Insurance Contracts Imply Duty Of Disclosure By Insured: NCDRC

Brief Facts of the Case

The complainant's wife took out a policy under 'Jeevan Anand' from Life Insurance Corporation/insurer, with a sum assured of Rs. 5 Lakhs and an annual premium of Rs. 41,930. The wife fell ill and died due to cardio-respiratory failure. The complainant notified the insurer and filed a claim, which was rejected. An appeal was made to the insurer's Zonal Office, but no action was taken, leading to a complaint being filed. The complainant had provided all necessary details, including the deceased pre-existing condition of diabetes, which he believed should have been examined by the insurer when the policy was issued. The complainant filed a complaint before the District Forum and sought the policy amount of Rs. 5 Lakhs, Rs. 50,000 for mental agony and harassment, and Rs. 10,000 for litigation expenses. The District Forum partly allowed the complaint and directed the insurer to pay Rs. 5 lakhs along with Rs. 500 as litigation costs. The complainant appealed to the State Commission of Jharkhand, which dismissed the appeal. Consequently, the complainant filed a revision petition before the National Commission.

Contentions of the Insurer

The insurer acknowledged issuing the policy and receiving the claim but argued that the deceased had concealed critical information about her disease and treatment. It was discovered during the investigation that the deceased had a history of diabetes and other conditions for which she had been treated prior to taking out the policy. The insurer contended that this non-disclosure constituted a material misrepresentation, justifying the repudiation of the claim. They maintained that the decision to reject the claim was made in good faith based on the investigation and did not involve any deficiency.

Observations by the National Commission

The National Commission observed that the main issue in this case was the rejection of a death claim under a life insurance policy. The commission emphasized that the claim was rightly repudiated due to the non-disclosure of material facts at the time of policy issuance. The commission referred to case laws such as Bajaj Allianz Life Insurance Company Ltd. v. Dalbir Kaur and Reliance Life Insurance Co. Ltd. v. Rekhaben Nareshbhai Rathod, which emphasize the duty of disclosure in insurance contracts and the voidability of policies for non-disclosure. The Commission highlighted that the deceased life (DLI) assured had failed to disclose prior ailments and treatments, justifying the repudiation. The records showed that the DLI had obtained the policy and that the complainant's claim for Rs. 5 lakh was rejected due to undisclosed medical conditions. The commission observed that despite the complainant's assertions to the contrary, the proposal form did not mention these prior conditions. The commission found no grounds for revisional intervention and upheld the State Commission's decision, dismissing the revision petition.

Case Title: Abdul Mannan Vs. Life India Corporation of India

Case Number: R.P. No. 1971/2015