Rejecting the contention of Reliance Life Insurance Company on concealed material evidence by the insured, the national consumer disputes redressal commission (NCDRC) directed the insurance company to pay the claim amount of Rs1 crore with an interest of 9% and Rs50,000 litigation cost to the nominee of the deceased life assured (DLA).
In an order, the NCDRC bench of Subhash Chandra (presiding member) says, "While it may be Reliance Life Insurance's case that the DLA did not disclose the fact of hospitalisation as required in the proposal form, the medical examination of the proposed insured is regarding pre-existing illness or diseases. Hospitalisation on account of a motor vehicle accident not reported in the form need not be held against the DLA as this does not amount to concealment of any pre-existing illness or disease, and specifically, since another insurance company, the Life Insurance Corporation of India (LIC) had cleared his claim without objection on this ground. Therefore, it cannot be said that the DLA concealed material evidence while obtaining the policy for which grounds the policy itself was considered void and the claim repudiated by Reliance Life Insurance."
The bench directed Reliance Life Insurance to pay, within two months, to the nominee of the DLA the amount of insurance for which he was eligible (Rs1 crore or 10 times the annualised premium or 105% of the premium paid as of the date of death) along with interest at 9% per annum from the date of submission of the claim.
On 14 October 2015, Moradabad-based Vijay Kumar Verma, an employee of Oriental Bank of Commerce (OBC), bought a life insurance policy for Rs1 crore from Reliance Life Insurance. The insurance policy was issued after a medical fitness examination conducted by the insurer.
On 27 October 2015, Mr Verma met with a road accident while riding a two-wheeler. He was found lying injured on the road in an unconscious state due to head injuries. He was taken to the government hospital in Karnal and was provided first aid, followed by admission to Arvinda Hospital in Karnal. Subsequently, he was shifted to Medanta Hospital in Gurgaon, where he expired on 9 November 2015.
His nominee Nirmala Devi informed Reliance Life Insurance about Mr Verma's death and submitted an insurance claim. However, on 7 May 2016, the insurer rejected the claim stating that Mr Verma had not disclosed that he had met with an accident one year before obtaining the policy in the proposal form and had suffered a concussion injury to the head.
Mr Verma was also covered by other policies, and without any objection, LIC settled the insurance claim filed by Ms Devi. She then approached NCDRC, claiming Rs2 crore for accidental death insurance, Rs50,000 for harassment and Rs51,000 towards litigation costs.
During the hearing, Reliance Life Insurance contended that the insurance claim was within one month and seven days from the commencing of the policy and, therefore, under Section 45 of the Insurance Act, 1938, it was mandated to investigate the genuineness of the claim. Further, it says that Mr Verma's past medical history of head injury due to a road accident one year before the policy was a material fact that had not been disclosed in the proposal form.
In addition, the insurance company contended that under the life insurance policy, a nominee is not a beneficiary and, hence, Ms Nirmala Devi is not a consumer under the Consumer Protection Act. Submitting a certificate from Dr Vineet Bhai from Arvind Hospital, Reliance Life Insurance contended Mr Verma was admitted to the hospital from 31 July 2014 to 1 August 2016 for a head concussion injury. Further, Mr Verma had taken sick leave from 31 July 2014 to 9 August 2014.
The counsel for Ms Devi argued that Reliance Life Insurance had approved and issued the policy after a medical examination by doctors in its panel. The repudiation of the claim was because previous head injuries had not been disclosed in the proposal form and was stated to be not relevant to the repudiation since a first information report (FIR) had been lodged about the accident in the police station at Civil Lines in Karnal, he added.
After hearing both sides, the NCDRC bench says the insurance company's contention that Ms Devi be non-suited as she is not a 'consumer' under the Act cannot be considered valid. "A nominee under a policy of insurance is the rightful claimant of the benefits under the policy, which is a contract between the insured and the insurer. Under the Insurance Act, the nominee is recognised as a beneficiary for all benefits which the policy provides subject to various stipulations."
Commenting on Reliance Life Insurance's contention of not disclosing previous injury in the proposal form, Mr Chandra from NCDRC observed that there is nothing in the medical discharge certificate of the hospital relied upon by the opposite party to suggest that the DLA had been advised not to ride a two-wheeler on medical grounds on account of the concussion head injury suffered by him earlier. "Except for the fact that he had been advised rest for 10 days for which purpose the DLA (Mr Verma) obtained leave from his employees, in the absence of any documents that would indicate that the DLA was driving a two-wheeler against medical advice, no other evidence to attribute the cause of the road accident has been brought on record."
“It would be most unjust to consider the repudiation of the claim by the nominee of the DLA to be not acceptable,” the bench says, adding, “The repudiation of the claim for the reasons stated in the repudiation letter dated 7 May 2016 is not considered to be based on a judicious appreciation of the facts and circumstances of this case.”
NCDRC then directed to pay Rs1 crore, the amount of insurance for which Mr Verma was eligible, along with an interest of 9% and Rs50,000 as litigation cost.
(Consumer Case No1725 of 2016 Date: 8 August 2023)