No Connection Between Pre-Existing Ailment And Death, Chandigarh District Commission Holds Canara HSBC Insurance Co. Liable

Brief Facts:

Mr. Jagdish Lal (“Deceased”), the late husband of Mrs. Sunita Rani (“Complainant”), obtained a home loan of ₹11,50,000 from Punjab National Bank (“PNB”). Alongside the loan, PNB offered a loan insurance policy from Canara HSBC Insurance Company Ltd. (“Insurance Company”) to safeguard repayment in the event of the loanee's death. The deceased, who was 60 years old and retired at the time of loan acquisition, was included in a Master Policy by the insurance company without adequate explanation of terms or issuance of a membership certificate. The insurance company and PNB charged a one-time premium of ₹ 49,204.82 for loan insurance, covering the tenure of the loan from 31.12.2018 to 31.12.2027. Despite the deceased's retirement status and age, no medical examination was conducted by the insurance company. The deceased later succumbed to COVID-19 complications, prompting the Complainant, his nominee, to apply for the sum assured to settle the outstanding loan. However, the insurance company rejected the claim stating that the deceased didn't inform about his diabetes and CAD conditions before the issuance of the insurance policy. Feeling aggrieved, the Complainant approached the District Consumer Disputes Redressal Commission-I, Chandigarh (“District Commission”) and filed a consumer complaint against PNB and the insurance company.

In response, the insurance company contested the complaint, citing the deceased's concealment of medical history regarding diabetes and CAD. It argued that this non-disclosure constituted a fundamental breach of policy terms. It stated that the deceased understood the policy's terms and conditions and submitted responses indicating that he had no previous ailments. PNB didn't appear before the District Commission for the proceedings.

Observations by the District Commission:

The District Commission referred to a certificate issued by the Department of Forensic Medicine & Toxicology, Government Medical College & Hospital which revealed that the deceased tested positive for COVID-19 on the same day he passed away. It held that this finding indicated that the cause of death was unrelated to the alleged pre-existing ailments, such as diabetes and CAD, for which the claim was repudiated by the insurance company. Moreover, considering that the subject policy was acquired by PNB to secure the loan amount, it was the responsibility of the insurance company to conduct a medical examination of the loanee before issuing the policy.

The District Commission referred to the decision of the Punjab and Haryana High Court in Aviva Life Insurance Company India Limited Vs. Sarita Tripathi & Anr. [CWP No. 14892 of 2015], where it was held that the insurer should not rescind the claim if it chose not to subject the insured to a medical examination before issuing the policy. The District Commission held that the previous ailments of the deceased were not directly linked to the cause of death.

Therefore, considering the lack of connection between the pre-existing ailments and the cause of death, the District Commission held that the repudiation of the claim by the insurance company was unjustified. It directed the insurance company to pay ₹ 10,18,726/- for the claim and pay a compensation of ₹ 50,000/- for causing mental agony and harassment to the Complainant. It was also directed to pay ₹ 10,000/- for the litigation costs incurred by the Complainant. The District Commission dismissed the complaint against PNB.