Holding State Bank of India (SBI) and SBI Life Insurance Co Ltd (SBI Life) guilty of unfair trade practice and deficiency in service in rejecting the death insurance claim of a borrower of a home loan, the national consumer disputes redressal commission (NCDRC) directed them to settle the claim in full in terms of the related policy and pay compensation of Rs8,000. While setting aside the order of Punjab state consumer disputes redressal commission, NCDRC affirmed the order passed by the Gurdaspur district consumer disputes redressal forum.
In an order, the NCDRC bench of Subhash Chandra (presiding member) says, "The respondents (SBI and SBI Life) have failed to discharge the burden of proving willful concealment of material information by the deceased life assured (DLA) at the time of obtaining the policy and have failed to bring on record any evidence of the treating doctor by way of evidence or affidavit. The order of the state commission is therefore liable to be set aside since it is based on surmise and presumption."
The case is related to a Rs9.63 lakh home loan (including insurance premium) obtained by Gurdaspur-based Harjit Kaur from SBI. While obtaining the home loan of Rs9 lakh, she was made a member of the SBI Life Dhanraksha Plus LPPT policy after paying a premium of Rs63,445. However, after a brief illness, on 10 June 2011, she expired. Her husband and nominee, Sarabjit Singh, filed a claim with SBI Life. However, the insurance company rejected the claim, stating that the policy was obtained by suppressing material evidence about Ms Kaur's pre-existing illnesses.
Mr Singh filed a complaint before the district forum. The district forum allowed the complaint on the grounds that the policy was a requirement under the loan, had not been sought by Ms Kaur of her own volition, and that the policy was issued after due examination.
The district forum says, "...while partly allowing the present complaint, we hold the SBI and SBI Life as guilty of unfair trade practice and deficiency in service and thus order them to settle the impugned claim in full in terms of the related policy (i.e., liquidate the housing loan outstanding) besides to pay Rs5,000 as compensation and another Rs3,000 as cost of litigation to the complainant within 30 days."
The state commission, however, upheld the appeal of SBI and SBI Life on the grounds that a policy of insurance obtained based on a false declaration of good health was a violation of 'utmost good faith'. It set aside the order of the district forum.
Mr Singh then approached NCDRC. The counsel for Mr Singh submitted that the order passed by the state commission order did not set out any valid and legal reasons and did not consider the fact that Ms Kaur had not opted for the policy but had to necessarily take it on account of her having taken a house building loan from SBI under a proposer master policy.
Further, he says, "The state commission erred in concluding that Ms Kaur was suffering from diabetes and kidney disease for four years without any affidavit or evidence from the doctor concerned and was therefore based on presumption."
The counsel for SBI contended that Ms Kaur submitted all the required papers to SBI Life, including a declaration of good health. "Ms Kaur, the deceased, was not maintaining good health and in fact, was suffering from chronic ailments like diabetes mellitus and chronic kidney disease before the date of subscribing to the policy," the counsel stated.
SBI Life submitted that the loan was granted on 21 April 2010 and Ms Kaur expired on 1 June 2011. The counsel for SBI Life says, "While processing the claim, SBI Life found that the deceased had submitted the wrong declaration regarding her health; hence, it rejected the claim. Non-disclosure of material information is fatal to the doctrine of utmost good faith and thus, the contract of insurance is vitiated."
After hearing all parties and perusing documents available on record, NCDRC observed that it is evident that Ms Kaur did not approach SBI Life for a policy. "It was, rather, a policy that was required to be taken as part of the house building loan that was sanctioned by SBI to her. The policy is a master policy of SBI which had admittedly granted a loan to the Ms Kaur. There is no evidence on record that she approached SBI Life for a life insurance policy."
"This is also evidenced by the fact that SBI was the proposer. The policy was approved by SBI Life based on the proposal and after its due diligence with regard to the health status of DLA. The repudiation of the claim is based on the basis of an investigation by SBI Life that Ms Kaur suffered from pre-existing diseases which had not been disclosed at the time of obtaining the policy based on a doctor's certificate issued by the hospital where she was admitted prior to her death," it added.
Mr Chandra from NCDRC also noted that SBI and SBI Life had not examined the doctor. "There is also no affidavit on record and no evidence showing previous medical treatment has been brought on the record," he says, adding, "this contention of SBI and SBI Life cannot be considered."
As regards violation of uberrimae fides or the principle of utmost good faith, NCDRC says this case needs consideration in view of the fact that the policy was not of Ms Kaur's volition but rather was imposed upon her as a condition of the house building loan sanctioned by SBI.
"This is evidenced by the fact that the proposer was SBI and was not applied for by either the DLA (Ms Kaur) or by any other agent of the insurance company. There is nothing on the record that the DLA had approached SBI Life or a policy or that it filled in the declaration of good health in which there was concealment of pre-existing illnesses. All the paperwork was done by SBI as the 'proposer'," the bench says.
While allowing the petition filed by Mr Singh, NCDRC set aside the order passed by the state commission and affirmed the district forum's order.
(Revision Petition No642 of 2017 Date: 4 December 2023)
