewed each year. For the 2008‑09 renewal the insurer introduced a cap on coverage for certain procedures, notably angioplasty, without informing the policyholders, who believed they were merely renewing the existing policy on the same terms. After the insurer paid only a partial claim, the District Consumer Forum held that the insurer had committed a deficiency in service and ordered payment of the balance. The State Commission and the National Consumer Disputes Redressal Commission reversed that order, treating the renewal as a fresh contract with the new terms. The Supreme Court held that the insurer had a duty, under the principle of uberrima fides and the Consumer Protection Act, to disclose material changes at renewal; its failure amounted to a deficiency in service. Consequently, the Court set aside the orders of the State Commission and NCDRC, restored the District Forum’s order, and directed the insurer to pay the balance amount plus costs.

Issues considered

The nature of a renewal of an insurance policy – whether it creates a new contract with altered terms or continues the original contract.
Whether the insurer’s failure to disclose a newly introduced limitation clause at renewal constitutes a deficiency in service under Consumer Protection Act, 1986 s.2(g).
Whether unilateral mistake or non‑disclosure of material terms can render the renewed contract void or avoidable.
The extent of the insurer’s duty of utmost good faith (uberrima fides) and the applicability of unfair contract term principles.
The liability of the insurer for the acts or omissions of its agents in the renewal process.

Legislation cited

Subjects

insurance renewalnon‑disclosuredeficiency of serviceconsumer protectionuberrima fidesunfair contract termsstandard form contractsenior citizensclaim settlementunilateral mistake

Judgment

[2021] 9 S.C.R. 787 787

JACOB PUNNEN & ANR. A
v.
UNITED INDIA INSURANCE CO. LTD.
(Civil Appeal No. 6778 of 2013)
DECEMBER 09, 2021 B
[ K. M. JOSEPH AND S. RAVINDRA BHAT , JJ.]
Consumer Protection Act, 1986 – s.2(g) – Insurance policy –
Renewal of – Limitations imposed on Insurer’s liability – Non-
disclosure by Insurer – Deficiency in service – Appellants had an
C
annual medical insurance policy with the respondent-insurer – Policy
was renewed successively by paying appropriate premium — Policy
containing fresh terms was issued after receipt of the premium for
the year 2008-09 – Introduction of the cap on the coverage by the
insurer on certain types of surgical procedures – Second appellant
underwent angioplasty in June 2008 – Appellants submitted claim D
to the insurer who accepted the claim but, paid the partial amount –
District Forum allowed the appellants’ complaint – Findings upset
by State Commission – Order upheld by NCDRC – On appeal, held:
Per S. Ravindra Bhat, J. Appellants were kept in the dark and asked
to renew a policy, the terms of which had undergone a significant
E
change as its cover was radically different and imposed limitations
on the insurer’s liability – Appellants were not informed that they
had paid premium for a new policy, but were led to believe that they
had in fact renewed a pre-existing policy on the same terms, with
only difference being the removal of their son as a beneficiary and
a higher coverage – Insurer was under a duty to inform the appellant F
about the limitations which it was imposing in the renewed policy —
Failure to inform the policy holders resulted in deficiency of service
– Per K.M. Joseph, J. (Supplementing) There was unjustifiable non-
disclosure by the Insurer about the introduction of limitation clause
which constituted a deficiency in service – Orders of NCDRC and
G
State Commission set aside and that of the District Forum restored –
Contract Act, 1872 – s.22 – Principle of uberrima fides – Constitution
of India – Part IV – Arts.38, 39, 42, 47 – Insurance Regulatory and
Development Authority, 1999 – Insurance Act, 1938 – IRDA (Health
Insurance) Regulations, 2016 – Chapter III – Regulations 11, 13 -
H
787
788 SUPREME COURT REPORTS [2021] 9 S.C.R.

A Universal Declaration of Human Rights 1948 – Article 25 –
International Covenant on Economic, Social and Cultural Rights,
1976.
Insurance – Renewed contract – Held: A renewed contract
of insurance may provide terms which are different from the terms
B of the original contract of insurance – If the renewed contract is
agreed in all respects by both parties, the fresh terms (with
restrictions) would be binding.
Insurance – Renewal of existing policy – Duty of insurers –
Discussed.
C Consumer Protection Act, 1986 – s.2(g) – Deficiency in service
– Held: In order to demonstrate deficiency, it is not necessary that
the same emanates only from a law or a contract – The term “or
otherwise” in s.2(g) clearly provides for circumstances where a
certain level of service is expected from a provider.
D Doctrines/Principles – Insurance – Principle of uberrima
fides – Applicability of – Discussed.
Insurance – Standard Form Contracts – Unfair contractual
terms – Refusal for enforcement of – Power of Courts – Discussed.
Insurance – Role of insurance agents – Failure to discharge
E
the duties – Vicarious liability of the insurer – Discussed.
Words & Expressions – Contracts d’ adhesion – Held: Most
policies- health and medical insurance policies being no exception,
are in standard form – One who seeks coverage of a life policy/a
personal risk, such as accident or health policy has little choice
F
but to accept the offer of certain standard term contracts termed as
contracts d’ adhesion, a French legal term.
Allowing the appeal, the Court
HELD: Per S. RAVINDRA BHAT, J.
G 1.1 Renewal: The insurer insisted that the 2008-09 ‘Gold’
policy was in fact a ‘new’ one, and not a renewal, which was
available with the appellants, before the second appellant’s
surgery took place. There can be said to be no consensus ad
idem on the introduction of the cap on the coverage by the insurer,
H as the appellants were not informed that they had paid premium
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE 789
CO. LTD.

for a new policy, but were led to believe that they had in fact A
renewed a pre-existing policy on the same terms, with only
difference being the removal of their son as a beneficiary and a
higher coverage (from Rupees 6 lakhs to Rupees 8 lakhs in total)
for the appellants, which was accepted by the insurer. The general
rule of acceptance of an insurance proposal by the assured
B
involves unconditional acceptance of all the terms. Thus the cap
on the coverage placed by the insurer without prior intimation to
the assured and without providing an opportunity to the assured
to seek alternate insurance policies that were more favourable
to their needs was restrictive, and thus not enforceable.
[Paras 16, 18][802-B-C, F-H] C
LIC v. Raja Vasireddy Komalavalli Kamba, (1984) 2 SCC
719 : [1984] 3 SCR 350 – relied on.
Biman Krishna Bose v. United India Insurance Co. Ltd.
(2001) 6 SCC 477 : [2001] 1 Suppl. SCR 255 – referred
to. D

1.2 If the renewed contract is agreed, in all respects, by
both parties, undoubtedly the fresh terms (with restrictions) would
be binding. However, that would not be the case when a new
term is introduced unilaterally about which the policy holder is in
the dark. Further, the allusion to continuation of the terms of the E
Gold policy in respect of senior citizens (who were not to be
compelled to migrate to another policy) but were to be subject to
the same terms, upon payment of a different rate of premia,
reinforces the conclusion that there was in fact, a renewal of the
existing terms. If parties are not agreed on the terms, one of the F
likely results would be its avoidance. “Mistake” is not defined,
under the Contracts Act, 1872; however, Section 22 of the Act
enacts that a unilateral mistake of fact, does not result in its nullity.
The law in India is that unless the unilateral mistake about the
terms of a contract is so serious as to adversely undermine the
entire bargain, it does not result in automatic avoidance of a G
contract. Applied to the facts of this case, it is evident that the
appellants could insist on the old insurance policy, on the premise
that it renewed the pre-existing policy. The other conclusion

H
790 SUPREME COURT REPORTS [2021] 9 S.C.R.

