Insurer's Liability Is Determined Based On Strict Interpretation Of Terms Of Contract, No Deviation Allowed: NCDRC

Brief Facts of the Case

The complainant purchased a LIC Jivan Anand With Profits (With Accident Benefit) policy from the Life Insurance Policy/insurer with a sum assured of Rs.2,00,00. The policy was set to mature at a later date. The complainant paid the first half-yearly premium to the insurer. Before purchasing the insurance, he underwent a medical examination, and all necessary forms were completed as per the insurer's requirements. Upon being deemed medically fit, the insurer issued the policy. Unfortunately, the complainant was involved in an accident resulting in 100% permanent disability. He subsequently filed a claim for the sum assured with the insurer. However, the claim was rejected by the insurer, citing the suppression of a pre-existing disease. The complainant filed a complaint in the District Forum and the complaint was allowed. Aggrieved by the District Forum's order, the insurer appealed to the State Commission which rejected the appeal. Consequently, the insurer filed a revision petition in the National Commission.

Contentions of the Insurer

The insurer argued that the complainant failed to disclose a pre-existing condition when filling out the proposal form, which goes against the terms and conditions of the Policy. Thus, it is believed that they were justified in denying the complainant's claim.

Observations by the Commission

The Commission observed that the District Forum meticulously analyzed the evidence and arguments before issuing a well-reasoned order. Similarly, after a comprehensive review of the pleadings and contentions, the State Commission found no justifiable reasons to intervene in the District Forum's decision. This determination was primarily rooted in the lack of substantial evidence supporting the reasons stated in the insurer's repudiation letter and the absence of proof indicating any pre-existing conditions in the Complainant before obtaining the policy, as per the pre-existing disease exclusion clause outlined in Clause 5 of the policy. The main point of contention revolved around the disparity in the compensation amount awarded, which amounted to Rs. 7,02,000, surpassing the sum assured under the insurance policy of Rs. 2,00,000, along with any accrued bonus. Upon the scrutiny of the policy details by the commission it was observed that the maximum sum assured stood at Rs. 2,00,000, as stipulated in Clause 10(a)(ii) of the policy terms and conditions. The complaint raised concerns regarding additional benefits of Rs. 5,00,000 without specifying the relevant provision from the policy terms and conditions. Furthermore, the Commission emphasized the importance of adhering to the terms and conditions of the policy, citing precedents such as United India Insurance Co. Ltd. v. Harchand Rai Chandan Lal (2004) and Suraj Mal Ram Niwas Oil Mills Pvt. Ltd. v. United India Insurance Co. Ltd. (2010), which underscored the need for strict interpretation of insurance contracts and adherence to the terms thereof. In these cases, the Supreme Court reiterated that the words used in an insurance contract must be given paramount importance, with no room for adding, deleting, or substituting any terms, unless ambiguity exists. The Court emphasized that the insurer's liability is determined strictly by the terms of the contract, and any deviation from these terms is impermissible.

The Commission granted the Revision Petition in part and directed the insurer to disburse the sum assured of Rs. 2,00,000, along with any accrued bonus, along with simple interest at a rate of 9% per annum.

Case Title: Zonal Manager, Life Insurance Corporationof India & Anr Vs. Sunil Kumar

Case Number: R.P. No. 1838/2019