NCDRC Holds Bajaj Insurance Liable For Deficiency In Service Over Wrongful Repudiation Of Insurance Claim

Brief Facts of the Case

The complainant's son had purchased a life insurance policy from Bajaj Allianz Life Insurance/insurer with an annual premium and a sum assured. He passed away suddenly, and the complainant, as the nominee, filed a claim. The insurer paid only the fund value, rejecting the insurance claim, stating that the deceased had failed to disclose alcohol consumption in the health declaration form. The insurer argued that this non-disclosure affected the terms of the policy. The complainant maintained that her son was healthy, had no bad habits, and the rejection caused emotional distress. Aggrieved, she filed a consumer complaint before the District Commission, seeking the sum assured and compensation. The District Commission allowed the complaint and directed the insurer to pay Rs. 4,28,618 towards the insurance claim. Aggrieved, the insurer appealed before the State Commission of Gujarat, which allowed the appeal, prompting the complainant to file a revision petition before the National Commission.

Contentions of the Insurer

The insurer argued that the deceased did not disclose chronic alcohol consumption and liver disease, which was discovered after death during their investigation. They claimed that if these conditions had been known, the policy would not have been issued or would have had different terms. The policy had lapsed due to non-payment of premiums and was later revived by the deceased through a DGH form. In this form, the deceased failed to disclose alcohol-related health issues. Based on the investigation, medical records, and the DGH form, the insurer determined the death was due to alcohol-related liver disease. As a result, the claim for Rs. 4,08,000 was denied, but the fund value of Rs. 20,618 was paid to the complainant. The insurer stated this decision followed procedure and the claim rejection was justified.

Observations by the National Commission

The National Commission observed that the core issue was whether the policyholder failed to disclose his alcohol consumption and liver disease and if such non-disclosure justified the insurer rejecting the claim. The insurer argued that the deceased consumed alcohol daily for 12 years but did not disclose this in the Declaration of Good Health. The complainant contended that the policyholder never consumed alcohol, as stated in the original proposal form. The insurer relied solely on a hospital admission record to substantiate its claim, which lacked corroboration or affidavits to prove regular alcohol use. The commission noted that unsigned hospital records alone could not establish the insurer's claim. Further, the insurer failed to meet the burden of proof required to apply an exclusionary clause, as clarified in United India Insurance Co. Ltd. v. M/s Hyundai Engineering & Construction Co. Ltd. and other precedents. The commission concluded that the insurer did not sufficiently prove false declarations or material non-disclosure. Following precedents, including Narsingh Ispat Ltd. v. Oriental Insurance Co. Ltd., any ambiguity in evidence favors the insured. The rejection of the claim was deemed unjustified, and the insurer's decision was rejected. The National Commission upheld the District Forum's order, and allowed the revision petition.

Case Title: Vasantiben Vs. Bajaj Allianz Life Insurance Company Ltd

Case Number: R.P. No. 1737/2017

Click Here To Read/Download The Order