Insurance - Temporary and resolved ailments unrelated to the cause of death do not constitute suppression of material facts.

NCDRC Orders Life Insurance Corporation to Settle Rs. 1 Crore Claim. Insurer's Rejection of Claim Over Non-Disclosure of Minor Ailments Deemed Unjustified

In a landmark decision, the National Consumer Disputes Redressal Commission (NCDRC) has directed Life Insurance Corporation (LIC) to settle a life insurance claim of Rs. 1 crore, following the rejection of the claim due to alleged non-disclosure of minor health treatments. The case, filed by Smt. Kanta against the insurance giant, highlighted key issues in insurance law, particularly concerning the disclosure of material facts.

The dispute arose after LIC repudiated the claim on the grounds that Smt. Kanta's deceased husband had not disclosed prior homeopathic treatments for bronchitis and lipoma when applying for the policy. However, the NCDRC found that these temporary and resolved ailments were unrelated to the cause of death, which was a sudden cardiac arrest. The bench, comprising AVM J Rajendra AVSM VSM (Retd) and Anoop Kumar Mendiratta, ruled that these conditions did not constitute suppression of material facts.

The Commission criticized the insurer's practice of seeking unrelated information, such as inquiries into any domestic violence complaints against the deceased. Such actions were deemed unwarranted and strongly deprecated by the bench.

The judgment emphasized the duty of utmost good faith in insurance contracts, noting that non-disclosure of minor, unrelated health issues does not breach this duty. The Commission reiterated that it is the insurer's responsibility to prove the materiality of any non-disclosed facts, which LIC failed to do in this case.

The NCDRC directed LIC to pay the policy amount along with interest from the date of claim repudiation and also awarded litigation costs to the complainant. The decision underscores the importance of fair practices in the insurance sector and serves as a reminder to insurers about their obligations under consumer protection laws.

Bottom Line:

Repudiation of insurance claim on grounds of non-disclosure of material facts - Temporary and resolved ailments unrelated to the cause of death do not constitute suppression of material facts.

Statutory provision(s): Consumer Protection Act, 1986, Insurance Act, 1938

Smt. Kanta v. Life Insurance Corporation, (NCDRC)(New Delhi) : Law Finder Doc Id # 2775870