Non-Disclosure Of Material Facts Would Justify Repudiation, Chhattisgarh State Commission Allows SBI Life's Appeal

Brief Facts:

Vijay Yadav (“Deceased”), the Complainant's husband, had obtained two life insurance policies from SBI Life Insurance Co. Ltd. (“Insurance Company”). During the subsistence of the policies, the Deceased passed away. Following his death, the Complainant submitted the necessary documents to claim the insurance benefits. However, the Insurance Company returned the premium amounts for both policies, totalling Rs. 140,000/-, claiming that the Deceased had died due to excessive alcohol consumption. As a result, they denied the insurance benefits. Feeling aggrieved, the Complainant filed a complaint with the District Consumer Disputes Redressal Commission, Mahasamund, Chhattisgarh (“District Commission”).

In response, the Insurance Company asserted that the Deceased's Membership Form under the first policy was received on August 28, 2015. The policy, with an initial premium of Rs. 4,936/-, had a sum assured of Rs. 670,000, payable in the event of death as per the policy terms. At the time of his death on July 2, 2020, the assured sum was Rs. 45,465/-, which was duly transferred to the Complainant's bank account.

For the second policy, initiated on October 25, 2018, with an initial premium of Rs. 70,000/- and a sum assured of Rs. 700,000/-, the Insurance Company claimed that the Deceased had misrepresented his health condition. They discovered that he was a chronic alcoholic and under treatment for the same before signing the proposal form. Consequently, they repudiated the claim and refunded the premiums totalling Rs. 140,000/- to the Complainant.

The District Commission found that the Insurance Company had issued the first policy on September 24, 2015, and another policy on October 26, 2018. By repudiating the claim within three years, the District Commission concluded that the Insurance Company had committed a deficiency in service. Therefore, the complaint was partly allowed, directing the Insurance Company to pay the balance sum assured after deducting the refunded premiums, along with compensation and litigation costs.

Dissatisfied by the District Commission's order, the Insurance Company filed an appeal to the State Consumer Disputes Redressal Commission, Chhattisgarh (“State Commission”).

Observations by the State Commission:

The State Commission observed that the death claim for the first policy issued in 2015 had already been settled. An amount of Rs. 45,465/-, as per the policy conditions, was transferred to the Complainant's bank account on October 29, 2020. This transfer was clearly stated in the written version before the District Commission and was not contested by the Complainant with any concrete evidence.

Regarding the second policy, issued on October 26, 2018, the Deceased died within three years, on July 2, 2020. The State Commission referred to Section 45 of the Insurance Act, 1938, as amended by the Insurance Law (Amendment) Act 2015, which allows policies to be questioned within three years on grounds of fraud. The investigation revealed that the Deceased was a chronic alcoholic and had been under treatment for mental health issues for four years, which he did not disclose while filling out the proposal form. The medical prescriptions and discharge cards from various hospitals confirmed this. The State Commission perused the proposal form which showed these questions were answered negatively by the Deceased.

The State Commission referred to Satwant Kaur Sandhu vs New India Assurance Company Ltd. [(2009) 8 SCC 316], which emphasized the duty of the proposer to disclose material facts in insurance contracts. It also referred to Branch Manager, Bajaj Allianz Life Insurance Co. Ltd. vs Dalbir Kaur and Subhash Kumar vs. Branch Manager, Bajaj Allianz Life Insurance Co. Ltd. & Anr. [Revision Petition No. 2049 of 2017], where the NCDRC reinforced the need for full disclosure in insurance contracts.

The State Commission concluded that the Deceased had concealed material information regarding his medical history. This non-disclosure justified the Insurance Company's decision to repudiate the claim. It was held that the District Commission had failed to appreciate the facts properly. Consequently, the appeal was allowed, and the order of the District Commission was set aside.

Case Title: Head Claims, SBI Life Insurance Co. Ltd. and Anr. vs Smt. Sumitra Yadav

Case No.: Appeal No. FA/23/334

Advocate for the Appellants: Shri Anshul Mishra

Advocate for the Respondent: Shri Lokesh Kumar Mishra

Date of Pronouncement: June 7th, 2024