Order Name: Indumati Vs. Senior Divisional Manager, Life Insurance Corporation
Case No.: F.A. No. 206/2017
The National Consumer Disputes Redressal Commission (NCDRC), led by Mr. Subhash Chandra and Dr. Sadhna Shanker, has ruled that insurers have the right to reject policies if any significant information is not disclosed by the policyholder. This verdict is based on the principle that any fact which could influence an insurer’s decision is considered material.
Case Background
In this case, the complainant’s husband had an insurance policy with Life Insurance Corporation (LIC) worth Rs. 30,00,000. He passed away due to septic shock while the policy was still active. Upon filing a claim, the insurer rejected it, citing the non-disclosure of crucial health information by the deceased. After failing to resolve the issue with the Ombudsman, the complainant approached the State Commission of Maharashtra, seeking Rs. 30,00,000 as the policy amount, Rs. 12,000 for financial loss, and Rs. 5,00,000 for mental anguish, along with 14% interest from the claim rejection date. The State Commission dismissed her complaint, prompting an appeal to the National Commission.
Insurer’s Arguments
The insurer argued that the deceased did not disclose his hospitalization for Pleural effusion in the insurance proposal form. They claimed this justified the rejection of the claim. Additionally, the insurer argued that the complaint was time-barred and maintained that the deceased was responsible for providing accurate information, even though he was examined by the insurer’s panel doctor. They alleged that the policy was obtained fraudulently, making the doctrine of estoppel inapplicable.
National Commission’s Observations
The National Commission noted that under Section 45 of the Insurance Act 1938, an insurer can challenge a policy after two years if it can prove that the policyholder fraudulently suppressed material inaccuracies. The Commission emphasized that as a doctor, the deceased knew that omitting information about his previous ailments was a significant and deliberate oversight.
They referenced earlier cases, Satwant Kaur Sandhu vs. New India Assurance Company Ltd. and Reliance Life Insurance Company Ltd. vs. Rekhaben Nareshbhai Rathod, which held that hiding material health information invalidates an insurance contract. The Supreme Court has also stressed that such material facts are crucial for assessing risks and determining the terms of an insurance contract. Any fact that could influence a prudent insurer’s decision is material, and failing to disclose it allows the insurer to repudiate the policy.
Conclusion
The National Commission dismissed the appeal and upheld the State Commission’s decision, finding no legal or factual error.
Takeaway
This ruling underscores the importance of full disclosure when applying for insurance. Omitting significant health information can result in the rejection of claims, even if the policyholder has passed away. Always ensure all material facts are disclosed to avoid future complications with insurance claims.
