Insurance - Repudiation of life insurance claim on the ground of misrepresentation of occupation and income not permissible

HDFC Standard Life Insurance Ordered to Honor Insurance Claim in Landmark NCDRC Judgment. National Consumer Disputes Redressal Commission rules against insurer's claim repudiation, emphasizing the doctrine of contra proferentem and insurer's duty to verify policy details.

In a significant ruling, the National Consumer Disputes Redressal Commission (NCDRC) upheld a decision requiring HDFC Standard Life Insurance Company Ltd. to honor a life insurance claim initially repudiated on grounds of misrepresented occupation and income by the insured. The case, HDFC Standard Life Insurance Company Ltd. v. Ram Kunwar Chauhan, centered around the doctrine of uberrima fides, which mandates utmost good faith in insurance contracts, and the rule of contra proferentem, where ambiguities in insurance documents are construed against the insurer.

The controversy began when Anil Kumar Chauhan, insured under a term assurance policy, passed away, prompting his nominee, Ram Kunwar Chauhan, to file a claim for the policy sum of Rs. 20 lakh. The insurer rejected the claim, alleging false declarations in the proposal form regarding Anil's occupation as a teacher and income, which investigations suggested were inaccurate. The State Consumer Disputes Redressal Commission, however, ruled in favor of the claimant, directing the insurer to pay the assured sum with interest and additional compensation for mental agony.

Upon appeal, the NCDRC partially upheld the State Commission's order, affirming the payout of the sum assured but modifying compensatory damages. The appellate body emphasized the insurer's responsibility to verify the insured's details before policy issuance and declared the non-disclosure of alternate profession and income as non-material, given the lack of concrete evidence from the insurer.

The judgment further clarified that multiple compensations for a single instance of service deficiency are unsustainable, thereby setting aside the additional awards for mental distress and wrongful rejection. The decision is seen as a reinforcement of consumer rights in insurance disputes and a reminder for insurers to adhere to the highest standards of good faith and fair dealing.

Bottom Line:

Ambiguity in proposal form regarding the insured's occupation and income should be construed against the insurer under the rule of contra proferentem

Statutory provision(s): Consumer Protection Act, 2019 Section 51, Evidence Act, 1872 Sections 101, 102, 103, 104, 106

HDFC Standard Life Insurance Company Ltd. v. Ram Kunwar Chauhan, (NCDRC)(New Delhi) : Law Finder Doc Id # 2775868