Hyderabad District Commission Holds LIC Liable For Repudiation Of Valid Claim Based On Insured's Subsequent Policy With Another Insurance Co.

Brief Facts:

The matter pertained to the tragic demise of Mr. K. Surya Snehit's (“Complainant”) father, Shri K. Prabhakar Rao, in a fatal accident. Mr Rao accidentally slipped into a canal, resulting in his drowning. After getting to know about the incident, the Complainant's family rushed to the scene, where they found Mr Rao deceased. The Complainant's mother filed a complaint with the local police station the following day. Mr Rao had an insurance policy, 'Jeevan Amar', with the Life Insurance Corporation of India (“LIC”), with a sum assured of Rs. 80 lakhs. The policy, initiated in 2020, required annual premium payments, which Mr Rao dutifully fulfilled until his demise. The Complainant, as the nominee, submitted a death claim for the sum assured, supported by requisite documents including the death certificate and FIR copy. Despite the submission and surrender of the original policy, LIC refused to honour the claim, stating that Mr Rao didn't disclose another policy with SBI Life Insurance. Feeling aggrieved, the Complainant approached the District Consumer Disputes Redressal Commission-III, Hyderabad, Telangana (“District Commission”) and filed a consumer complaint against LIC.

In response, LIC argued that Mr Rao did not disclose another policy he held with SBI Life Insurance, which it argued was material information affecting the underwriting decision. It maintained that Mr. Rao's failure to disclose this policy constituted suppression of material facts, leading to the rejection of the subject policy claim. Moreover, it highlighted the policy conditions regarding forfeiture in certain events and argued that LIC policies operate under a contract of 'uberrima fides', requiring full disclosure of all material information.

Observations by the District Commission:

The District Commission noted that upon comparing the commencement dates of the policies, it was evident that the SBI policy was taken after the LIC policy, making it implausible for Mr Rao to disclose it during the proposal for the LIC policy. Therefore, it held that there was no suppression of material facts by Mr Rao regarding the SBI policy in the proposal form of the subject policy, thereby entitling the Complainant to the death benefits as the nominee and son of the deceased.

Additionally, the District Commission noted that LIC had already settled a similar claim submitted by the Complainant's sister who was also a nominee under the SBI insurance policy. Therefore, the District Commission held LIC liable for deficiency in services. Consequently, it directed LIC to pay the death claim amount of Rs. 80,00,000/- along with Rs.25,000/- towards compensation and Rs. 5,000/- towards litigation costs.