Holding that the insurer’s decision was unjustified and contrary to the principle of good faith, the national consumer disputes redressal commission (NCDRC) has directed HDFC Standard Life Insurance Company Ltd to pay Rs20 lakh to a bereaved father whose son’s life insurance claim was repudiated.
In an order on Wednesday, the NCDRC bench of air vice-marshal (AVM) J Rajendra (retd) and justice Anoop Kumar Mendiratta, says, “The policy in question is a term life insurance cover, not a mediclaim policy, and the death occurred suddenly. The insurer has not filed any affidavit or credible evidence beyond its investigator's report to establish his actual income or occupation. Moreover, the insurer had a duty to verify these details before policy issuance. Accordingly, failure to disclose the alternate profession and income does not constitute suppression of a material fact, and the insurer's repudiation of the claim is unjustified.”
The bench partly allowed HDFC Life’s appeal against the 2024 order of the Uttar Pradesh state consumer disputes redressal commission but upheld the core finding that the complainant was entitled to the sum assured. NCDRC, however, modified the state commission’s direction to pay additional compensation and reduced the relief to the insured amount with interest.
The case arose from the claim filed by Ram Kunwar Chauhan of Ghazipur district in Uttar Pradesh, whose son, Anil Kumar Chauhan, had purchased an HDFC term assurance policy on 2 March 2013 for a sum assured of Rs20 lakh for a 20-year term. He had paid an annual premium of Rs5,328 through an authorised agent of the insurer.
Barely two months later, on 20 May 2013, Anil Kumar Chauhan died following an illness. His father, named as the nominee, submitted the insurance claim along with all required documents. On 19 January 2015, HDFC Life rejected the claim on the grounds that Anil Kumar Chauhan had misrepresented himself as a teacher earning Rs2 lakh annually, while the insurer’s inquiry allegedly revealed he was a farmer with an income of only Rs30,000 a year.
Ram Kunwar Chauhan, the father, maintained that his son had truthfully declared his occupation and income and accused the insurer of wrongful denial of benefits. He approached the state consumer commission in 2015 seeking payment of the insured amount, interest, and compensation for harassment.
After prolonged proceedings, the state commission in its order dated 1 April 2024 found that the insurer had failed to substantiate its allegations and directed HDFC Life to pay Rs20 lakh with 12% annual interest from the date of death, an additional Rs1 lakh for mental agony and Rs10 lakh towards wrongful rejection and litigation expenses. It also directed that if the order was not complied with within 30 days, the interest rate would rise to 15% per annum.
Challenging this order, HDFC Life filed an appeal before the NCDRC, contending that the decision was arbitrary and unsustainable. Its counsel, Joydip Bhattacharya, argued that Anil Kumar Chauhan belonged to an agriculturist family with an annual income of Rs30,000, as shown in the family register and ration card. He said it was impossible for a person with such limited means to secure a policy of Rs20 lakh, and that Anil Kumar Chauhan’s misrepresentation of his occupation as a teacher materially affected the insurer’s risk assessment. The company also objected to the interest being calculated from the date of death instead of from the date of repudiation and described the damages awarded as excessive.
The bench noted that he did not appear before the commission and was proceeded ex parte. Nevertheless, after examining the record and hearing the insurer’s arguments, NCDRC held that there was no convincing proof of deliberate misrepresentation by the insured.
The commission observed that Anil Kumar Chauhan was a graduate and might have simultaneously engaged in teaching and farming and that HDFC Life had produced no affidavit or evidence other than an internal investigator’s report to substantiate its claims about his occupation or income. It also noted that the insurer had a duty to verify the proposal details before issuing the policy.
The bench relied on the Supreme Court’s rulings in Mahakali Sujatha vs Future Generali India Life Insurance Company Ltd and Mahaveer Sharma vs Exide Life Insurance Co Ltd, which reaffirmed that ambiguities in policy documents must be interpreted contra proferentem—against the drafter of the document, usually the insurer.
The commission quoted extensively from the Supreme Court’s discussion on the burden of proof, emphasising that the insurer bears the responsibility of proving any alleged non-disclosure or misrepresentation that would exclude its liability. It cited the apex court’s observation that “the burden of proving the fact which excludes the liability of the insurer to pay compensation lies on the insurer alone and no one else.”
NCDRC held that while insurance contracts are indeed based on utmost good faith, the obligation of good faith applies equally to insurers. The commission stated that failure to verify the insured’s declared income or occupation before policy issuance cannot later be used as grounds to deny a legitimate claim. It found that the alleged discrepancy between being a teacher or a farmer with Rs2 lakh or Rs30,000 income is not a material misrepresentation that would influence the insurer’s decision to issue the policy, particularly since the policy was a term life cover and not a medical insurance policy.
While upholding the complainant’s right to the insured amount, the commission modified the relief granted by the state commission. It observed that multiple compensations for a single deficiency in service were impermissible under the law. NCDRC therefore set aside the award of Rs1 lakh for mental agony and Rs10 lakh towards wrongful rejection, terming them excessive and legally untenable.
The final order directed HDFC Life to pay Ram Kunwar Chauhan the sum assured of Rs20 lakh with simple interest at 7% per annum from six months after his son’s death—i.e., from 20 November 2013—until actual payment. The payment must be made within two months from the date of the order, failing which the interest for the delayed period would increase to 10% per annum. The commission made no order as to costs.
The judgment, pronounced on 8 September 2025, underscores the NCDRC’s continued insistence on fairness and accountability in the insurance sector. It also highlighted that ambiguities or unclear queries in insurance proposal forms cannot be construed against consumers.
The ruling reflects a balanced approach: while the insurer was spared the heavy compensations imposed by the state commission, it was reminded that mere suspicion or retrospective interpretation of declarations cannot justify the denial of genuine claims.
The case also exposes the need for greater diligence at the underwriting stage of insurance policies. The commission’s observation that HDFC Life had the means and opportunity to verify the insured’s occupation and income before policy issuance highlights a systemic gap in due diligence. Many life insurance policies, especially in rural areas, are sold through agents who fill forms on behalf of clients, sometimes introducing inaccuracies that later become grounds for rejection.
(First Appeal No344 of 2024 Date: 8 October 2025)