A would be cold comfort to the party seeking insurance cover, as
the choice would be to avoid it altogether- too drastic as to
constitute a choice. The first point is answered accordingly,
in favour of the appellants. [Paras 19, 21, 22][803-A-C, E;
805-B-C]
B Canara Bank v. United India Insurance Co. Ltd (2020)
3 SCC 455 : 2020 (3 ) SCALE 228; Satwant Kaur
Sandhu v. New India Assurance Co. Ltd. (2009) 8 SCC
316 : [2009] 10 SCR 560; Tarsem Singh v. Sukhminder
Singh (1998) 3 SCC 471 : [1998] 1 SCR 456 – relied
on.
C
2.1 Duty of Insurers: A striking feature of insurance law, is
the principle of uberrima fide (duty of utmost good faith) which
applies to both the insured as well as one who seeks indemnity
and cover. The insurer was under a duty to disclose any alteration
in the terms of the contract of insurance, at the formation stage
D (or as in this case, at the stage of renewal), the respondent cannot
be heard to now say that the insured were under an obligation to
satisfy themselves, if a new term had been introduced. The insurer
had caused a renewal reminder, which was acted upon and the
renewal cheque, issued by the appellant. At that stage, or just
E before the renewal premium was furnished the insurer, or its agent
was under a duty to alert the appellants that the change in terms,
was likely to impact their decision, and if so required, offer a
better or fuller coverage. Most policies- health and medical
insurance policies being no exception, are in standard form. One
who seeks coverage of a life policy/a personal risk, such as
F accident or health policy has little choice but to accept the offer
of certain standard term contracts – which are termed as contracts
d’ adhesion, a French legal term. A term introduced in a standard
form contract can be unfair, as to constitute an unfair trade practice
under the Consumer Protection Act, 1986. Contracts of adhesion
G (as contracts d’ adhesion are also called) leave little or no choice
to the customer; in this case, the policy holders were left with no
room to bargain and negotiate. In the present case, the standard
form contract, renewed year after year, left the appellants only
with the choice of raising the insurance cover. For that reason,

H
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE 791
CO. LTD.

the “informational blackout”, on the part of the insurer, was a A
crucial omission. [Paras 24, 26, 28 and 29][805-E; 808-B-C,
D-E; 809-C; 810-B-C, D]
United India Insurance Co. Ltd. v. M.K.J. Corpn 1996
(6) SCC 428; [1996] 5 Suppl. SCR 20; Pioneer Urban
Land & Infrastructure Ltd v Govindan Raghavan 2019 B
(5) SCC 525; Modern Insulators Ltd.v Oriental
Insurance Co. Ltd 2000 (2) SCC 734: [2000 ] 1 SCR
1076 – relied on.
Sherdley v Nordea Life and Pension [2012] 2 All ER
(Comm) 725; SA [2012] EWCA Civ 88 - referred to. C
Law Commission’s Report- ‘Unfair (Procedural &
Substantive) Terms in Contract’ - referred to.
2.2 In the present case, even if, for arguments’ sake, one
was to accept the submissions of the insurer which is that their
agent should have informed the appellant policy holders, the D
absence of any evidence that he did or any evidence adduced by
the insurer that despite information the appellants chose to accept
the policy in the terms which they eventually were furnished, the
only consequence would be that as principal the insurer is liable.
Such a failure assumes importance even from the perspective of E
consumer protection law. The Consumer Protection Act, 1986
states the definition of ‘deficiency’ in service under Section 2(g)
as “[A]ny fault, imperfection, shortcoming or inadequacy in the
quality, nature and manner of performance which is required to be
maintained by or under any law for the time being in force or has
been undertaken to be performed by a person in pursuance of a F
contract or otherwise in relation to any service”. In order to
demonstrate deficiency, it is not necessary that the same emanates
only from a law or a contract. The term “or otherwise” clearly
provides for circumstances where a certain level of service is
expected from a provider. The principle of uberrima fides involves G
prior intimation of change in terms in insurance contracts. The
deficiency of service assumes even more significance in the
present case, as it pertains to senior citizens. The special status
of senior citizens in general was taken cognizance of by the insurer
as well, when it relied on guidelines (applicable for new insurance
H
792 SUPREME COURT REPORTS [2021] 9 S.C.R.

A products, with effect from 28.1.2017). The insurer’s argument
here was that no existing senior citizen policy holder could be
compelled to migrate to a new Scheme. However, in the present
case, the Mediclaim holders were kept in the dark, and asked to
renew a policy, the terms of which had undergone a significant
change in that its cover was radically different, and imposed
B
limitations on the insurer’s liability. The argument of the insurer
has no merit and is not acceptable. [Paras 33-35][812-E-H;
813-A-B, D-E]
Delhi Electric Supply Undertaking v. Basanti Devi
(1999) 8 SCC 229 : [1999] 3 Suppl. SCR 219; Life
C Insurance Corporation of India v Rajiv Kumar Bhaskar
2005 (6) SCC 188 : [2005] 1 Suppl. SCR 867 – relied
on.
2.3 The insurer was clearly under a duty to inform the
appellant policy holders about the limitations which it was
D imposing in the policy renewed for 2008-2009. Its failure to inform
the policy holders resulted in deficiency of service. The impugned
order of the NCDRC as well as the order of the State Commission
are set aside. The order of the District Forum is restored.
[Para 40][817-D-E]
E United India Insurance Co. Ltd. v. Manubhai
Dharmasinhbhai Gajera (2008) 10 SCC 404 : [2008]
9 SCR 778; Reliance Life Insurance Co. Ltd. vs
Rekhaben Nareshbhai Rathod 2019 (6) SCC 175 :
[2019] 6 SCR 733; Life Insurance Corporation of India
F vs Asha Goel 2001 (2) SCC 160 : [ 2000] 5 Suppl.
SCR 646; P.C. Chacko vs Chairman, Life Insurance
Corporation of India 2008 (1) SCC 321 : [2007] 12
SCR 352; Central Inland Water v Brojo Nath
Ganguly&Anr 1986 (3) SCC 156 : [1986] 2 SCR 278;
Life Insurance Corporation of India v Consumer
G Education and Research Centre & Ors 1995 (5) SCC
482 – referred to.
Per K.M. JOSEPH, J. (Supplementing)
1. A renewal of the contract would ordinarily, undoubtedly
involve the expectation of replication of the terms of the original
H
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE 793
CO. LTD.

contract and what is more, the actual continuation of the terms. A
However, the actual contract may provide otherwise. The terms
of the renewed contract of insurance may be located in the actual
contract of insurance. A renewed contract of insurance may
provide terms which are different from the terms of the original
contract of insurance. However, the claim under the Consumer
B
Protection Act, 1986 must be allowed on the ground that there
has been a deficiency on the part of the Insurer. The Insurer
brought about a change in the policy. This change introduced a
cumbersome limitation. It kept the Insured in the dark about the
limitation at the time when the renewal notice was issued, and
what is more, the premium was accepted. The Insurer had a duty C
to inform the appellants that a change regarding the limitation on
its liability was being introduced. There was unjustifiable non-
disclosure by the Insurer about the introduction of clause of
limitation and, in this case, it constituted a deficiency in service.
[Paras 5, 6][819-C-F; 820-A]
D
Biman Krishna Bose v. United India Insurance Co.Ltd.
(2001) 6 SCC 477: [2001] 1 Suppl. SCR 255 –
referred to.
Case Law Reference
In the judgment of S. RAVINDRA BHAT, J. E

[2001] 1 Suppl. SCR 255 explained Para 6
[2008] 9 SCR 778 referred to Para 6
[1984] 3 SCR 350 relied on Para 18
F
[2009] 10 SCR 560 relied on Para 21
[1998] 1 SCR 456 relied on Para 22
[1996] 5 Suppl. SCR 20 relied on Para 24
[2019] 6 SCR 733 referred to Para 24
G
[2000] 5 Suppl. SCR 646 referred to Para 24
[2007] 12 SCR 352 referred to Para 24
[2000 ] 1 SCR 1076 relied on Para 24
[1986] 2 SCR 278 referred to Para 28
H
794 SUPREME COURT REPORTS [2021] 9 S.C.R.

A [1999] 3 Suppl. SCR 219 relied on Para 32
[2005] 1 Suppl. SCR 867 relied on Para 33
In the judgment of K.M. JOSEPH, J.
[2001] 1 Suppl. SCR 255 explained Para 4
B CIVIL APPELLATE JURISDICTION : Civil Appeal No.6778
of 2013.
From the Judgment and Order dated 11.07.2012 of the National
Consumer Disputes Redressal Commission in Revision Petition No.2743
of 2011.
C
Ms. Arundhati Katju, Mrs. Priya Puri, Ms. Eysha Marysha, Yati
Sharma, Ranjay Dubey, Advs. for the Appellants.
Amit Kumar, Ms. Priyanka Das, Jawaharlal, Mukesh Chandra,
Binay Kumar Das, Mrs. K. Enatoli Sema, Ms. Chubalemla Chang, Advs.
for the Respondent.
D
The Judgments of the Court were delivered by
S. RAVINDRA BHAT, J.
1. The appellants challenge the order of the National Consumer
Disputes Redressal Commission (“the NCDRC”)1 which upheld the
E concurrent rejection of their application seeking relief.
2. The undisputed facts are that the appellants contracted with
the respondent (hereinafter referred to as “the insurer”), and secured a
medical insurance policy (hereinafter referred to as “Mediclaim”), for
the first time in 1982. The policy was annual and was renewed
F successively, each year by the appellants by paying the appropriate
premium - the last renewal policy forming the subject matter of the
present appeal. The policy renewed by the appellants on 28.03.2007
was in force for a year i.e., till 27.03.2008. Before the date of expiry of
the Mediclaim (on 27.03.2008), the insurer sent a reminder to the
G appellants to renew their policy, if they so wished, annually. The reminder
also intimated the appellants that the premium was ` 17,705/- and had to
be paid by 27.03.2008. The appellants paid the requisite amount by
cheque (issued on 26.03.2008) and in this regard the receipt was received
from the insurer on 30.03.2008. This receipt indicated that the insurance
1
H Order dated 11.07.2012 in Revision Petition No.2743 of 2011.
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE 795
CO. LTD. [S. RAVINDRA BHAT, J.]

