Insurance Claim Cannot Be Rejected Without Proof Of Pre-Existing Disease: Delhi State Commission Directs Insurer To Pay ₹20 Lakh

The Delhi State Consumer Disputes Redressal Commission, comprising Justice Sangita Dhingra Sehgal (President) and Bimla Kumari (Member), held India First Life Insurance Company Ltd. liable for deficiency in service for wrongfully repudiating an insurance claim on the ground of alleged non-disclosure of pre-existing disease. The Commission observed that the insurer failed to produce any cogent medical evidence, relied on a contradictory and hearsay-based investigation report, and could not establish that the alleged illness had any nexus with the cause of death.

Brief Facts

The appellant/complainant's husband had obtained a life insurance policy under the “India First Group Credit Life Plan” for a sum assured of ₹20 lakh by paying a one-time premium. The policy commenced on 20.06.2012.

Following his death on 24.02.2014, the complainant submitted a claim. However, the insurer repudiated the claim on 10.11.2014 alleging suppression of pre-existing diseases, including diabetes and chronic kidney disease.

Aggrieved by the repudiation, the complainant approached the District Commission, contending that the insurer had wrongfully denied a genuine claim and that the alleged exclusion clauses were never properly communicated. However, the District Commission dismissed the complaint, holding that there was non-disclosure of material facts and no deficiency in service on the part of the insurer.

Challenging this order, the complainant filed an appeal before the State Commission.

Contentions of the Insurer

The insurer contended that the insured had concealed material facts regarding pre-existing diseases like diabetes and kidney disease while obtaining the policy. It argued that the contract was based on utmost good faith, and due to non-disclosure and false health declaration, the claim was rightly repudiated as per policy terms.

Observation and Decision

The State Commission observed that the insurer failed to produce any cogent medical evidence to prove that the deceased was suffering from a pre-existing disease at the time of obtaining the policy. It held that common lifestyle diseases like diabetes cannot, by themselves, be treated as valid grounds for repudiation, especially in the absence of proof of hospitalization or direct nexus with the cause of death.

The Commission further noted that the investigation report relied upon by the insurer was contradictory and based on hearsay, lacking any reliable documentary support. It also found that the insurer had failed to establish that the terms and conditions of the policy were ever supplied to the insured, and that there was an unjustified delay of 213 days in repudiating the claim, in violation of IRDA guidelines.

Accordingly, the Commission held that the repudiation of the claim amounted to deficiency in service. The appeal was allowed, and the insurer was directed to pay ₹20,00,000 (sum assured) with interest @6% per annum from the date of repudiation till realization, along with ₹1,00,000 as compensation for mental agony and ₹50,000 as litigation costs.

Case Title: MS. SUNITA KAIN vs. INDIA FIRST LIFE INSURANCE COMPANY LTD.

Case No.: FIRST APPEAL NO.-237/2023

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