Burden of Proof On Insurer To Substantiate Reasons For Denial Of Claim : Telangana State Commission Holds LIC Liable For Deficiency In Service

The Telangana State Commission, presided by Smt. Meena Ramanathan And Sri. V. V. Seshubabu held Life Insurance Corporation liable for deficiency in service and held that the burden of proof to prove the basis for the repudiation of claim lies with the insurer. Brief Facts of the Case The complainant's deceased husband had a life insurance policy worth Rs. 1,00,000 with the Life Insurance Corporation/ insurer, which lapsed in 2012 but was later revived after paying the premium. The insured passed away from a sudden heart attack, and the complainant submitted a claim with all required documents. The insurer rejected the claim, citing “suppression of health conditions” by the deceased when taking out and reviving the policy. The insurer alleged he had received treatment for a heart condition at a medical institute before obtaining the policy. The complainant denies this, asserting the deceased was healthy and had not received such treatment. The complainant filed a complaint before the District Commission, which allowed the complaint. It directed the insurer to pay the policy amount of Rs. 1,00,000 at 9% interest, Rs. 10,000 for compensation and Rs. 2,000 as litigation costs. Aggrieved, the insurer appealed before the State Commission of Telangana. Contentions of LIC The insurer contended the complaint is not valid as per fact and/or law. With a half-yearly premium of Rs. 3,267, the policyholder effected the policy for Rs. 1,00,000. It became due but was later restored under a health declaration made upon revival. It was argued that the rationale behind insurance contracts lies with the concept of “utmost good faith” underlying issuance and revival alike. In an investigation, it was revealed that the deceased had already had a heart attack treatment when he applied for this policy. The insurer argued that there was deliberate concealment, and for this reason, the complaint should be dismissed. Observations by the State Commission The State Commission observed that there is no dispute that the life assured took the policy and later passed away. In the proposal form (Ex.B1), he clearly stated he had not received any treatment or been hospitalized in the last five years. He also denied any history of serious ailments like liver, heart, kidney issues, or diabetes. The policy had lapsed but was later revived, and no adverse health conditions were disclosed during the revival. The insurer heavily relied on Ex.B3, the admission record from Kamineni Institute of Medical Sciences, which showed that the deceased was admitted for chest pain and had a history of diabetes for five years. However, in the complaint, it was explicitly stated that the life assured had not received any treatment at that hospital and was in good health when the policy was taken and revived. The burden was on the insurer to prove that Ex.B3 pertained to the life assured. No one from the hospital was called to confirm that the medical record belonged to the life assured or to verify the treatments mentioned. The Commission observed that without such evidence, Ex.B3 cannot be relied upon. Consequently, it was held that there is no basis to claim non-disclosure of material health facts by the life assured. Therefore, the Commission dismissed the appeal and upheld the District Commission's order. Case Title: The Branch Manager, Life Insurance Corporation of India Vs. Rapolu Lalitha Case Number: F.A. No. 481/2020Click Here To Read/Download The order

Burden of Proof On Insurer To Substantiate Reasons For Denial Of Claim : Telangana State Commission Holds LIC Liable For Deficiency In Service

Ayushi Rani

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