The national consumer disputes redressal commission (NCDRC) has dismissed an appeal filed by HDFC Standard Life Insurance Company Ltd, upholding an order of the Uttar Pradesh (UP) state consumer disputes redressal commission directing the insurer to pay ₹75 lakh to the widow of a deceased policyholder, after ruling that the company failed to prove fraudulent suppression of material facts. NCDRC also noted that the statutory protection under Section 45 of the Insurance Act can be squarely applied in this case, preventing the insurer from questioning the policy after expiry of the prescribed period of three years.
In
an order last week, the NCDRC bench of air vice-marshal (AVM) J Rajendra (retd) and justice Anoop Kumar Mendiratta held that the insurer had failed to discharge the statutory burden under Section 45 of the Insurance Act, 1938, to establish that the deceased policyholder had deliberately concealed a material medical condition while obtaining the policy.
"Apart from relying upon the medical records generated during the hospitalisation of the deceased life insured (DLA) in October-November 2016, no cogent evidence has been produced to establish that, on the date of submission of the proposal form on 17 October 2013, the DLA was suffering from any liver disease or chronic alcoholism, was aware of such condition, or had deliberately suppressed the same. Significantly, before issuing the policy, HDFC Standard Life itself subjected the DLA to a medical examination through its authorised diagnostic centre and, being satisfied with the medical reports, accepted the proposal and issued the policy. The insurer has also failed to establish, as required by the Explanation to Section 45(4) of the Insurance Act, 1938, that had the alleged facts been disclosed, no life insurance policy would have been issued," the bench said.
The appeal challenged a 9 February 2021 order of the UP state consumer disputes redressal commission, which had directed the insurer to pay the insured sum of ₹75 lakh with 10% simple interest from the date of filing of the complaint, besides awarding ₹1 lakh as compensation for mental agony and ₹20,000 towards litigation costs.
After submitting the proposal form on 17 October 2013 and paying the initial premium of ₹15,612, Muzaffar Nagar-based Sourabh Jain had purchased a life insurance policy from HDFC Standard Life with a sum assured of ₹75 lakh. His wife, Neha Jain, was named as the nominee.
Before issuing the policy on 8 November 2013, the insurer conducted a medical examination of Mr Jain through its authorised diagnostic centre and accepted the proposal after being satisfied with the medical reports.
Mr Jain died on 22 November 2016 at the Institute of Liver and Biliary Sciences, Delhi. Following his death, his widow lodged a claim on 24 February 2017.
However, HDFC Standard Life repudiated the claim on 28 July 2017, alleging that Mr Jain had concealed material facts, including an alleged history of chronic alcoholism and rejection of an earlier insurance proposal by another insurer.
Before NCDRC, HDFC Standard Life argued that its post-claim investigation revealed that the insured had been suffering from progressive liver failure before obtaining the policy and had deliberately answered 'No' to questions relating to serious illness, hospitalisation, liver disease and alcoholism in the proposal form.
The insurer contended that this amounted to a breach of the principle of utmost good faith governing insurance contracts and justified repudiation of the policy. It also argued that the state commission had wrongly relied only on the death summary mentioning cardiac arrest while ignoring evidence of a pre-existing liver ailment.
Rejecting these submissions, the commission observed that the insurer relied only on hospital records created during Mr Jain's hospitalisation in October-November 2016 and failed to produce any evidence showing that he suffered from liver disease or chronic alcoholism at the time of submitting the proposal form in October 2013.
The commission also noted that the insurer had subjected the proposer to a medical examination before issuing the policy and had accepted the proposal after being satisfied with the reports.
Further, it held that the insurer failed to establish, as required under the Explanation to Section 45(4) of the Insurance Act, that the policy would not have been issued had the alleged facts been disclosed.
The commission also emphasised that the policy had commenced on 18 November 2013 and the insured died on 22 November 2016, after the expiry of three years.
It held that the statutory protection under Section 45 of the Insurance Act, therefore, squarely applied, preventing the insurer from questioning the policy after expiry of the prescribed period.
The bench observed that, even otherwise, the insurer was required to prove that the alleged misstatement related to a material fact, was made fraudulently and was knowingly false. Since no such evidence was produced, repudiation of the claim was legally unsustainable and amounted to a deficiency in service as well as an unfair denial of contractual benefits.
While deciding the appeal, the commission relied on several Supreme Court judgments, including Reliance Life Insurance Co Ltd vs Rekhaben Nareshbhai Rathod, Texco Marketing Pvt Ltd vs Tata AIG General Insurance Co Ltd, United India Insurance Co Ltd vs Hyundai Engineering & Construction Co Ltd and Narsingh Ispat Ltd vs Oriental Insurance Co Ltd.
It reiterated that although insurance contracts are based on the doctrine of utmost good faith, the burden lies on the insurer to prove that any alleged suppression was material, deliberate and directly affected the risk undertaken. It further observed that exclusion clauses must be strictly proved by the insurer and any ambiguity should operate in favour of the insured.
Finding no illegality or perversity in the state commission's decision, the NCDRC dismissed HDFC Standard Life's appeal and affirmed the order directing payment of the insurance claim. It made no order as to costs.
(First Appeal No242 of 2021 Date: 1 July 2026)
Insurance business is a mockery in India
Insurance business is a mockery in India