Terming the repudiation letter issued by the insurance company as 'illegal and liable to be set aside', the national consumer disputes redressal commission (NCDRC) directed Birla Sun Life Insurance Co Ltd to pay a claim amount of Rs5 crore with an interest of 9% within two months to the nominee of the deceased life assured (DLA).
In an order last week, the NCDRC bench of justice Ram Surat Ram Maurya (presiding member) and Bharatkumar Pandya (member) says, "...material facts for underwriting the risk to be covered by the insurer were related to health queries, which were answered correctly by the DLA. Information relating to insurance history cannot be said to be material for underwriting the risk to be covered by the insurer. Similarly, the date of birth was relevant for charging the premium, and on the basis of the date of birth as 14 October 1960, a higher premium has been charged as such, no prejudice has been caused to the insurer. In view of the aforesaid discussion, we find that the repudiation letter dated 20 February 2015 is illegal and liable to be set aside."
In September 2012, Kandivali, Mumbai-based Yogesh Balwantrai Parekh bought a 20-year policy for Rs5 crore from Birla Sun Life Insurance. He paid a basic premium of Rs3.76 lakh for the Birla Sun Life Insurance Protector Plus Plan policy for a sum assured of Rs5 crore. The insurance company conducted a medical examination of Mr Parekh and issued a policy of Rs5 crore from 31 December 2012 to 31 December 2032.
While visiting Rajkot for business, Mr Parekh developed sudden chest pain. On 26 April 2014, he expired. Ratnam Hospital at Rajkot, where he died, informed the local police, who conducted an inquest of the dead body and sent it for post-mortem. After post-mortem, the dead body was released, brought to Mumbai, and cremated on 27 April 2014.
Dipti Yogesh Parekh, the nominee of Mr Parekh, filed an insurance claim on 13 June 2014. Birla Sun Life Insurance demanded some papers which were provided. Instead of settling the claim, the insurer referred the matter to the reinsurer as the insurance amount was of high value. As asked by the reinsurer, Birla Sun Life Insurance investigated the case. It rejected the claim via letter on 20 February 2015, on the grounds that in the proposal form, Mr Parekh, the DLA, had replied in respect of the queries relating to his health and previous insurance policies in the negative which was incorrect.
The investigation found that Mr Parekh had applied for an insurance policy from Birla Sun Life Insurance on 3 January 2004 which was rejected for his adverse medical history. The date of birth of Mr Parekh, as mentioned in the proposal form, did not tally with his birth certificate as issued by Sangli Miraj and Kupwad City Municipal Corporation and his permanent account number (PAN) card. Due to concealment of material facts, the policy was void, the insurer contended.
Ms Parekh argued that the policy was issued after an in-depth medical examination of Mr Parekh, in which nothing adverse was diagnosed and the date of birth, as mentioned by him in the proposal form, was as mentioned in his PAN card. "Date of birth was relevant to charge the premium. In this case, on the basis of date of birth as 14 October 1960, a higher premium was charged and no prejudice was caused to the insurer."
Birla Sun Life Insurance had appointed Sanjay Bhatt Claims Consultancy Pvt Ltd to investigate Mr Parekh's death. The investigator, after investigation, submitted a report on 12 February 2015, stating that the entire police procedure relating to the inquest and sending the dead body for post-mortem was fake and that the post-mortem report was not reliable.
After hearing both sides and perusing the documents available on record, NCDRC observed that Birla Sun Life Insurance adduced evidence of Dr CH Asrani (medical expert) and Mr Bhatt (the investigator) to prove that the DLA was suffering from diabetes and heart-related diseases before obtaining the policy in question. "Mr Bhatt, the investigator, made hectic efforts to prove that the police records and post-mortem report of Mr Parekh are fabricated documents but the fact that he died on 26 April 2014 at Ratnam Hospital could not be falsified. If Ratnam Hospital informed the local police about the suspicious death of Mr Parekh, then the police was duty bound to make an inquest, send the dead body for post-mortem."
"In the absence of any other document relating to post mortem of the body of Mr Parekh, we see no reason to disbelieve the post-mortem report and viscera examination report as produced by the complainant (Ms Parekh). In the repudiation letter, the investigator's report was not relied upon. Even for the sake of argument, it is taken that Mr Parekh died due to a heart attack, then also it could not be presumed that he was suffering from diabetes and heart diseases in December 2012 at the time of obtaining the present policy," the bench says.
Another question NCDRC decided was when the interest is payable on the insurance claim. Referring to a judgement by the Supreme Court in secretary, irrigation department, the government of Orissa vs GC Roy (1992) 1 SCC 508, the bench says interest is compensation for deprivation of use of the money to its legitimate owner.
"Regulation 9 of Insurance Regulatory and Development Authority -IRDA (Protection of Policyholders' Interest) Regulations, 2017 provides for completion of survey within three months and after that the insurer is required to take decision within one month. Therefore, at the most from the date of communication of loss, the settlement has to be done within six months. If it is not done within six months, then the claimant is entitled for interest after six months," NCDRC ruled.
It then directed Birla Sun Life Insurance to pay, within two months, Rs5 crore with 9% interest per annum from 13 December 2014 to Ms Parekh.
(Consumer Case No1289 of 2015 Date: 11 October 2023)