policy period would be operative from 28.03.2008 to 27.03.2009. The A
monetary coverage of the policy was (` 8,00,000/- (` 4,25,000/- for the
first appellant and ` 3,75,000/- for the second appellant). The second
appellant had to undergo angioplasty in June (09.06.2008 to 12.06.2008)
at Chennai. The appellants submitted a claim for ` 3,82,705.27/- to the
insurer, as amounts due under the contract of insurance policy, towards
B
the expenses incurred by them. The insurer, however, accepted the claim
and paid the partial amount by releasing ` 2,00,000/- to them.
3. Feeling aggrieved, the appellants represented to the insurer,
repeatedly and unavailingly to the insurer to make good the balance
amount. Exhausted, the appellants filed a complaint before the District
Consumer Disputes Redressal Forum (hereafter “the District Forum”), C
Kottayam for a direction that the insurer ought to pay them ` 2,07,705/
- along with costs and interests on the compensation.
4. The insurer’s position before the District Forum was that the
terms and conditions of Mediclaim policy changed periodically. The policy
for the relevant year indicated that in respect of procedures (such as D
angioplasty), 70% of the policy limit could be claimed subject to an overall
limit of ` 2,00,000/- for any one surgery or procedure. The insurer also
argued that having been issued with the policy document which was
accepted by the appellants, the latter could not then complain that they
were any amounts over and above the terms agreed upon. E
5. The District Forum allowed the appellants’ complaint holding
firstly that an insurance contract evidences a commercial transaction,
and is to be construed like any other agreement, on its own terms subject
to fulfillment of the conditions of uberrima fides i.e., utmost good faith
by the parties and secondly that the insurer was under a duty to intimate F
to be insured with respect to change in terms before the renewal of the
policy. On the basis of these findings, the District Forum directed the
insurer to pay the appellants, `1,75,000/- as the balance amount and also
awarded ` 5,000/- as compensation. Aggrieved, the insurer approached
the State Consumer Redressal Commission which by its order upset the
findings of the Consumer Forum, holding that the terms of the policy G
were known to the appellants who were bound by it. In these
circumstances, the appellants approached the NCDRC with a revision
petition. The NCDRC upheld the insurer’s contention that the insurance
policy renewed by the appellants on 28.03.2008 was a fresh contract
entered into between the parties which reflected changes compared H
796 SUPREME COURT REPORTS [2021] 9 S.C.R.

A with the previous terms. These conditions – the NCDRC held – were
known to the appellants or were presumed to be known since they had
claimed under that policy and that it was not open to them to claim
ignorance of the terms under the fresh policy which had placed
percentage and monetary cap on certain types of surgical procedures.
B 6. It is argued by the counsel for the appellants Ms. Arundhati
Katju that the State Forum and the NCDRC fell into error in holding that
the appellants were aware and were deemed to have been aware of the
terms of the policy. It was emphasized that the appellants had not applied
and obtained a fresh policy but had rather renewed an existing policy –
as they did earlier from time to time annually. Placing reliance on Biman
C Krishna Bose v. United India Insurance Co. Ltd.2, and United India
Insurance Co. Ltd. v. Manubhai Dharmasinhbhai Gajera3, it was
argued that the renewal of an insurance policy would imply that the
existing terms would bind the parties. As a consequence, the insurer
being a party cannot impose unilateral changes, either at the point of
D time when the policy is renewed or during its currency.
7. Learned counsel compared the terms of the previous policy
(which had covered the period March 2007-March 2008) with the policy
in question (for the period March 2008 to March 2009) and submitted
that the overall limit of coverage was changed by the appellants as
E compared to the previous year. It was also stated that the previous policy
covered health risks of three individuals i.e., the appellants and their son
whereas the policy in question covered only the appellants. Counsel
submitted furthermore that the insurer had undeniably issued a notice
pursuant to which a policy was renewed on 26.03.2008. In the
circumstances, it was duty of the insurer to inform the insured of the
F likely change in coverage to enable them to explore an alternative i.e., to
opt for a policy that would cover all risks more comprehensively, even if
it were to cost them more. Counsel urged that in these circumstances,
the insurer was clearly guilty of deficiency of service in as much as the
insurer was in the dark about the nature of the limited coverage.
G 8. Learned counsel on behalf of the insurer Mr. Amit Kumar urged
this court to uphold the finding of the NCDRC submitting that there was
no deficiency in service by the respondents. It was submitted that the
appellants never disputed that in fact the policy was dispatched pursuant
2
(2001) 6 SCC 477.
3
H (2008) 10 SCC 404.
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE 797
CO. LTD. [S. RAVINDRA BHAT, J.]

to the renewal. A careful reading of the policy for the year 2008-2009 A
would have indicated that it differed radically from the policy from the
previous year because of a term indicating a monetary limit on the
reimbursable expenditure, by the insurer. In these circumstances, the
appellants could not place any blame upon the insurer.
9. It was submitted that the insurer was under no obligation to B
indicate or to intimidate to the appellants about the likely changes under
its policies. In other words, there was no duty in law which obliged the
insurer to intimate the policy holder – at the point of time of renewal that
the terms of the new policy would be different from those of the earlier,
lapsed/expired policy. It was submitted that the term “renewal” has no
special significance given that the contract of insurance i.e., policy in C
this case is the first annual one. Therefore, the policy for 2008-09 is a
different contract of insurance from the one which preceded it. Learned
counsel submitted that the very circumstance that a higher coverage
limit was indicated in respect of two individuals only as compared to
three insured under the previous policy showed that the insurer had D
complied with the offer of the insured, who desired such coverage.
10. Learned counsel for the insurer brought to the notice of this
Court that the obligation of intimating the insured, has been spelt out in
the Standardized General Terms and Clauses in Health Insurance Policy
Contracts by the Insurance Regulatory and Development Authority of
India (IRDA), in 2020. He submitted that the obligation to intimate stems E
out of Clause 14 which deals with the possibility of revision of terms of
a policy including the premium rates. This clearly indicates that only the
existing policy holder has to be notified. However, in renewal of same
policy does not place any such obligation upon the insurer to intimate
insured person at the point of renewal of the policy. F
11. It was urged furthermore that the monetary cap of ` 2,00,000/
- in the present case was not conjured by the insurer, which merely
complied the IRDA’s directions. In this regard, the learned counsel
submitted that insurer acted upon the IRDA’s direction, which were
communicated to its offices and branches by way of internal guidelines.
G
Learned counsel also submitted that at the point of time of renewal, no
implied obligation on the part of the insurer can be inferred given that
each transaction signifies a fresh contract of Insurance. In other words,
it is up to the insured to inquire, if the terms of the renewed policy would
be in any way would be different from the previous one.
H
798 SUPREME COURT REPORTS [2021] 9 S.C.R.

