NCDRC Holds LIC Responsible For Deficiency In Service Over Denial Of Legitimate Insurance Claim

Brief Facts of the Case

The complainant's husband obtained a life insurance policy from Life Insurance Corporation/insurer for Rs. 10,00,000, valid until 2035. After paying the half-yearly premium, he passed away due to an electric shock. The complainant, as the nominee, submitted the necessary documents and filed a claim, but the insurer failed to pay. She then alleged a deficiency in service and filed a complaint before the District Commission, which allowed the complaint. It directed the insurer to make the payment of the sum assured to the complainant, along with Rs.3300 for the mental harassment and the litigation expenses. Aggrieved, the insurer appealed before the State Commission of Haryana, which dismissed the appeal. Consequently, the insurer filed a revision petition before the National Commission.

Contentions of the Insurer

The insurer argued that the complaint was not maintainable and that the complainant had no legal standing. They claimed she concealed important facts and filed the complaint with ulterior motives. The deceased policyholder had serious health conditions, including a hernia, hydrocele, Hepatitis C, septicaemia, and diabetes, which were not disclosed when purchasing the policy. Despite specific questions, these details were omitted in the proposal form. As the contract was based on the accuracy of this information, the insurer rejected the claim due to non-disclosure. The insurer upheld the claim repudiation after an appeal and argued that the rejection was justified, as the policyholder was not in good health at the time of taking the policy. They asserted that there was no deficiency in service on their part.

Observations by the National Commission

The National Commission observed that the central issue was whether the complainant was entitled to claim against the insurer for the accidental death of the deceased life insured (DLI), despite false answers about his health conditions in the insurance application. It was undisputed that the DLI had an active insurance policy at the time of his death due to electrocution, and he had paid both the half-yearly premium and the additional premium for the Accidental Death and Disability Benefit Rider. The insurance policy was valid, and the accident occurred while the policy was in force. The Commission referred to Condition No. 11 of the insurance policy, which defines the criteria for claiming benefits under the Accidental Death and Disability Benefit Rider. Additionally, it cited the Supreme Court's ruling in LIC vs. Sunita, which held that the concealment of pre-existing health conditions does not affect the right to claim accidental death benefits if the accident occurred while the policy was active. The court emphasised that the insurer is liable to pay accidental death benefits under the policy when the death is caused by an unforeseen event, as defined by the policy. The Commission also noted its limited revisional jurisdiction under Section 58(1)(b) of the Consumer Protection Act, 2019, which parallels Section 21(b) of the 1986 Act. It relied on the rulings in Rubi (Chandra) Dutta vs. United India Insurance Co. Ltd. and Sunil Kumar Maity vs. SBI, where the Supreme Court reiterated that revisional powers are to be exercised only in cases of material irregularity or jurisdictional error. The Commission does not have the authority to interfere with concurrent findings by lower forums based on the appreciation of evidence, as clarified by the Court in Rajiv Shukla vs. Gold Rush Sales and Services Ltd.

After reviewing the facts, the Commission found no illegality or irregularity in the orders of the State Commission and District Forum. Therefore, the revision petition was dismissed, and the previous rulings were upheld.

Case Title: Life Insurance Corporation Of India Vs. Smt. Sunita Devi

Case Number: R.P. No. 1579/2023