Insurance Policy Voidable If Presence Of Suppression Of Facts In Proposal Form: NCDRC

Brief Facts of the Case

Max Life Insurance/insurer issued a life insurance policy to the life assured. A bank sanctioned a loan to the complainant, who was required to make monthly payments for 8 years. The bank, acting as an agent for the insurance company, facilitated the insurance policy issuance. The policyholder passed away shortly after the policy was issued. The complainant was the nominee who submitted a claim, which was denied due to non-disclosure of a medical condition. The complainant claimed there was no prior knowledge or intentional non-disclosure of the illness by the policyholder, arguing that the repudiation constituted a deficiency in service. Consequently, the complainant filed a consumer complaint before the State Commission of Andhra Pradesh seeking payment of the sum assured with interest and costs. The State Commission dismissed the complaint, following which the complainant appealed before the National Commission.

Contentions of the Opposite Party

The insurer denied the allegations, stating that the policy was obtained with a single premium payment. They refuted claims that the bank induced the policyholder to obtain the policy and confirmed the claim was repudiated due to non-disclosure of the policyholder's prior medical condition, as evidenced by medical records. The insurer refunded the premium to the policyholder's account and argued there was no deficiency in service since the claim repudiation was in line with policy terms. Furthermore, the bank also denied the allegations, asserting there was no contractual relationship between the complainant and the bank regarding the insurance policy. The bank stated it only facilitated a loan and had no role in the insurance claim repudiation. They argued that the bank was wrongly involved in the proceedings without any cause of action and sought dismissal of the complaint against it.

Observations by the National Commission

The National Commission observed that the primary issue in this case was the repudiation of an insurance claim by the insurer due to the alleged concealment of pre-existing medical conditions by the insured. The key question is whether the insured provided false information or concealed material facts about their health condition when applying for the insurance policy. The commission highlighted that it is undisputed that the insured received treatment for non-Hodgkin lymphoma at a hospital before signing the proposal form and obtaining the insurance policy. The insured passed away shortly after the policy was issued, and the cause of death was related to a pre-existing condition. The Commission found that the insured failed to disclose his medical conditions when obtaining the insurance policy. The Commission referenced the Supreme Court's decision in Bajaj Allianz Life Insurance Company Ltd. v. Dalbir Kaur, which emphasized that insurance contracts are based on utmost good faith and require the disclosure of all material facts. Similarly, in Reliance Life Insurance Co. Ltd. v. Rekhaben Nareshbhai Rathod, the Supreme Court held that suppression of facts in the proposal form renders an insurance policy voidable by the insurer. Based on these principles, the Commission found no illegality or infirmity in the State Commission's order and dismissed the appeal, upholding the original decision.

Case Title: Isnaka Devasenamma Vs. M/S. Max Life Insurance Company Limited

Case Number: F.A. No. 664/2022