Order Date: Not Specified
Order Name: Life Insurance Corporation Of India Vs. Reena Agarwal
Case No.: R.P. No. 849/2020
The National Consumer Disputes Redressal Commission, under the guidance of Justice Sudip Ahluwalia, has ruled in favor of the Life Insurance Corporation (LIC) in a case involving the necessity for insured individuals to provide accurate information in their insurance proposal forms.
### Key Facts
A man purchased two life insurance policies through LIC. Due to what was described as a year-end rush, the insurance agent had the man sign blank proposal forms, promising to fill them out later. A senior medical examiner conducted a thorough medical examination, and the policies were subsequently issued. Unfortunately, the man passed away due to acute abdominal pain, leaving behind his wife and two minor daughters.
Upon the man’s death, his wife, acting on behalf of their daughters, filed for the insurance claim. After three years, LIC rejected the claim, citing the suppression of material facts, specifically the man’s chronic alcoholism, which they claimed was the cause of death. Dissatisfied with this decision, the wife filed a complaint with the District Forum.
### Lower Courts’ Decisions
The District Forum ruled in favor of the complainant, directing LIC to pay Rs. 2,00,000 for each policy, along with 9% interest per annum and Rs. 50,000 for mental agony. LIC then appealed to the State Commission of Delhi, which upheld the District Forum’s decision. Finally, LIC took the matter to the National Commission.
### Arguments from LIC
LIC contended that the State Commission erred in its judgment. They argued that their Medical Officer should have noted the insured’s chronic alcoholism. However, they emphasized that it was the insured’s responsibility to disclose all material facts, regardless of the medical examination results. LIC pointed out that the insured had died within 6-7 months of the policy issuance, making the policy subject to scrutiny under Section 45 of the Insurance Act for any suppressed facts.
### National Commission’s Observations
The National Commission noted that the deceased was a law graduate and former advocate, making it unlikely that he would sign blank proposal forms without understanding their contents. They referred to the Supreme Court’s decision in Reliance Life Insurance Co. Ltd. and Anr. v. Rekhaben Nareshbhai Rathod, which stated that not knowing the contents of a proposal form does not absolve the insured of their responsibilities.
The National Commission found that the insurance company’s rejection of the claim was justified due to the willful suppression of material facts. They concluded that both the District and State Commissions had erred by ignoring the principle of utmost good faith (uberrima fides).
### Conclusion
The National Commission allowed LIC’s revision petition and dismissed the State Commission’s order.
### Takeaway
This ruling highlights the importance of providing accurate information in insurance proposal forms. Policyholders must ensure that all material facts are disclosed during the application process to avoid complications during claim settlements.
