Pleading Ignorance No Defense For False Statements In Signed Insurance Proposal: NCDRC

Brief Facts of the Case

The complainant's husband obtained a life insurance policy from Life Insurance Corporation/insurer, valid until 2020. As his legally wedded wife and policy beneficiary, the complainant claimed that the insurer's agent had made the complainant sign blank papers and fill in the information without explanation. The insurer's doctors declared the complainant fit during a health examination. However, the complainant later fell ill, was admitted, and subsequently passed away. As the sole legal heir, the complainant submitted a claim to the insurer, which was initially delayed and ultimately denied. The complainant then filed a complaint with the District Forum, which allowed the complaint. The insurer appealed to the State Commission, which allowed the appeal, following which the complainant filed a revision petition before the National Commission.

Contentions of the Insurer

The insurer argued that the deceased life assured (DLA) made deliberate misstatements and withheld material health information when filling out the proposal form. Specifically, the DLA concealed his treatment for diabetes mellitus-II and his treatment for pancreatitis, both of which occurred before the proposal form date. The insurer maintained that this concealment justified the forfeiture of the premium paid.

Observations by the National Commission

The National Commission observed that, as established by the Supreme Court in numerous judgments, insurance contracts are special agreements based on full disclosure. The person seeking insurance must disclose all material facts related to the risk. The commission referenced the Supreme Court's judgment in Manmohan Nanda Vs. United India Insurance Co. Ltd., which set forth rules for making an insurance proposal. It emphasized that carelessness is no excuse unless the error is so obvious that it couldn't mislead anyone. If the proposer incorrectly marks 'No' instead of 'Yes,' claiming it was a mistake won't suffice. The commission acknowledged the complainant's claim that the insurer's agent had the deceased life assured (DLA) sign blank papers and fill in the information without explaining. The commission further highlighted the Supreme Court's decision in Reliance Life Insurance Co. Limited and Anr. Vs. Rekhaben Nareshbhai Rathod stating that a person who signs a proposal containing false information cannot typically avoid the consequences by arguing they signed without reading or understanding it.

The National Commission concluded that the State Commission had issued a well-reasoned order, which should not be interfered with at the revision stage, and dismissed the petition.

Case Title: Sonia Vs. Life Insurance Corporation Of India

Case Number: R.P. No. 698/2017