Wrongful Repudiation Of Insurance Despite Full Disclosures By Insured, Chandigarh District Commission Holds Kotak Mahindra Life Insurance Liable

Brief Facts:

Mr Pardeep Garg, who obtained a home loan of ₹ 77,40,000/- from L&T Housing Finance Limited (“L&T”), mortgaged his only residential house due to financial distress. In June-July 2019, Rajesh Kushwaha, the marketing and sales manager of L&T, persuaded Mr Garg to secure the loan by obtaining insurance from Kotak Mahindra Life Insurance Company Ltd. (“Insurance Company”). Despite disclosing his kidney disease, the sales manager assured that it wouldn't hinder policy benefits. In October 2020, Mr Garg, the Deceased Life Assured (DLA), contracted COVID-19 and passed away. Mrs. Rajni Garg (“Complainant”) sought policy benefits, but the insurance company rejected the claim, citing the alleged concealment of kidney disease by the DLA. The Complainant made several communications with the insurance company but didn't receive any satisfactory response. Feeling aggrieved, the Complainant approached the District Consumer Disputes Redressal Commission-I, U.T. Chandigarh (“District Commission”) and filed a consumer complaint against the insurance company, its sales manager and L&T.

While admitting that the subject policy was obtained from them, the insurance company contended that the DLA concealed his kidney disease in the medical questionnaire, justifying the claim rejection. The sales manager denied any cause of action against him and prayed for the rejection of the complaint against him. Admitting that the DLA obtained a loan from them, L&T argued that if an insurance claim is payable, it should be by the insurance company, not them.

Observations by the District Commission:

The District Commission found no merit in the repudiation ground claiming the DLA suffered from kidney disease before purchasing the policy. It held that the insurance company failed to produce evidence showing the insured still suffered from the alleged disease and neglected to obtain information from the hospital about the basis of the recorded history.

Furthermore, even if the DLA was proven to have kidney disease, the District Commission held that it had no nexus with the cause of death. It held that the death due to ischaemic heart disease and myocardial infarction was unrelated to the lumbar spondylitis with PID with sciatica. It noted that the medical certificate of cause of death specified hypoxic cardiac arrest and COVID-19 pneumonia sepsis.

The District Commission held that the insurance company's repudiation was unjustified. Therefore, it held that the insurance company was liable for deficiency in services. Consequently, it directed the insurance company to pay the claim amount of ₹ 79,90,953/- to the Complainant along with interest. The insurance company was directed to pay a compensation of ₹ 20,000/- for mental agony caused to the Complainant. It was also directed to pay the litigation costs of ₹ 10,000/- to the Complainant.