Bihar State Commission Holds Bajaj Allianz Life Insurance Liable For Wrongful Repudiation Of Valid Claim

Brief Facts:

The Complainant's deceased brother had taken a life insurance policy from Bajaj Allianz Life Insurance (“Insurance Company”) on 4th July 2013. The policy assured a sum of Rs. 5,00,000/- and included a minimum death benefit of Rs. 15,00,000/-. The premium was to be paid half-yearly. The Complainant was the sole nominee in this policy. The deceased died on 17th November 2013. Following his death, the Complainant filed a claim at the Insurance Company's branch office where the policy had been purchased. However, the Insurance Company repudiated the claim, citing that the deceased had been suffering from a chronic disease before purchasing the policy and had concealed this information in his proposal form.

Feeling aggrieved, the Complainant filed a consumer complaint in the District Consumer Disputes Redressal Commission, Muzaffarpur, Bihar (“District Commission”). He argued that the reason provided by the Insurance Company for repudiating his claim was incorrect and baseless. He asserted that this action constituted a deficiency in service on the Insurance Company's part.

In response, the Insurance Company contended that the deceased failed to disclose that he had been suffering from a condition known as “large subacute lacunor in intract in left ganliocapsular area and chronic infection in right basal ganglia” since 16th January 2013. Therefore, the claim was rightfully repudiated as the terms and conditions of the policy were violated.

The District Commission partly allowed the complaint and directed the Insurance Company to disburse the minimum death benefit of Rs. 15,00,000/-, pay Rs. 20,000/- as compensation and Rs. 10,000/- as litigation costs to the Complainant. Dissatisfied by the decision of the District Commission, The Insurance Company filed an appeal before the State Consumer Disputes Redressal Commission, Bihar (“State Commission”).

Observations of the State Commission:

The State Commission noted that the Insurance Company was relying on letters issued by the 'local Sarpanch' and 'Aanganbari Sevika' to contend that the deceased was suffering from an undisclosed pre-existing disease. It was found that the Insurance Company failed to prove that the deceased had knowingly concealed a pre-existing illness. The State Commission relied on LIC of India vs Badri Nageshwaramma [II (2005) LPJI (NC)], where it was held that the burden of proving such a claim lies heavily on the insurance company.

It was further held that reports from the 'Sarpanch' and 'Aanganbari Sevika' could not be considered conclusive proof of the deceased's pre-existing illness, as they were not medical experts and did not support their reports with affidavits. The CT scan report submitted by the Insurance Company was also not adequately linked to the deceased as the only legible word was "Vijay", which was insufficient to confirm it as the deceased's report. Therefore, the State Commission held that the Insurance Company failed to justify repudiating the claim.

Consequently, the appeal was dismissed, and the order of the District Commission was upheld. The Insurance Company was ordered to pay an additional Rs. 25,000/- as the cost of the appeal, in addition to the amount ordered by the District Commission.

Case Title: Bajaj Allianz Life Insurance vs Abhay Kumar

Case No.: First Appeal No. A/58/2021

Date of Order: 8th July 2024