A Analysis and Conclusions
12. The previous policy4 indicated a limit of ` 3 lakhs each for the
appellants, and ` 1 lakh cover to Ajay Punnen Jacob (their son). The
policy in question, i.e., for 2008-09 covered an overall limit of ` 8 lakhs
(` 4,25,000/- for the first appellant and ` 3,75,000/- for the second
B appellant, his wife). A copy of the policy which has been produced
indicates that the premium (including service tax) paid was ` 17,705/.
The period of insurance was from 00.00 hrs of 28.03.2008 to midnight
of 27.03.2009. Clause 1.2 of the policy in question for 2008-09
indisputably introduced the following restrictive condition:
C “1.2 In the event of any claim(s) becoming admissible under
this scheme, the company will pay through TPA to the Hospital/
Nursing Home or the insured person the amount of such
expenses as would fall under different heads mentioned below,
and as are reasonably and necessarily incurred thereof by or
on behalf of such Insured Person, but not exceeding the Sum
D Insured in aggregate mentioned in the schedule hereto.
A) Room, Boarding Expenses as provided by the Hospital/
nursing home
B) Nursing Expenses
E C) Surgeon, Anaesthetist, Medical Practitioner, Consultants,
Specialists Fees
D) Anaesthetist, Blood, Oxygen, Operation Theatre Charges,
surgical appliances, Medicines & Drugs, Diagnostic
Materials and X-ray, Dialysis, Chemotherapy, Radiotherapy,
F Cost of Pacemaker, Artificial Limbs & Cost of organs and
similar expenses
Expenses in respect of the following specified illnesses will
be restricted as detailed below:

G

4
H Effective for 2006-2007
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE 799
CO. LTD. [S. RAVINDRA BHAT, J.]

(N.B: Company’s Liability in respect of all claims admitted A
during the period of insurance shall not exceed the Sum
Insured per person as mentioned in the schedule)”
13. In the previous policy5 the stipulation, limiting for medical
expenditure under various heads, were as follows:
“1 In the event of any claim/s becoming admissible under this B
scheme, the company will pay through TPA to the Hospital/
Nursing Home or the insured person the amount of such
expenses as would fall under different heads mentioned below,
and as are reasonably and necessarily incurred thereof by or
on behalf of such Insured Person, but not exceeding the Sum C
Insured in aggregate mentioned in the schedule herein.
A) Room, Boarding Expenses as provided by the Hospital/
nursing home
B) Nursing Expenses
D
C) Surgeon, Anesthetist, Medical Practitioner, Consultants,
Specialists Fees
D) Anesthesia, Blood, Oxygen, Operation Theatre Charges,
surgical appliances, Medicines & Drugs, Diagnostic
Materials and X-ray
E
E) Dialysis, Chemotherapy, Radiotherapy, Cost of Pacemaker,
Artificial Limbs & Cost of organs and similar expenses.
(N.B: Company’s Liability in respect of all claims admitted
during the period of insurance shall not exceed the Sum
Insured per person as mentioned in the schedule)” F
14. What is apparent from the record is that upon receipt of the
renewed notice, sometime in March 2008, the appellants issued a cheque
dated 26.03.2008 which was duly received. That the cheque was
encashed and a policy document issued by the insurer is not in dispute.
Both parties, i.e., the first appellant and the Divisional Manager of the G
insurer have filed affidavits in evidence. However, the pleadings as well
as these affidavits are unclear as to when the policy document was
actually despatched and received by the insurer and on which date it
was received by the appellants. Clearly, the policy containing the fresh
5
For 2006-2007 H
800 SUPREME COURT REPORTS [2021] 9 S.C.R.

A terms was issued after receipt of the premium for the year 2008-09. In
this regard, interestingly, the affidavit evidence of the insurer states as
follows:
“3. That it is stated that the petitioners renewed their policy
No.100505/48/07/00002034 for the period 28.03.2008 to
B 27.03.2009 and received the terms of the policy which has
been renamed as “United India Health Insurance Policy
(Gold)”. The total coverage of the policy was Rs.8,00,000/-
being Rs.4,25,000/- for petitioner No.1 and Rs.3,75,000/- for
the petitioner No.2. The petitioner received no claim discount
of Rs.3184.7 when renewing the same.
C
XXXXXXXX XXXXXXXX XXXXXXX
5. That it is stated that the petitioners made representation
vide letter dated 10.10.2008, to the respondent claiming the
entire amount of treatment from the respondent and in reply
D dated 04.11.2008, it was stated that the insurance company
in terms of the United India health insurance policy Gold
was liable to pay to the insured 70% of the sum insured or
Rs.2,00,000/- whichever was less in case of angioplasty.”
15. The insurer’s counsel had, during the course of the hearing,
E relied upon a document titled ‘Guidelines on Standardization of
General Terms and Clauses in Health Insurance Policy Contracts’
dated 11.06.2020 highlighting clauses 10 and 14 of the document. They
are extracted below:
“10 Renewal of Policy
F The policy shall ordinarily be renewable except on grounds
of fraud, misrepresentation by the insured person.
i. The Company shall endeavor to give notice for renewal.
However, the Company is not under obligation to give any
notice for renewal.
G ii. Renewal shall not be denied on the ground that the insured
person had made aclaim or claims in the preceding policy
years.
iii. Request for renewal along with requisite premium shall be
received by the Company before the end of the policy period.
H
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE 801
CO. LTD. [S. RAVINDRA BHAT, J.]

iv. At the end of the policy period, the policy shall terminate A
and can be renewed within the Grace Period of ...... days
(Note to insurers: Insurer to specify grace period as per
product design) to maintain continuity of benefits without
break in policy.
Coverage is not available during the grace period. B
V. No loading shall apply on renewals based on individual
claims experience”
XXXXXXXX XXXXXXXX XXXXXXX
14. Possibility of Revision of Terms of the Policy including C
the Premium Rates
The company, with prior approval of IRDAI, may revise or
modify the terms of the policy including the premium rates.
The insured person shall be notified three months before the
changes are effected.” D
The insurer had also relied upon a copy of the United India
Insurance Company administrative guidelines for the new insurance
products effective 28.01.2007, especially para 14 which reads as follows:
“14 RENEWALS OF EXISTING POLICIES
Existing Policyholders who are below the age of 35 years as E
on the date of introduction of this Product will be allowed to
renew the Policy as Platinum. All other Policyholders will be
brought under the Gold Policy.
An entrant into the Platinum Policy will be allowed to continue
under the Policy even after he crosses 35 years. As on date F
the table is available upto the age of 45 years. This will be
expanded based on the claims experience of the next two
years.
In respect of Senior Citizens who are our existing
policyholders, they will be allowed to renew the policy on G
existing terms and conditions but at revised rates of premium
under Gold Policy. They should not be compelled to migrate
to the new Scheme. If they so desire to enter the new Scheme,
the same may be allowed on collection of fresh proposal.
H
802 SUPREME COURT REPORTS [2021] 9 S.C.R.

A Persons above the age of 60 years and taking a Health Policy
for the first time can be granted the Senior Citizens Policy
only.”
Analysis:-
The first point: on renewal
B
16. In the facts of the present appeal, the insurer insisted that the
2008-09 ‘Gold’ policy was in fact a ‘new’ one, and not a renewal, which
was available with the appellants, before the second appellant’s surgery
took place. There is some dispute on this aspect; the appellants contended
that the amended terms of the 2008-09 Gold policy were received only
C after three months of the payment of the renewal premium, and thus
there was no scope for them to have read and given consent to the cap
on angioplasty coverage in the new Gold policy.
17. The insurer had placed reliance on the administrative guidelines
(supra) to highlight the clause on renewal, in order to demonstrate that
D the 2008-09 Gold policy was a new insurance product, and not a renewal
of the previous Mediclaim policy. However, the same clause stated that,
“In respect of senior citizens who are our existing policy holders,
they will be allowed to renew the policy on existing terms and
conditions but at revised rates of premium under Gold policy”. The
E clause further stated that, “They should not be compelled to migrate
to the new (Gold) scheme. If they so desire to enter the new scheme,
the same may be allowed on collection of fresh proposal”.
18. In such a situation, there can be said to be no consensus ad
idem on the introduction of the cap on the coverage by the insurer, as
F the appellants were not informed that they had paid premium for a new
policy, but were led to believe that they had in fact renewed a pre-
existing policy on the same terms, with only difference being the removal
of their son as a beneficiary and a higher coverage (from Rupees 6
lakhs to Rupees 8 lakhs in total) for the appellants, which was accepted
by the insurer. The general rule of acceptance of an insurance proposal
G by the assured involves unconditional acceptance of all the terms. 6 Thus
the cap on the coverage placed by the insurer without prior intimation to
the assured and without providing an opportunity to the assured to seek
alternate insurance policies that were more favourable to their needs
was restrictive, and thus not enforceable.
6
H LIC v. Raja Vasireddy Komalavalli Kamba, (1984) 2 SCC 719 (para 15).
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE 803
CO. LTD. [S. RAVINDRA BHAT, J.]

