Insured Must Report All Details Accurately, Regardless Of Importance: NCDRC

Brief Facts of the Case

The complainant's son had obtained a life insurance policy with a sum assured of ₹30,00,000 and an annual premium of ₹12,566 for 30 years from Aviva Life Insurance/insurer. Following the death of the insured due to a heart attack, the complainant notified the insurer, but the claim was denied, citing pre-existing Chronic Kidney Disease. Subsequently, the complainant filed a complaint with the State Commission, seeking the insurer's direction to pay the policy amount of ₹30,00,000, along with compensation for mental anguish and deficiency in service, totaling ₹34,10,000, with interest at 12% per annum. The State Commission allowed the complaint, following which the insurer appealed before the National Commission against the State Commission's order.

Contentions of the Insurer

The insurer contended that the Deceased Life Assured had secured the policy by withholding crucial information. They argued that the deceased had been hospitalized, complaining of breathlessness for two months, and was discharged the following day. It was further asserted that according to hospital records, the deceased had a history of Chronic Kidney Disease and was undergoing maintenance hemodialysis. The insurer maintained that the insurance proposal had been accepted in good faith and urged the dismissal of the complaint.

Observations by the Commission

The commission observed that in the case of P C Chacko & Anr. Vs. Chairman, LIC of India & Ors., it was held that a contract of insurance is rooted in the principle of utmost good faith, as established by the Supreme Court. Similarly, in Satwant Kaur Sandhu Vs. New India Assurance Co. Ltd., it was emphasized that an assured is obligated to provide full and truthful information within their knowledge when applying for insurance, irrespective of their opinion on its materiality. The commission further referred to the case of Reliance Life Insurance Co. Ltd. Vs. Rekhaben Nareshbhai Rathod, highlighting that the duty of full disclosure extends to all pertinent information that may influence the insurer's decision to provide coverage. Therefore, the failure to disclose previous insurance coverage in the proposal form can lead to the insurer repudiating the claim under the policy.

The commission further observed that in the present case, the insured's argument that the cause of death was unrelated to the withheld information in the proposal form cannot be upheld. Additionally, the deceased life assured was obligated to disclose all material facts known when obtaining the policy, regardless of their connection to the cause of death. The commission held that the insurer was justified in repudiating the claim based on the non-disclosure of material facts.

Consequently, the Commission overruled the State Commission's order and allowed the appeal by the insurer.

Case Title: Aviva Life Insurance Co. India Ltd. Vs. Kariyappa

Case Number: F.A. No. 355/2017