Why widow won Rs 2 crore payout, but apex consumer body rejected second life insurance claim

“The failure of the DLA (deceased life assured) to give a complete disclosure in this regard cannot be ignored since the correct disclosure of having already obtained earlier policies would have enabled the insurer to take a considered decision based on the egregious risk,” the consumer commission said on April 6.

Background

The complaint was filed by Rohini Balaji Goli, whose husband had taken two life insurance policies, worth Rs 2 crore each, in 2014 and 2015.

According to the complaint, the insured underwent medical tests before issuance of the policies and was found fit, following which both policies were issued. The man later died on March 17, 2017, due to septic shock and related complications.

The complainant submitted claims on April 29, 2017, but the insurer repudiated them on October 26, 2017, alleging suppression of material facts including prior insurance policies and a disability arising from a 2010 accident.

NCDRC’s findings on disability disclosure

• The national consumer commission held that non-disclosure of the disability was not material in the facts of the case. It observed that the insurer had itself conducted medical examinations prior to issuing the policies, and therefore, the physical condition of the insured was within its knowledge or could have been reasonably ascertained.
• The bench noted that the cause of death, septic shock and related complications was entirely unrelated to the earlier injury suffered in 2010.
• In these circumstances, the consumer commission concluded that the alleged non-disclosure did not influence the decision of a prudent insurer and could not be used to reject the claim.

Assessment of non-disclosure of policies

• While examining the issue of undisclosed insurance policies, the consumer commission drew a distinction between the first and second policies.
• In respect of the first policy issued in 2014, it found that the insured had disclosed major policies taken from LIC and Bajaj Allianz, although there was an inaccuracy in mentioning the total sum assured.
• The commission held that this discrepancy could be treated as a bona fide mistake rather than fraudulent suppression.
• It also noted that the other undisclosed policies were of relatively small amounts, taken over a long period, and would not have influenced the decision of a prudent insurer in issuing a Rs 2 crore policy.
• However, the consumer commission upheld the repudiation of the second policy issued in 2015. It found that in the second proposal form, the insured had failed to disclose earlier high-value policies from LIC and Bajaj Allianz and had only mentioned the first policy issued by the same insurer.
• The bench emphasised that each proposal form is independent and requires full and accurate disclosure.
• It concluded that the omission of substantial prior insurance coverage was material and could have affected the insurer’s risk assessment, thereby justifying repudiation of the second claim.

Insurer’s grounds

Advocates Meenakshi Midha, Muskaan Garg, Gary Singh and Vartika Gupta, appearing for the insurance company, argued that the insured had failed to disclose a 51 per cent permanent disability in his right upper limb caused by a road accident in 2010. They also contended that several existing insurance policies held by the insured with other insurers were not disclosed in the proposal forms.

According to the insurer, these omissions amounted to a breach of the principle of “utmost good faith,” which governs insurance contracts, and had a direct bearing on its decision to underwrite the risk. It maintained that the policies were obtained through misrepresentation, thereby justifying repudiation of both claims.

Complainant’s stand

Advocates Arun Johri and Ankur Gupta, appearing for the complainant, denied any suppression of material facts, asserting that the insured had undergone medical examination by doctors empanelled with the insurer and was declared fit at the time of policy issuance.

The counsel argued that the alleged disability did not affect mobility, sight or hearing in a manner relevant to the questions in the proposal form and, therefore, did not require disclosure in the manner alleged.

It was further submitted that the cause of death had no connection with the prior injury and that major insurance policies had been disclosed, with any omissions relating only to minor policies that were not material to the risk assessment.

Final directions

Partly allowing the complaint, the commission directed the insurer to pay Rs 2 crore under the first policy along with interest at 6 per cent per annum from the date the amount became due until realisation.
At the same time, it upheld the repudiation of the second Rs 2 crore policy, holding that the non-disclosure in that instance was material and justified the denial of the claim.

Jaguar airbag failure at 90 Kmph: Why national consumer commission denied Rs 5 crore payout after 12-year battle

On April 2, the National Consumer Disputes Redressal Commission (NCDRC) has dismissed a complaint alleging a critical airbag failure in a Jaguar Land Rover vehicle seeking Rs 5 crore compensation, holding that the safety system functioned as designed and did not suffer from any manufacturing defect.

A bench of Justice A P Sahi, President, and Bharatkumar Pandya, Member, was hearing a consumer complaint alleging deficiency in service and manufacturing defect in a Jaguar Land Rover “Autobiography” model vehicle.

“The services of the airbag being complained of beyond the warranty period cannot extend any benefit or a cause to the complainant no. 1 (Bhullar) to claim any indemnification for an alleged defect. The background of the case therefore on these peculiar facts does not warrant a relief on the allegations of deficiency made by the complainant against the OPs (Jaguar Land Rover and AMP Motors),” the national consumer commission said.