19. In these circumstances, this Court is of the opinion that the A
eventuality contemplated in Biman Krishna Bose (supra), i.e.,
inapplicability of old terms, in the cases of renewal, when the contracts
provide “or otherwise”, has to be applied contextually. If the renewed
contract is agreed, in all respects, by both parties, undoubtedly the fresh
terms (with restrictions) would be binding. However, that would not be
B
the case when a new term is introduced unilaterally about which the
policy holder is in the dark. Further, the allusion to continuation of the
terms of the Gold policy in respect of senior citizens (who were not to be
compelled to migrate to another policy) but were to be subject to the
same terms, upon payment of a different rate of premia, reinforces the
conclusion that there was in fact, a renewal of the existing terms. C
20. Arguendo, assuming the appellants had received the policy
documents on time, i.e., requisite disclosure had been made, and then
the appellants had in fact misunderstood the terms and mistaken the
new Gold policy for the previous policy, the question is, post payment of
premium, were they in a position to protest, or do anything about it. D
Irrespective of the answer to the question of whether the renewal of an
insurance contract results in a new contract or otherwise, the issue which
arises is whether the appellants, as beneficiaries of the policy, could
complain about mistake in its terms, and the possible consequences of
such mistake.
E
21. There cannot be any gainsaying to the fact that if parties are
not agreed on the terms, one of the likely results would be its avoidance.
“Mistake” is not defined, under the Contract Act, 1872; however, Section
22 of the Act7 enacts that a unilateral mistake of fact, does not result in
its nullity. The general law on avoidance of a contract was explained by
this court in Canara Bank v. United India Insurance Co. Ltd.8 in the F
following terms:
“[T]o make a contract void, the non-disclosure should be of
some very material fact. No doubt, it would have been better
if the Bank and the insured had given at least one tripartite
7
Extracted below:
G
“Section 22. Contract caused by mistake of one party as to matter of fact.
— A contract is not voidable merely because it was caused by one of the parties to it
being under a mistake as to a matter of fact.
— A contract is not voidable merely because it was caused by one of the parties to it
being under a mistake as to a matter of fact.”
8
(2020) 3 SCC 455 H
804 SUPREME COURT REPORTS [2021] 9 S.C.R.

A agreement to the Insurance Company but, in our view, in the
peculiar facts of this case, not disclosing the tripartite
agreement or the names of the owners cannot be said to be
such a material fact as to make the policy void or voidable.
We are clearly of the view that there is no fraudulent claim
made. There is no false declaration made and neither is the
B
loss and damage occasioned by any wilful act or connivance
of the insured”. [Para. 45, emphasis supplied]
What is a “material fact” was explained in Satwant Kaur Sandhu
v. New India Assurance Co. Ltd.9, as follows:
C “The term “material fact” is not defined in the Act and,
therefore, it has been understood and explained by the courts
in general terms to mean as any fact which would influence
the judgment of a prudent insurer in fixing the premium or
determining whether he would like to accept the risk. Any
D fact which goes to the root of the contract of insurance and
has a bearing on the risk involved would be “material”.
[Para 22].
22. In Tarsem Singh v. Sukhminder Singh10, this court clarified
that a unilateral mistake would not render a contract void under Indian
E contract law:
“20. Section 20 of the Act lays down as under:
“20. Agreement void where both parties are under mistake
as to matter of fact.—Where both the parties to an
agreement are under a mistake as to a matter of fact
F essential to the agreement, the agreement is void.
Explanation. —An erroneous opinion as to the value of
the thing which forms the subject-matter of the agreement,
is not to be deemed a mistake as to a matter of fact.”
21. This section provides that an agreement would be void if
G both the parties to the agreement were under a mistake as to
a matter of fact essential to the agreement. The mistake has to
be mutual and in order that the agreement be treated as void,

9
(2009) 8 SCC 316
10
H (1998) 3 SCC 471
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE 805
CO. LTD. [S. RAVINDRA BHAT, J.]

both the parties must be shown to be suffering from mistake A
of fact. Unilateral mistake is outside the scope of this section.”
[emphasis supplied]
Therefore, the law in India is that unless the unilateral mistake
about the terms of a contract is so serious as to adversely undermine the
entire bargain, it does not result in automatic avoidance of a contract. B
Applied to the facts of this case, it is evident that the appellants could
insist on the oldinsurance policy, on the premise that it renewed the pre-
existing policy. The other conclusion would be cold comfort to the party
seeking insurance cover, as the choice would be to avoid it altogether-
too drastic as to constitute a choice. The first point is answered C
accordingly, in favour of the appellants.
The second point: duty of insurers
23. This court next proceeds to address itself to the second
question, namely what are the duties of an insurer, when a policy holder
seeks renewal of an existing policy. The insurer here contends that the D
consumer was under an obligation to inquire about the terms of the policy,
and any changes that might have been introduced, in the standard terms.
It was urged that the appellants, in the facts of this case, should have
inquired from the concerned agent; since they omitted to do so, they
were bound by the terms of the policy. E
24. A striking feature of insurance law, is the principle of uberrima
fide (duty of utmost good faith) which applies to both the insured as well
as one who seeks indemnity and cover. In United India Insurance Co.
Ltd. v. M.K.J. Corpn.11 this court underlined the importance of this
principle, and its application to the insurer, in the following terms: F
“It is a fundamental principle of Insurance law that utmost
good faith must be observed by the contracting parties. Good
faith forbids either party from concealing (non-disclosure)
what he privately knows, to draw the other into a bargain,
from his ignorance of that fact and his believing the contrary.
G
Just as the insured has a duty to disclose, similarly, it is the
duty of the insurers and their agents to disclose all material
facts within their knowledge, since obligation of good faith
applies to them equally with the assured. The duty of good
11
1996 (6) SCC 428 H
806 SUPREME COURT REPORTS [2021] 9 S.C.R.

A faith is of a continuing nature. After the completion of the
contract, no material alteration can be made in its terms
except by mutual consent. The materiality of a fact is judged
by the circumstances existing at the time when the contract is
concluded.”
B Other decisions too have expressed the same view.12 In Modern
Insulators Ltd. v Oriental Insurance Co. Ltd13 this court observed
that:
“It is the fundamental principle of insurance law that utmost
good faith must be observed by the contracting parties and
C good faith forbids either party from non-disclosure of the
facts which the parties know. The insured has a duty to disclose
and similarly it is the duty of the insurance company and its
agents to disclose all material facts in their knowledge since
the obligation of good faith applies to both equally.”

D 25. The universal applicability of the principle of uberrima fides
to both parties to a contract of insurance- and in the context of omission
of one of them (the insurer) to notify the other, about a material change
in the terms, at the stage of pre-contract, was highlighted in Sherdley v
Nordea Life and Pension14. The insured invested in two individual unit-
linked life insurance contracts with Nordea Life and Pensions SA
E (“Nordea”). The contracts were designed to enhance the tax efficient
growth of a capital assurance plan. At the relevant time, the insured
were living in both Wales and Spain and were British nationals. At the
time of contract, they were habitually resident in the jurisdiction of
England and Wales; when they commenced proceedings, they had become
F habitually resident in Spain. Their investments went “disastrously wrong”;
when they sued Nordea in England, the company argued that there was
no jurisdiction in England under the “Judgments Regulation” (EC No 44/
2001) and claimed that proper jurisdiction were courts in Spain, or
Luxembourg. The contractual documents referred to than three law and
jurisdiction agreements: for England, for Luxembourg, and for Spain.
G The plaintiff-insured, however, argued that there was an initial agreement
12
Reliance Life Insurance Co. Ltd. vs Rekhaben Nareshbhai Rathod 2019 (6) SCC 175;
Life Insurance Corporation of India vs Asha Goel 2001 (2) SCC 160; P.C. Chacko vs
Chairman, Life Insurance Corporation of India 2008 (1) SCC 321 and Satwant Kaur
Sandhu vs New India Assurance Company Limited 2009 (8) SCC 316
13
2000 (2) SCC 734
14
H [2012] 2 All ER (Comm) 725; SA [2012] EWCA Civ 88
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE 807
CO. LTD. [S. RAVINDRA BHAT, J.]

in favour of jurisdiction in England, as the country of their habitual A
residence at the time of contract, and that that agreement was never
displaced. The Court of Appeal rejected the insurer’s objection, and
held as follows:
“Against the background of these principles, which in the
absence of relevant submission from the parties I am content
B
to adopt, then, the argument was to be conducted purely in
terms of the judge’s own analysis, I would regard his decision,
that there was an albeit inchoate consensus in favour of
English law and jurisdiction at a time prior to the submission
and acceptance of Nordea’s proposal, as a critical finding,
raising the question whether that consensus had ever been C
displaced. It is true that the application forms are at a stage
pre-contract: however, in my judgment they constitute, on the
judge’s finding, an agreement that if a contract is ultimately
made it will be on the terms agreed in the application forms.
It seems to me that on that basis there would be a strong
argument that that finding never had been displaced. That D
would be because, although the Sherdleys had signed the
proposal acceptance forms, Nordea had not brought to the
Sherdleys’ attention that, on page 6 of the proposal, an
applicable law and jurisdiction clause was now proposed in
a form which departed from the earlier consensus. An E
insurance contract is a contract of the utmost good faith,
and I do not think it is consistent with that required good
faith that an insurer should present to an insured an alteration
in the previously agreed law and jurisdiction provisions of
their proposed contract without making that clear to the
insured. That is consistent with the Directive’s requirements F
that the applicable law of the parties’ insurance contract
should be communicated to the insured before the conclusion
of the contract “in a clear and accurate manner, in writing,
in an official language of the Member State of the
commitment”. If, however, there had been no prior agreement
on English law and jurisdiction, then I think that a G
straightforward proposal, in writing, which the insured was
asked to read carefully, as the Sherdleys were asked to read
Nordea’s proposal, before indicating their consent on a
proposal acceptance form, would satisfy the requirements of
article 23.” H
808 SUPREME COURT REPORTS [2021] 9 S.C.R.

