The National Consumer Disputes Redressal Commission, chaired by Subhash Chandra, found Life Insurance Corporation (LIC) accountable for service deficiencies in a recent insurance case. They invalidated the claim due to the non-disclosure of prior non-life-threatening health conditions.
The case involved a woman whose husband purchased two LIC policies: the Jeevan Tarang Policy (valued at Rs. 19,75,000 with a half-yearly premium of Rs. 74,923) and the Samriddhi Plus Policy (valued at Rs. 2,75,000 with a one-time premium of Rs. 2,00,000). Unfortunately, her husband was diagnosed with right lung cancer and passed away. When she filed a claim, LIC rejected the Jeevan Tarang Policy, asserting that her husband had not disclosed his earlier health issues, including diabetes and a gall bladder surgery in 2007. However, they did make an ex gratia payment of Rs. 2,75,000 under the Samriddhi Plus policy. The woman then filed a complaint with the State Commission of Maharashtra, which ruled in her favor. LIC, not satisfied with this result, appealed to the National Commission.
LIC’s main argument was that the deceased had failed to disclose his previous insurance policies, three of which were relinquished. They backed their argument with several Supreme Court judgments, primarily relying on the Rekhaben case, which decreed that the concealment of prior illness and existing policies were valid reasons for rejecting a claim.
On reviewing the case, the Commission noted that the deceased had indeed hidden his health information and provided false answers in his insurance proposal. However, it also pointed out that LIC could not introduce new reasons for rejection beyond the initially stated ones, so the concealment of previous policies could not be considered at this point.
The Commission considered the Supreme Court’s judgment in the Rekhaben case, where the rejection was based on non-disclosure of good health, not previous policies. It also took into account another case, Satwant Kaur Sandhu Vs. New India Assurance Co. Ltd, where it was held that the insured had to prove that the suppression of facts was not material, especially if the claim was made within two years of the policy.
However, the Commission clarified that the deceased’s failure to disclose his earlier policies did not apply to this case. He had died of “septic shock with pneumonia,” with “Carcinoma of the lung” as the preceding cause. His death occurred within two years of the policy commencement, with no disclosure of previous policies or critical illnesses.
The Commission referred to a previous Supreme Court ruling (Sulbha Prakash Motegaonkar, 2020) where it was stated that the concealment of a non-life-threatening condition that didn’t cause death should not bar an insurance claim. This precedent was applicable to the current case, where the deceased developed cancer after his policy approval. His non-disclosure of diabetes and a prior gall bladder surgery could not disqualify him from the claim.
Accordingly, the Commission upheld the order of the State Commission, instructing LIC to pay Rs 19,75,000 (the sum assured under the policy) along with a 9% per annum interest and Rs. 10,000 as litigation costs. The case was titled ‘Life Insurance Corporation Of India Vs. Shubhalaxmi Shankar Shetty’ with the case number F.A. No. 2145/2019.
