Telangana State Commission Holds LIC Liable For Deficiency In Service Over Wrongful Repudiation Of Insurance Claim

Brief Facts of the Case

The complainant, a police constable, had four Life Insurance Corporation policies on which he is regularly paying his premiums. Subsequently, the complainant met with an accident while traveling by Golkonda Express and suffered amputation of his left leg. However, the insurer rejected the insurance claim of the complainant on grounds that there was no permanent disability. The complainant, with no other income source, deemed the rejection arbitrary and filed a complaint before the District Commission, which allowed the complaint. It directed the insurer to pay the claim amount of Rs.7,50,000 with interest @ 9% , Rs. 25,000 as compensation and Rs. 5,000 as litigation costs. Aggrieved, the insurer appealed before the State Commission of Telangana.

Contentions of the Insurer

The insurer argued that the complainant did not provide proof that he lost his job with the Andhra Pradesh government due to the amputation of his left leg. It was contended that the complainant also failed to disclose if he had taken loans on the policies before the accident. Based on these points, the insurer sought dismissal of the complaint, denying any service deficiency or negligence.

Observations by the State Commission

The Commission observed that the insurer rejected the claim, stating the complainant was not eligible for disability benefits. However, the policy in question contained no clause to support this For Policies No.2 and No.3, the insurer denied disability benefits, claiming the complainant's amputation of one foot did not qualify. The policy schedules lacked clauses related to disability benefits, and no evidence was submitted to justify repudiation. Furthermore, Policy No.4, an LIC Jeevan Saral policy, was repudiated on grounds of lapsed status, yet the insurer failed to prove unpaid premiums or provide reminders. The Commission criticized the insurer's negligence, deficient service, and failure to produce policy documents. It was held that the claim denials were unjustified and amounted to harassment. The appeal lacked merit and was dismissed, confirming the District Commission's order.

Case Title: The Zonal Manager, LIC of India Vs. K.Nagendra Balaji

Case Number: F.A. No. 106/2022