Mother’s 12-year legal battle against LIC ends with court ordering staggering Rs 1.26 crore payout

Dr Inder Jit Singh (NCDRC presiding member) and Shashi Nandkeolyar (member) pronounced the order on June 9.

“After considering all the facts and circumstances of the case, we hold that the insured has not suppressed any material facts with respect to any pre-existing disease in the proposal form. Hence, the rejection of the claim by the Insurance Company in all five cases on these grounds was not justified,” the commission said on June 9.

No evidence of pre-existing disease

• In all five cases, the proposal form is dated June 27, 2010 (submitted to the insurance company July 6, 2010), the court noted. On this date, the insured was not suffering from any disease.
• No medical or treatment records have been placed on record by the insurance company to show whether, on or before the date the insured submitted the proposal form, he was suffering from any disease, knew about any disease, or was taking any treatment for such disease.
• Mere mention in the discharge summary of the hospital about a “history of 2 months of diabetes mellitus” is not sufficient evidence to conclude that the insured was suffering from diabetes on or before the date of signing the proposal form.
• In fact, a subsequent discharge summary dated February 5, 2013, from the same hospital referred to the insured as non-diabetic.
• Moreover, death happened on June 11, 2013, nearly three years later, due to a heart attack, which has no nexus with the disease allegedly suppressed.

Son took 5 policies before death

The case relates to Nitin Suresh Gambhir, who had submitted proposals for five life insurance policies with LIC in June 2010. The policies carried a combined sum assured of Rs 60 lakh. His mother, Jayshree Suresh Gambhir, was the nominee under the policies.

The 38-year-old died on June 11, 2013, due to cardiac arrest. Following his death, his mother filed insurance claims under all five policies.

However, LIC rejected the claims on July 11, 2014, alleging that the deceased had withheld material information regarding his health while obtaining the policies.

According to LIC, he was suffering from diabetes mellitus and had been admitted to PD Hinduja Hospital in September 2010 for treatment of a non-healing ulcer and cellulitis, but had failed to disclose those facts.

Why LIC rejected claim

• LIC argued that hospital records from September 2010 described Gambhir as a “known case of diabetes since two months” and showed that he was receiving medication for the condition.
• The insurer maintained that he was obligated to inform LIC about changes in his health and that his failure to do so amounted to suppression of material facts, rendering the policies void.
• The corporation also claimed that some of the policies had not yet commenced risk coverage when the health developments occurred, and therefore, the information should have been disclosed before the policies became effective.

State commission had granted partial relief

• In September 2016, the Maharashtra State Consumer Commission partly accepted the mother’s complaint.
• It directed LIC to pay claims under three policies worth Rs 40 lakh, along with interest, but upheld the repudiation of claims under two other policies worth Rs 20 lakh.
• It also awarded compensation for mental agony and litigation costs.
• Unhappy with the ruling, both sides approached the NCDRC.
• LIC challenged the relief granted under the first three policies, while Jayshree Gambhir sought payment under the remaining two policies as well.

No link between alleged diabetes, death

The commission further observed that Gambhir died nearly three years after the alleged diagnosis and that the cause of death was a heart attack. It held that there was no evidence showing any nexus between the alleged diabetes and the eventual death claim.

Referring to Supreme Court precedents, the commission said the insurer had failed to demonstrate that the alleged non-disclosed condition had any connection with the claim being made.

Dispute over two policies also resolved

• A major issue before the NCDRC concerned the two policies for which the state commission had denied relief.
• The commission examined premium receipts and found that the first premiums for those policies had actually been received by LIC on September 7, 2010, rather than September 13, 2010, as claimed by the insurer.
• Consequently, the insurance risk was deemed to have commenced on September 7 itself.
• Since Gambhir’s hospitalisation began only on September 11, 2010, he was under no obligation to disclose that development before the commencement of the risk.
• The NCDRC, therefore, concluded that the repudiation of claims under those two policies was also unjustified.

LIC directed to pay Rs 60 lakh claim

Allowing the mother’s appeal and dismissing LIC’s challenge, the commission ordered the insurer to pay the entire insured amount of Rs 60 lakh under all five policies.

The prolonged legal delay will ultimately cost the insurer dearly. The mandated 9 per cent simple interest adds Rs 5.4 lakh to the tally every year, accumulating to a staggering Rs 64.8 lakh over the 12-year dispute.

When added to the Rs 60 lakh principal, Rs 1 lakh for mental agony, and Rs 50,000 in litigation costs, LIC’s total final payout stands at Rs 1,26,30,000 (Rs 1.26 crore).

With the ruling, Jayshree Gambhir’s long legal fight that began after her son’s death in 2013 has finally come to an end, securing the full insurance benefits that had remained locked in litigation for more than a decade.