HDFC Standard Life Insurance Asked To Pay Rs46.87 Lakh Death Insurance Claim with 9% Interest
Moneylife Digital Team 17 October 2024
While dismissing a first appeal and upholding an order passed by a state commission, the national consumer disputes redressal commission (NCDRC) directed HDFC Standard Life Insurance Company Ltd (now HDFC Life Insurance) to pay Rs46.87 lakh with interest at the rate of 9%pa (per annum), Rs2 lakh compensation for mental agony and Rs25,000 cost to the nominee of the deceased life assured (DLA).
 
In an order last week, the NCDRC bench of Subhash Chandra (presiding member) and Dr Sadhna Shanker (member) says, "It is not open for HDFC Standard Life Insurance at this stage after having approved the policy to reject the claim on the ground of ubberima fidei when it did not itself exercise the due diligence required. It is also not denied that the premium was paid by the respondent's late husband in respect of the policies. HDFC Standard Life Insurance also failed to lead evidence despite the opportunity before the state commission to bring documents on record."
 
"It is therefore, manifest that the policy approved by HDFC Standard Life Insurance was sanctioned even after all the columns of the proposal form duly filled in had declared in the negative. While it was necessary that the DLA should have disclosed the information, it was equally incumbent on the insurer to have ensured that all the details were provided to it prior to its approval of the insurance cover," the bench says.
 
Tangutur, Andhra Pradesh-based Gangineni Vasundhara's husband (DLA), was a business entrepreneur who, in 2008, had taken a life insurance policy from HDFC Standard Life Insurance after the necessary medical tests. He also took another policy in 2014 for Rs56 lakh after undergoing medical tests. On 5 May 2015, he expired due to cardiac arrest. 
 
When Ms Vasundhara filed the death insurance claim, HDFC Standard Life Insurance rejected it, saying that the DLA did not disclose the existence of previous policies he had held while obtaining the policy from the insurer. On 5 December 2019, the insurer electronically transferred Rs9.12 lakh to Ms Vasundhara's account. 
 
She then approached the Andhra Pradesh state consumer disputes redressal commission. As HDFC Standard Life Insurance failed to file its written version, its right to do so was closed. It also failed to file its evidence affidavit.
 
While allowing the complaint, the state commission held that while it was not disputed that HDFC Standard Life Insurance approved a policy, the claim under the policy had been repudiated on the ground that the DLA did not disclose the existence of previous policies in the proposal form. "The burden of proof lay on the insurer to establish this, which it had failed to do."
 
Aggrieved by the state commission decision, HDFC Standard Life Insurance filed a first appeal before NCDRC. It argued that the DLA submitted the proposal form with false information. However, during investigations, it was found that the DLA held various life insurance policies with different companies such as SBI Life, Bajaj Life, Max Life, TATA AIG Life, Kotak Life and Shriram Life. "A contract of insurance governed by the doctrine of ubberima fidei and the failure to make full disclosure of material facts by the DLA constituted non-disclosure of a 'material fact' which had not been appreciated by the state commission," the insurer argued.
 
The counsel for Ms Vasundhara contended that under Section 45 (1) of the Insurance Act, no life insurance policy could be called into question on any ground after the expiry of three years and hence, Section 45 (2) relating to repudiation was not applicable in the case. 
 
"The refund of the premium of Rs9.12 lakh to Ms Vasundhara also does not arise as per Proviso II to Section 45 (4) if the claim was rejected on the grounds of fraud. The claim had also not been repudiated on the grounds of life expectancy under Section 45 (4) since a medical examination had been conducted before the policy and an additional premium was charged," the counsel says.
 
After hearing the arguments and perusing the records, NCDRC observed that it is evident that the life insurance claim has been repudiated on the grounds of suppressing material facts that the DLA had other life insurance policies, the details of which had not been disclosed.
 
HDFC Standard Life Insurance had appointed three investigators to inquire about the admissibility of the claim preferred. "However, neither the investigators' report indicating details of the previous policies nor any affidavits to establish the same have been brought on record," the bench noted.
 
Further, it says the life insurance policy in question had been obtained based on a proposal form which did not disclose whether any policy had been obtained earlier by the DLA or otherwise; HDFC Standard Life Insurance approved the policy without insisting that this information be provided to it.  
 
"However, in view of the claim raised before it, it (the insurer) has now taken the position that there was non-disclosure of material information which rendered the policy liable to be void ab initio on the principle of ubberima fidei...HDFC Standard Life Insurance sanctioned the policy without checking the pre-existence of other policies since it has not brought the original documents on record. HDFC Standard Life Insurance was also required to exercise due diligence while approving a policy and cannot be absolved of the responsibility of having approved the policy without ensuring proper verification and exercising due diligence with respect to the information sought by it through the proposal form," NCDRC says in the order.
 
(First Appeal No870 of 2020  Date: 10 October 2024)
 
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