LIC Cannot Deny Accidental Death Benefit On 'Hyper-Technical' Grounds: Chandigarh Consumer Commission

The District Consumer Disputes Redressal Commission, Chandigarh, comprising Amrinder Singh Sidhu (President) and B.M. Sharma (Member), has held that insurance companies cannot reject legitimate claims by taking shelter behind minor or hyper-technical objections, particularly when the insured has acted in good faith. Holding the Life Insurance Corporation of India (LIC) guilty of deficiency in service, the Commission directed LIC to pay the accidental death benefit denied under a life insurance policy.

Brief Facts of the Case:

The complainants, Raj Kumari and Mahendra Singh, had taken a life insurance policy from Life Insurance Corporation of India in the name of their minor son, Mandeep Singh. During the currency of the policy, Mandeep Singh died on October 12, 2020, due to electrocution caused by an open street-light wire.

After his death, the complainants approached LIC for settlement of the claim. As there was no nomination under the policy, they obtained a succession certificate from a civil court. Pursuant thereto, LIC released a sum of ₹2,41,500 towards the basic death benefit on February 7, 2023.

However, LIC refused to pay the accidental death benefit amounting to ₹1,87,500, prompting the complainants to approach the District Consumer Disputes Redressal Commission, Chandigarh alleging deficiency in service and unfair trade practice.

Contentions of the Complainants:

The complainants argued that the deceased died due to electrocution during the subsistence of the policy and, therefore, they were entitled to the accidental death benefit. While LIC released the basic sum assured after the complainants obtained a succession certificate, it wrongfully denied the accidental benefit of ₹1,87,500 on technical grounds.

It was contended that the policy did not mandate any separate exercise of option for accident benefit upon attaining majority, nor was any such requirement ever communicated to the deceased or the complainants. The rejection of the claim was thus arbitrary and amounted to deficiency in service and unfair trade practice.

Contentions of the Opposite Party (LIC):

LIC admitted issuance of the policy and payment of the basic death claim but contended that the accidental benefit was not payable. It was argued that although the policy was taken when the life assured was a minor, he had attained majority before his death. Upon attaining majority, according to LIC, the life assured was required to execute a nomination and specifically opt for the accident benefit, which he failed to do during his lifetime.

Observations and decision of the Commission:

The Commission observed that the death of the life assured was accidental and occurred during the validity of the policy. It held that LIC failed to prove any policy condition requiring the deceased to separately opt for accident benefit after attaining majority or that such requirement was ever communicated to him. Rejecting LIC's hyper-technical defence, the Commission found the denial of accidental benefit to be deficiency in service.

Emphasising that insurance is meant to safeguard against unforeseen contingencies and is not a luxury, the Commission held that insurers cannot deny claims on minor technicalities when the insured has acted bona fide. The denial of the accidental death benefit was held to amount to deficiency in service and unfair trade practice.

Accordingly, the complaint was partly allowed, and LIC was directed to pay ₹1,87,500 towards the accidental death benefit along with interest at 9% per annum from February 7, 2023, besides ₹20,000 as compensation and litigation costs. The Commission, however, declined interest on the amount already paid towards the basic death benefit.

Case Title: Raj Kumari and ors Vs. LIC

Case No.: CC/137/2023

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