Failure To Settle Claim After 1 Year Of Insured's Death, Chandigarh District Commission Holds LIC Liable

Brief Facts:

The deceased insured obtained LIC's Jeevan Lakshya policy, in which his wife was the nominee. The policy's premium was paid quarterly, with the last payment of ₹10,204/- made online. The deceased was admitted to Suddhi Ayurveda Panchakarma Hospital, diagnosed with whole abdomen blockage, cough, and weakness, and discharged on 25.4.2023. Later, he was admitted to Ojas Hospital with lower respiratory tract infection, sepsis, septic shock, and CKD – Stage V. He passed away on 8.5.2023. Following his death, his wife also died leaving the Complainants as the legal heirs. The Complainants requested LIC to release the sum assured of ₹ 8 Lakh via a letter. Despite multiple requests, LIC did not release the funds. Feeling aggrieved, the Complainants filed a consumer complaint in the District Consumer Disputes Redressal Commission-I, U.T. Chandigarh (“District Commission”) against LIC.

In response, LIC accepted that the policy was obtained by the deceased but argued that the claim's admission was subject to an investigation under Section 45 of the Insurance Act. It expressed willingness to release the claim following the investigation and in accordance with the policy's terms and conditions to the policy's legal successors.

Observations by the District Commission:

The District Commission noted that the deceased passed away due to natural causes as confirmed by the death summary and the death certificate. LIC expressed its readiness to release the claim subject to the completion of the investigation and in accordance with the policy's terms and conditions. However, the District Commission noted that LIC failed to produce any document indicating whether it has initiated or concluded the investigation process.

Therefore, the District Commission held that LIC's failure to settle the claim, even after one year of the deceased insured's death and nine months after receiving the application from the Complainants, constituted a deficiency in service and an unfair trade practice.

Consequently, the District Commission directed LIC to pay the sum assured of ₹ 8 Lakh to the Complainants along with interest at 9% per annum. Additionally, LIC was ordered to pay ₹40,000/- as compensation for mental agony and harassment to the Complainants and ₹10,000/- as costs of litigation.

Case Title: Master Naman and Ors. vs Life Insurance Corporation of India and Anr.

Case Number: CC/565/2023

Date of Decision: 02/07/2024