Haryana State Commission Holds Exide Life Insurance Co. Liable For Wrongful Termination Of Insurance Policy

The State Consumer Disputes Redressal Commission, Haryana bench of Shri Naresh Katyal (Judicial Member) held 'Exide Life Insurance Company' liable for unfair trade practice for wrongfully terminating the insurance policy without allowing the policyholder to make a representation. It also failed to investigate the policyholder's medical history between the policy's proposal and commencement time.

Brief Facts:

The Complainant's husband (“deceased”) held the 'Exide Life Guaranteed Income Insurance Plan' by Exide Life Insurance Company Ltd. (“Insurance Company”). During the subsistence of the policy, he was involved in a fatal road accident. An FIR was registered on the same of the accident. After the deceased succumbed to the injuries, the Complainant filed a death claim with the Insurance Company. She was asked to fulfil certain formalities, which she did by submitting a representation subsequently.

However, instead of paying the assured sum of Rs. 22,48,382/-, which included the guaranteed death benefit and rider benefits, the Insurance Company refunded the premium amount to the deceased's bank account without notifying her. Later, the Insurance Company refused to accept the Complainant's papers for settling the claim as per the insurance contract. No resolution was provided by the Insurance Company even after the Complainant sent a legal notice. Feeling aggrieved, the Complainant filed a consumer complaint in the State Consumer Disputes Redressal Commission, Haryana (“State Commission”).

In response, the Insurance Company argued that there was no valid policy at the time of the deceased's death. It stated that the policy had already been cancelled under Section 45(2) of the Insurance Act due to the deceased's failure to disclose his two-year-old liver ailment. The Insurance Company claimed that it had informed the deceased about the cancellation and had refunded the premium amount of Rs. 56,686/- to his bank account.

Observations of the Commission:

The State Commission found that the Insurance Company failed to provide substantial evidence of the deceased's medical condition. Its report from the 'Fraud Detection and Prevention Unit' was found unreliable as it lacked signatures or official stamps.

Moreover, the State Commission highlighted that the Insurance Company had sufficient time between the policy's proposal and its commencement, to investigate any medical history but failed to do so. It noted that the Insurance Company did not allow the deceased to be heard before terminating the policy, violating the principles of natural justice.

Therefore, the State Commission held that the termination of the policy was arbitrary and amounted to unfair trade practice. It declared the cancellation letter as illegal and non-binding. The complaint was allowed, and the Insurance Company was directed to pay Rs. 22,24,191/- to the Complainant with 7% interest. Additionally, it was directed to pay Rs. 30,000/- as compensation for mental agony and Rs. 20,000/- as litigation costs.

Case Title: Anjali Devi vs Exide Life Insurance Company Ltd. and Others

Case No.: CC/390/2018

Advocate for the Complainant: Mr Sudhir Gupta

Advocate for the Respondent: Mr Inderjeet Singh

Date of Decision: 24th September 2024

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