A 26. In view of the state of law, which is, that the insurer was
under a duty to disclose any alteration in the terms of the contract of
insurance, at the formation stage (or as in this case, at the stage of
renewal), the respondent cannot be heard to now say that the insured
were under an obligation to satisfy themselves, if a new term had been
introduced. If one considers the facts of this case, it is evident that the
B
insurer had caused a renewal reminder, which was acted upon and the
renewal cheque, issued by the appellant. At that stage, or just before the
renewal premium was furnished the insurer, or its agent was under a
duty to alert the appellants that the change in terms, was likely to impact
their decision, and if so required, offer a better or fuller coverage. One
C cannot be oblivious to two circumstances here. The first, is that medical
or health insurance cover becomes crucial with advancing age; the policy
holder is more likely to need cover; therefore, if there are freshly
introduced limitations of liability, the insured may, if advised properly,
and in a position to afford it, seek greater coverage, or seek a different
kindof policy. The second, is that most policies – health and medical
D
insurance policies being no exception, are in standard form. It would be
worthwhile to notice at this stage that one who seeks coverage of a life
policy/a personal risk, such as accident or health policy has little choice
but to accept the offer of certain standard term contracts – which are
termed as contracts d’ adhesion, a French legal term. This has been
E defined as15
“A standard-form contract prepared by one party, to be signed
by the party in a weaker position, usually a consumer, who
has little choice about the terms. Also termed Contract of
adhesion; adhesory contract; adhesionary contract; take it
F or leave it contract; leonire contract.
Some sets of trade and professional forms are extremely one-
sided, grossly favouring one interest group against others,
and are commonly referred to as contracts of adhesion. From
weakness in bargaining position, ignorance or indifference,
G unfavoured parties are willing to enter transactions controlled
by these lopsided legal documents”
27. The Law Commission16 has addressed this issue in the report
titled ‘Unfair (Procedural & Substantive) Terms in Contract’. The
15
Black’s Law Dictionary, 9 th edn., p. 368
16
H The Law Commission of India in its 199th Report
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE 809
CO. LTD. [S. RAVINDRA BHAT, J.]

commission recommended enactment of a law to counter such unfair A
terms in contracts. The draft legislation suggested by the report, defined
an unfair contract as follows:
“A contract or a term thereof is substantively unfair if such
contract or the term thereof is in itself harsh, oppressive or
unconscionable to one of the parties.” B
28. The courts’ remedial power, to refuse enforcement of such
contracts, or contractual terms, finds support in a few decisions of this
Court.17 Recently, while deciding a consumer dispute, this Court applied
the principle that unfair terms in a contract, cannot be enforced, if there
is absence of free choice, on the part of a consumer, in Pioneer Urban C
Land & Infrastructure Ltd v Govindan Raghavan18. It was held that
a term introduced in a standard form contract can be unfair, as to
constitute an unfair trade practice19 under the Consumer Protection Act,
1986, and observed as follows:
“A term of a contract will not be final and binding if it is D
shown that the flat purchasers had no option but to sign on
the dotted line, on a contract framed by the builder. The
contractual terms of the Agreement dated 08.05.2012 are ex-
17
Central Inland Water v Brojo Nath Ganguly&Anr 1986 (3) SCC 156; Life Insurance
Corporation of India v Consumer Education and Research Centre &Ors 1995 (5) SCC E
482, where it was observed that:
“ The appellants or any person or authority in the field of insurance owe a public duty
to evolve their policies subject to such reasonable, just and fair terms and conditions
accessible to all the segments of the society for insuring the lives of eligible persons. The
eligibility conditions must be conformable to the Preamble, fundamental rights and the
directive principles of the Constitution. The term policy under Table 58 is declared to be
accessible and beneficial to the large segments of the Indian society. The rates of premium F
must also be reasonable and accessible.”
18
2019 (5) SCC 525
19
Defined by Section 2 (r) of the Act as follows:
(r) “unfair trade practice” means a trade practice which, for the purpose of
promoting the sale, use or supply of any goods or for the provision of any
service, adopts any unfair method or unfair or deceptive practice including any
of the following practices, namely- G
------------------------- ------------------------
(vi) makes a false or misleading representation concerning the need for, or the
usefulness of, any goods or services;
(vii) gives to the public any warranty or guarantee of the performance, efficacy
or length of life of a product or of any goods that is not based on an adequate or
proper test thereof:…”
H
810 SUPREME COURT REPORTS [2021] 9 S.C.R.

A facie one-sided, unfair, and unreasonable. The incorporation
of such one-sided clauses in an agreement constitutes an
unfair trade practice as per Section 2 (r) of the Consumer
Protection Act, 1986 since it adopts unfair methods or
practices for the purpose of selling the flats by the Builder.”
B 29. Contracts of adhesion (as contracts d’ adhesion are also called),
as discussed previously, leave little or no choice to the customer; in this
case, the policy holders were left with no room to bargain and negotiate.
In the present case, the standard form contract, renewed year after
year, left the appellants only with the choice of raising the insurance
cover. The last renewal, of course, resulted in the deletion of their son as
C a beneficiary. However, even with this little choice, the result of their
being kept in the dark about the new terms which placed limits on
individual surgical procedures meant that had any other information with
respect to the increased coverage which could have resulted in the higher
individual limits (for surgical procedures) from they might have benefitted
D was denied to them. For that reason, the “informational blackout”, so to
say, on the part of the insurer, was a crucial omission.
30. During the hearings, it was urged on behalf of the insurer that
the agent would have ordinarily informed the policy holder as she or he
was in touch with them. The insurer did not lead evidence in this regard.
E Its agent was not asked to affirm any affidavit. In these circumstances,
the inference to be drawn is that the agent did not inform – at the time of
renewal of the policy, in 2008, about the limits in regard to coverage of
individual procedures but also omitted them any information that there
could have been possibility of higher coverage by payment of higher
premium which might have resulted in a higher limit for the various
F surgeries or procedures covered by the policy.
31. There is no doubt that insurance business is run through brokers
and agents. The role of an agent in this regard is to be examined. This
Court has spelt out, in the context of insurance business the role of
insurance agents and the liability or responsibility of insurance companies
G in the event of failure to discharge the duties cast upon agents, and the
likely vicarious responsibility or liability of the insurer.
32. In Delhi Electric Supply Undertaking v. Basanti Devi20 the
insurer, Life Insurance Corporation, had floated a ‘Salary Savings Scheme’
20
H (1999) 8 SCC 229
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE 811
CO. LTD. [S. RAVINDRA BHAT, J.]

in which the employer deducted premium from its employees’ salaries A
and paid them to LIC on the employees’ behalf. The premium for a
period of time was not deducted from an employee’s salary. On the
death of the employee, his legal representatives claimed the insured
amount. LIC rejected the claim on the grounds of lapse of the policy due
to non-payment of premium, and that the actions of the employer did not
B
bind LIC given that it was not an ‘agent’ of LIC. This Court turned
down the argument, and held that
“11. In the present case we are not concerned with the
insurance agent. It is not the case of LIC that DESU could be
permitted as an insurance agent within the meaning of the
Insurance Act and the regulations. DESU is not procuring or C
soliciting any business for LIC. DESU is certainly not an
insurance agent within the meaning of the aforesaid
Insurance Act and the regulations but DESU is certainly an
agent as defined in Section 182 of the Contract Act. The mode
of collection of premium has been indicated in the Scheme D
itself and the employer has been assigned the role of collecting
premium and remitting the same to LIC. As far as the employee
as such is concerned, the employer will be an agent of LIC. It
is a matter of common knowledge that insurance companies
employ agents. When there is no insurance agent as defined
in the regulations and the Insurance Act, the general principles E
of the law of agency as contained in the Contract Act are to
be applied.
12. Agent in Section 182 means a person employed to do any
act for another, or to represent another in dealings with third
persons and the person for whom such act is done, or who is F
so represented, is called the principal. Under Section 185 no
consideration is necessary to create an agency. As far as Bhim
Singh is concerned, there was no obligation cast on him to
pay premium direct to LIC. Under the agreement between LIC
and DESU, premium was payable to DESU who was to deduct G
every month from the salary of Bhim Singh and to transmit
the same to LIC. DESU had, therefore, implied authority to
collect premium from Bhim Singh on behalf of LIC. There was,
thus, valid payment of premium by Bhim Singh. The authority
of DESU to collect premium on behalf of LIC is implied. In
H
812 SUPREME COURT REPORTS [2021] 9 S.C.R.

