NCDRC Upholds SBI Life Insurance's Rejection Of Insurance Claims Due To Non-Disclosure Of Material Facts

The National Commission relied on the principle of utmost good faith, observing that the non-disclosure of relevant information can lead to a voidable insurance contract.

Brief facts:

The deceased assured (Appellant) took life insurance worth Rs.5,00,000/- from SBI Life Insurance Company Ltd (Respondent) on 31.01.2013. Shortly after the policy was issued, the insured died due to cardiac arrest. Despite the completion of all formalities, his widow was denied claims.

Feeling aggrieved, the widow filed a complaint in the District Commission, Hanumangarh. The insurance company contended that the deceased had concealed his records of drug addiction and hospitalization.

Through an order dated 20.04.2015, the District Commission held the insurance company liable and directed them to pay Rs.5 Lakh and Rs.5000/—for mental harassment. Aggrieved, the insurance company filed an appeal before the State Commission.

State Commission through its order dated 28.04.2016, held that the insurance company was authorized to reject the insurance claim. Feeling aggrieved, the complainant filed a revision petition before the National Commission.

Contentions of SBI Life Insurance:

The insurance company contended that the deceased is liable for suppressing material facts. They also argued that there was no documentary evidence to prove that the deceased died due to a heart attack and not drug addiction. Further, there was no affidavit or report to show that the deceased underwent de-addiction treatment.

They further contended that the deceased was bound by the terms even though he was unfamiliar with English. They cited LIC of India Vs. Neelam Sharma 2014 NCJ 861 (NC) & Satwant Kaur Sandhu vs. New India Assurance Co. Ltd V (2009) CPJ 8 SC wherein it was held that concealment of facts can lead to claim repudiation. Thus, the right of the insurance company to deny the claim was upheld.

Observation by the National Commission:

The National Commission stated that the suppression of medical history justifies the claim of the insurance company. Following the principle of utmost good faith as established in Bajaj Allianz Life Insurance Company Ltd. v. Dalbir Kaur 2020 SCC OnLine SC 848, the insured is obligated to disclose all material facts.

Furthermore, in Reliance Life Insurance Co. Ltd. v. Rekhaben Nareshbhai Rathod (2019) 6 SCC 175, the Supreme Court has affirmed that suppressing relevant facts renders the policy voidable at the insurer's discretion. The undisclosed medical history led to an increase in the risk of death. Reliance was placed on the test laid down in Mahakali Sujhata v. Branch Manager, Future General Insurance Co Ltd., 2024 LiveLaw (SC) 300 to determine constituents of 'material fact' in insurance claims.

Therefore, the Commission concluded that the SBI Life Insurance Company had a valid reason to reject the claim as the deceased failed to disclose his medical history. The revision petition was dismissed and the order of the State Commission was upheld.

Case Title: Swarna Kaur Vs. SBI Life Insurance Company Ltd. & Anr.

Case No: Revision Petition NO. 1972 OF 2016

Counsel for the petitioner- Mr. Rahul Gupta

Counsel for the respondent- Mr. Bharat Malhotra

Date of Pronouncement: 07.11.2024

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