The Tripura State Consumer Disputes Redressal Commission affirmed that an insurer can be held liable for deficiency in service under the Consumer Protection Act, 2019, but calibrated the quantum of compensation for mental agony and litigation costs, while imposing statutory interest on the awarded amount.
Background & Facts
The Dispute
The appellant, SBI General Insurance Company Limited, issued a health insurance policy to the respondent, Sri Pulak Saha, covering himself and his family for the policy year 2021-2022. During the COVID-19 pandemic, the respondent was diagnosed positive on 09.05.2021 and was admitted to the ICU of AGMC & GBP Hospital in West Tripura. He was discharged on 18.05.2021 after a ten-day stay, having incurred medical expenses of Rs.51,700.
Key Facts
- 09.05.2021 - Respondent tested positive for COVID-19 and was admitted to ICU.
- 18.05.2021 - Discharge from hospital; treatment cost incurred: Rs.51,700.
- 2021-2022 - Period for which the health insurance policy was in force.
- Post-discharge - Respondent submitted claim for reimbursement along with hospital discharge summary, prescription, and bills.
- Insurer’s verification - Company officials visited respondent’s residence, verified documents, and assured prompt reimbursement.
- Claim settlement - The insurer failed to settle the claim within the stipulated time.
- 22.12.2022 - Respondent filed a complaint before the West Tripura District Consumer Disputes Redressal Commission seeking:
- Reimbursement of Rs.51,700 for treatment,
- Rs.1,00,000 for mental agony and harassment,
- Rs.1,00,000 for legal expenses.
- 18.08.2025 - District Commission awarded the entire relief claimed, finding deficiency in service.
Procedural History
- 22.12.2022: Complaint filed before West Tripura District Consumer Disputes Redressal Commission (DC).
- 18.08.2025: District Commission order awarding Rs.35,018 (reduced treatment amount), Rs.1,00,000 for mental agony, and Rs.1,00,000 for litigation costs.
- First Appeal No. SC/16/FA/15/2025: Appellant filed appeal before the Tripura State Consumer Disputes Redressal Commission challenging the District order.
- 14.08.2026: Judgment delivered by the Tripura SC.
Parties' Positions
- Appellant argued that:
- No valid insurance contract existed on the date of the alleged claim.
- The respondent was not a "consumer" within the meaning of Section 2(d) of the CPA 2019.
- The insurer was not liable for mental agony or litigation costs.
- Respondent contended that:
- He was a bona-fide policyholder and the insurer failed to honour the claim.
- The delay caused mental harassment and financial strain, justifying compensation.
Relief Sought
- Appellant: Set aside the District Commission’s order, reduce or eliminate compensation for mental agony and litigation costs, and declare no liability.
- Respondent: Uphold the District order and recover the full quantum of claimed amounts.
The Legal Issue
The central question was whether Section 2(11) of the Consumer Protection Act, 2019 applies to an insurance company’s refusal to settle a legitimate medical claim, and whether compensation for mental agony and litigation costs is permissible under the Act.
Arguments Presented
For the Appellant
The appellant relied on State of Maharashtra v. M/s. Reliance General Insurance Co. and the definition of “consumer” in Section 2(d) of the CPA 2019, asserting that an insurer is a “service provider” but the respondent’s claim did not arise from a contract of insurance because premium receipt was allegedly absent. It further cited Section 64VB of the Insurance Act, 1986, contending that the insurer could not be held liable without a valid policy.
For the Respondent
The respondent invoked the same Section 2(11) definition of “deficiency” and submitted that the insurer’s refusal to reimburse constituted a shortcoming in service. It relied on M/s. New India Assurance Co. Ltd. v. Smt. Renu for the principle that mental agony arising from unjustified denial of claim is compensable under the CPA.
The Court's Analysis
The Commission first examined the statutory definition of “deficiency” under Section 2(11) of the Consumer Protection Act, 2019:
“(11) ‘deficiency’ means any fault, imperfection, shortcoming or inadequacy in quality, nature and manner of performance which is required to be maintained …” The Court held that the insurer’s refusal to honour a claim, despite having verified the documents and assured reimbursement, satisfied the definition of deficiency. It rejected the appellant’s contention that the respondent was not a consumer, observing that a policyholder who pays premium is squarely within the consumer definition.
On the issue of mental agony, the Court noted that the CPA allows compensation for “any act of negligence or omission … which causes injury to the consumer” and that the prolonged denial of a legitimate claim during a pandemic constituted a form of mental harassment. However, the Court found the quantum of Rs.1,00,000 excessive in the circumstances and reduced it to Rs.50,000, aligning the award with precedents that calibrate compensation to the actual injury suffered.
Regarding litigation costs, the Court affirmed that the consumer is entitled to recover reasonable expenses incurred in pursuing the claim, but again reduced the amount to Rs.50,000, deeming the original figure disproportionate.
The Court also addressed interest. It ordered 7.5% per annum interest on the reduced treatment amount of Rs.35,018, calculated from the date of filing the complaint before the District Commission (22.12.2022) until actual payment. An additional 12% per annum interest was stipulated to accrue after the six-week compliance period if the insurer defaults.
In sum, the Court upheld the finding of deficiency, modified the quantum of compensation, and imposed statutory interest, thereby striking a balance between consumer protection and proportionality of awards.
The Verdict
The appeal was dismissed in part. The appellant-insurance company was ordered to pay:
- Rs.35,018 with 7.5% interest per annum from 22.12.2022 until payment;
- Rs.50,000 in lieu of the originally awarded Rs.1,00,000 for mental agony and harassment;
- Rs.50,000 towards cost of litigation; All amounts are to be paid within six weeks of the judgment (by 26.09.2026). Failure to comply will attract an additional 12% per annum interest.
What This Means For Similar Cases
Consumer Definition Extends to Policyholders
Practitioners must treat insurance policyholders as consumers under Section 2(d) of the CPA 2019, even where the insurer disputes the existence of a contract. This widens the scope for filing complaints against insurers for service lapses.
Compensation Must Be Proportionate
While mental agony and litigation costs are recoverable, courts will scrutinise the quantum. Lawyers should substantiate the amount claimed with evidence of actual hardship to avoid reductions.
Statutory Interest Is Mandatory
The Court’s direction of 7.5% interest from the date of filing and a higher 12% post-default rate underscores the importance of timely compliance. Counsel should advise clients to settle awards promptly to avoid escalated interest.