A any case, DESU had ostensible authority to collect premium
from Bhim Singh on behalf of LIC. So far as Bhim Singh is
concerned DESU was an agent of LIC to collect premium on
its behalf.”
33. This reasoning was applied in Life Insurance Corporation
B of India v Rajiv Kumar Bhaskar21. It would be useful, in the present
context to extract the relevant terms of the notification,22 [especially
Clauses 3 (2) and 4 (1)] issued by the IRDA:
“3(2) An insurer or its agents or other intermediatory shall
provide all material information in respect of a proposed cover
C to the prospect to enable the prospect to decide on the best
cover that would be in his or her interest.”
************** *************** **************
4(1) Except in cases of a marine Insurance cover, where
current market practices do not insist on a written proposal
D form in all cases, a proposal for grant of a cover, either for
life business or for general business, must be evident by a
written document. It is the duty of an insure to furnish to the
insured free of charge, within 30 days of the acceptance of a
proposal, a copy of the proposal form.”
E In the present case, even if, for arguments’ sake, one was to
accept the submissions of the insurer which is that their agent should
have informed the appellant policy holders, the absence of any evidence
that he did or any evidence adduced by the insurer that despite information
the appellants chose to accept the policy in the terms which they eventually
F were furnished, the only consequence would be that as principal the
insurer is liable.
34. Such a failure assumes importance even from the perspective
of consumer protection law. The Consumer Protection Act, 1986 states
the definition of ‘deficiency’ in service under Section 2(g) as “[A]ny
fault, imperfection, shortcoming or inadequacy in the quality, nature
G
and manner of performance which is required to be maintained by
or under any law for the time being in force or has been undertaken
to be performed by a person in pursuance of a contract or otherwise
in relation to any service”. In order to demonstrate deficiency, it is not
21
2005 (6) SCC 188
22
H Dated 16 October 2002
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE 813
CO. LTD. [S. RAVINDRA BHAT, J.]

necessary that the same emanates only from a law or a contract. The A
term “or otherwise” clearly provides for circumstances where a certain
level of service is expected from a provider. As stated above in the
judgment, the principle of uberrima fides involves prior intimation of
change in terms in insurance contracts. The deficiency of service assumes
even more significance in the present case, as it pertains to senior citizens.
B
35. The special status of senior citizens in general was taken
cognizance of by the insurer as well, when it relied on guidelines
(applicable for new insurance products, with effect from 28.1.2017) which
inter alia, stated that
“In respect of Senior Citizens who are our existing C
policyholders, they will be allowed to renew the policy on
existing terms and conditions but at revised rates of premium
under Gold Policy. They should not be compelled to migrate
to the new Scheme. If they so desire to enter the new Scheme,
the same may be allowed on collection of fresh proposal.”
D
The insurer’s argument here was that no existing senior citizen
policy holder could be compelled to migrate to a new Scheme. However,
in the present case, the Mediclaim holders were kept in the dark, and
asked to renew a policy, the terms of which had undergone a significant
change in that its cover was radically different, and imposed limitations
on the insurer’s liability. The argument of the insurer has no merit and is E
not acceptable.
36. Worldwide, nations are seeking viable answers to the question
of how to offer health care to their citizens. The World Health
Organization (WHO) defines health as a dynamic state of complete
physical, mental, spiritual and social well-being and not merely the absence F
of disease or infirmity.23 Healthy living conditions and good quality health
23
The Constitution of the WHO in its preamble says as much:
“Health is a state of complete physical, mental and social well-being and not
merely the absence of disease or infirmity. The enjoyment of the highest attainable
standard of health is one of the fundamental rights of every human being without
distinction of race, religion, political belief, economic or social condition.” G
In Calcutta Electric Supply Corporation Ltd. v. Subhash Chandra Bose, (1992) 1 SCC
441 this court, quoting from various international covenants, observed that,
“the term ‘health’ implies more than an absence of sickness. Medical care and
health facilities not only project against sickness but also ensure stable man
power for economic development. Facilities of health and medical care generate
devotion and dedication to give the workers’ best, physically as well as mentally
H
814 SUPREME COURT REPORTS [2021] 9 S.C.R.

A is not only a necessary requirement it is also recognized as a fundamental
right. Article 25 of the Universal Declaration of Human Rights 194824
lays down that everyone has the right to a standard of living, adequate
for the health and well-being of himself and of his family, including food,
clothing, housing and medical care. The International Covenant on
Economic, Social and Cultural Rights, 1976, too recognizes the right to
B
health, of citizens of every nation.25
37. Part IV of the Indian Constitution which contain the Directive
Principles of State Policy imposes duties on the state. Some of its
provisions directly or indirectly are associated with public health. These
principles direct the state to take measures to improve the condition of
C health care of the people. Articles 38 imposes duty on state that state
secure a social order for the promotion of welfare of the people. Without
an overall viable framework of public health, the state cannot achieve
this obligation, in a meaningful manner. Article 39(e) relates to workers
and enjoins the state to protect their health. Article 41 imposes the duty
D in productivity. It enables the worker to enjoy the fruit of his labour, to keep him
physically fit and mentally alert for leading a successful, economic, social and
cultural life. The medical facilities, are therefore, part of social security and like
gilt edged security, it would yield immediate return in the increased production
or at any rate reduce absenteeism on grounds of sickness, etc. health is thus a
state of complete physical, menial and social well-being and nut merely the
E absence of disease or infirmity”.
24
Article 25 reads as follows:
(1) Everyone has the right to a standard of living adequate for the health and
well-being of himself and of his family, including food, clothing, housing and medical
care and necessary social services, and the right to security in the event of unemployment,
sickness, disability, widowhood, old age or other lack of livelihood in circumstances
beyond his control.
F (2) Motherhood and childhood are entitled to special care and assistance. All
children, whether born in or t of wedlock, shall enjoy the same social protection.
25
Article 12 (of the Covenant, of 1976, reads as follows:
“1. The States Parties to the present Covenant recognize the right of everyone
to the enjoyment of the highest attainable standard of physical and mental health.
2. The steps to be taken by the States Parties to the present Covenant to achieve
the full realization of this right shall include those necessary for:
G (a) The provision for the reduction of the stillbirth-rate and of infant mortality
and for the healthy development of the child;
(b) The improvement of all aspects of environmental and industrial hygiene;
(c) The prevention, treatment and control of epidemic, endemic, occupational
and other diseases;
(d) The creation of conditions which would assure to all medical service and
medical attention in the event of sickness.”
H
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE 815
CO. LTD. [S. RAVINDRA BHAT, J.]

on the state to public assistance essentially for those who are sick and A
disabled. Article 42 casts primary responsibility upon the state to protect
the health of infants and mother through maternity benefit. Article 47
spells out the duty of the state to raise the level of nutrition and standard
of living of its people. Other provisions relating to health fall in this Part
of the Constitution. The state is asked in particular, to direct its policies
B
towards securing health of workers.
38. For a long time, state policy in this country was to involve only
public sector entities in the insurance sector. All this changed, with the
opening up of the economy and entry of private sector insurers. To regulate
entities in the insurance business, the Insurance Regulatory and
Development Authority Act, 1999 (“the IRDA Act”) was enacted. Its C
provisions, together with that of the Insurance Act, 1938, and regulations
framed under both enactments, regulate all insurance related activities
(except marine and certain kinds of insurance) in India. Section 2 (6C)
of the Insurance Act defines “health insurance business” and defines it
as follows: D
“(6C) “health insurance business” means the effecting of
contracts which provide for sickness benefits or medical,
surgical or hospital expense benefits, whether in-patient or
out-patient travel cover and personal accident cover;]
The IRDA (Health Insurance) Regulations, 2016, (which replaced E
the previously applicable regulations of 2013- which were preceded by
guidelines regulating health insurance products contains regulations which
are relevant for the purpose of this case. Chapter III of these regulations
contains general provisions relating to Health Insurance. The relevant
part of Regulation 11 reads as follows: F
“11. Designing of Health Insurance Policies
a. Subject to Regulation 3 as applicable, Health insurance
product may be designed to offer various covers;
i. For specific age or gender groups
G
ii. For different age groups
iii. For treatment in all hospitals throughout the country,
provided the hospitals comply with the definition specified
iv. For treatment in specific hospitals only, provided the
morbidity rates used are representative H
816 SUPREME COURT REPORTS [2021] 9 S.C.R.

A v. For treatment in specific geographies only, provided the
morbidity rates used are representative
Provided, such specifications are disclosed clearly upfront
in the product prospectus, documents and during sale process.
And provided that no insurer shall offer any benefit or service
B without any insurance element.
********** ********** **********
c. Insurer shall not compel the insured to migrate to other
health insurance products. In case of migration from a
withdrawn product, the insurer shall offer the policyholder
C an alternative available product subject to portability
conditions.
d. Insurers shall ensure adequate dissemination of product
information on all their health insurance products on their
websites. This information shall include a description of the
D product, copies of the prospectus as approved under the
Product Filing Guidelines, proposal form, policy document
wordings and premium rates inclusive and exclusive of Service
Tax as applicable….”
Regulation 13 is relevant for the purposes of this appeal; it deals
E with renewal of policies, and reads as follows:
“13. Renewal of Health Policies issued by General Insurers
and Health Insurers (not applicable for travel and personal
accident policies)
i. A health insurance policy shall ordinarily be renewable
F
except on grounds of fraud, moral hazard or misrepresentation
or non-cooperation by the insured, provided the policy is not
withdrawn.
ii. An insurer shall not deny the renewal of a health insurance
policy on the ground that the insured had made a claim or
G claims in the preceding policy years, except for benefit based
policies where the policy terminates following payment of the
benefit covered under the policy like critical illness policy.
iii. The insurer shall provide for a mechanism to condone a
delay in renewal up to 30 days from the due date of renewal
H
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE 817
CO. LTD. [K. M. JOSEPH, J.]

without deeming such condonation as a break in policy. A
However, coverage need not be available for such period. 8
[Provided the renewal premium shall not be accepted more
than 90 days in advance of the due date of the premium
payment.]
iv. The promotion material and the policy document shall B
explicitly state the conditions under which a policy terminates,
such as on the payment of the benefit in case of critical illness
benefits policies.”
39. These regulations only underline expressly what was implicit,
i.e., the insurer’s obligation to inform every policy holder, about any C
important changes that would affect her or his choice of product. These
have been given statutory shape. Yet, the obligation of the insurer to
provide information to existing and policy holders, for them to exercise
choice, meaningfully, and choose products suited to their needs, existed.
In this case, that obligation was breached. D
40. In view of the above discussion, this Court is of the opinion
that the findings of the State Commission and the NCDRC cannot be
sustained. The insurer was clearly under a duty to inform the appellant
policy holders about the limitations which it was imposing in the policy
renewed for 2008-2009. Its failure to inform the policy holders resulted E
in deficiency of service. The impugned order of the NCDRC as well as
the order of the State Commission are hereby set aside. The order of
the District Forum is accordingly restored. Consequently, the appeal is
allowed; in the circumstances of this case, the respondent shall bear
additionalcosts, quantified at ` 50,000/-.
F
K. M. JOSEPH, J.
1. I have gone through the draft Judgment authored by my learned
Brother Justice S. Ravindra Bhat.
2. While I would agree with the relief proposed, I feel it is necessary G
to articulate my reasons by a separate opinion.
3. The facts have been set out by my learned brother. I would
avoid elaborate repetition. Suffice it to say that the appellants are husband
and wife and along with their son obtained an insurancepolicy in the
H
818 SUPREME COURT REPORTS [2021] 9 S.C.R.

A year 2006 with certain conditions attached. In fact, they have a case
that they had a policy of insurance for several years with the respondent
insurer. They obtained the policy in question for the year 2008, however,
wherein the son was not included and there was also change in the
amount of the insurance. The period of insurance was operative from
28.03.2008 to 27.03.2009. It is while this policy was in force that the
B
second appellant went for angioplasty in June 2008 and a claim for
Rs.3,82,705.27 was submitted. The insurer paid a sum of Rupees Two
Lakhs only. The reduction in the claim was based on the express provisions
which was in force in the policy in issue. Under the earlier policy for
previous year such a clause was conspicuous by its absence. It is also
C true that a notice was issued by the respondent Insurer for renewal and
the appellants issued a cheque towards renewal on 26.3.2008. It is
thereafter that the policy in question for the period in question (28.3.2008
to 27.3.2009) came to be issued.
4. In Biman Krishna Bose v. United India Insurance Co.Ltd.26
D this Court inter alia held as follows:
“5. A renewal of an insurance policy means repetition of the original
policy. When renewed, the policy is extended and the renewed
policy in identical terms from a different date of its expiration
comes into force. In common parlance, by renewal, the old policy
E is revived and it is sort of a substitution of obligations under the
old policy unless such policy provides otherwise. It may be that
on renewal, a new contract comes into being, but the said contract
is on the same terms and conditions as that of the original policy.
Where an insurance company which has exclusive privilege to
F carry on insurance business has refused to renew the mediclaim
policy of an insured on extraneous and irrelevant considerations,
any disease which an insured had contacted during the period
when the policy was not renewed, such disease cannot be covered
under a fresh insurance policy in view of the exclusion clause.
The exclusion clause provides that the pre-existing diseases would
G not be covered under the fresh insurance policy. If we take the
view that the mediclaim policy cannot be renewed with
retrospective effect, it would give handle to the Insurance
Company to refuse the renewal of the policy on extraneous

26
H (2001) 6 SCC 477
JACOB PUNNEN & ANR. v. UNITED INDIA INSURANCE 819
CO. LTD. [K. M. JOSEPH, J.]

consideration thereby deprive the claim of the insured for treatment A
of diseases which have appeared during the relevant time and
further deprive the insured for all time to come to cover those
diseases under an insurance policy by virtue of the exclusion
clause. This being the disastrous effect of wrongful refusal of
renewal of the insurance policy, the mischief and harm done to
B
the insured must be remedied. We are, therefore, of the view that
once it is found that the act of an insurance company was arbitrary
in refusing to renew the policy, the policy is required to be renewed
with effect from the date when it fell due for its renewal.”
(Emphasis supplied) C
5. Proceeding on the basis of the principles enunciated thereunder,
a renewal of the contract would ordinarily, undoubtedly involve the
expectation of replication of the terms of the original contract and what
is more, the actual continuation of the terms. However, as noted, the
actual contract may provide otherwise. The terms of the renewed contract D
of insurance may be located in the actual contract of insurance. A
renewed contract of insurance may provide terms which are different
from the terms of the original contract of insurance.
6. However, I am in agreement with my learned brother that the
claim under the Consumer Protection Act must allowed on the ground E
that there has been a deficiency on the part of the Insurer. The Insurer
brought about a change in the policy. This change introduced a
cumbersome limitation. It kept the Insured in the dark about the limitation
at the time when the renewal notice was issued, and what is more, the
premium was accepted. The Insurer had a duty to inform the appellants
that a change regarding the limitation on its liability was being introduced. F
This duty to take the insured into confidence was breached. This was
the deficiency in service. Even proceeding on the basis that the policy
incorporates the terms of the contract, insofar as the respondent insurer
unilaterally purported to incorporate a clearly cumbersome limitation
involving a breach of the duty to take the appellants into confidence, the G
court would not be powerless to undo the wrong. Be it that the policy
purported to incorporate the substantive limitation, the appellant can be
relieved of the result of the deficiency in service by the insured. This
can be done by restoring the position, the appellants would occupy if
there was no breach. I would, therefore, agree with my learned Brother
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820 SUPREME COURT REPORTS [2021] 9 S.C.R.

A that the appeal be allowed on the basis that there was unjustifiable non-
disclosure by the Insurer about the introduction of clause of limitation
and, in this case, it constituted a deficiency in service and resultantly the
appellants are entitled to relief. I, therefore, agree that the appeal be
allowed.
B
Divya Pandey Appeal allowed.

C

D

E

F

G

H