The national consumer disputes redressal commission (NCDRC) has upheld a compensation award of Rs25 lakh and costs against Max Life Insurance Co Ltd, directing the insurer to pay the assured amount along with interest and costs to a Chandrapur-based widow, whose husband’s death insurance claim was rejected due to alleged non-disclosure of a pre-existing health condition.
In an order issued last month, the NCDRC bench comprising presiding member Subhash Chandra and member air vice-marshal (AVM) J Rajendra (retd) says, "After careful consideration of the entire facts and circumstances of the case, it is evident that Max Life Insurance did not establish that the deceased life assured (DLA) was in fact suffering certain medical conditions and he was aware of the same, prior to answering the questions in the proposal form for obtaining the insurance policy in question. This was imperative to determine whether the DLA answered such questions, knowing them to be false. Because there is a good possibility that the DLA was not aware of his medical condition prior to filling the proposal form and Max Life Insurance has not established anything to the contrary."
The dispute dates back to 2013, when complainant Shalini Shastrakar approached the Maharashtra state consumer disputes redressal commission after Max Life Insurance repudiated her claim following the death of her husband, Devendra Wamanrao Shastrakar. He had purchased a life insurance policy worth Rs25 lakh from Max Life Insurance in December 2012 after undergoing all required medical tests. He passed away in April 2013, reportedly due to jaundice.
The insurer, however, rejected the claim, arguing that Mr Shastrakar, the policyholder, had concealed his medical history, particularly a diagnosis of heart disease, and claimed he was treated for congestive cardiac failure (CCF) at a local hospital in November 2012, just before the policy was issued. Max Life Insurance argued that this omission constituted material non-disclosure.
The Maharashtra state commission, in its 2016 order, found no reliable evidence proving that Mr Shastrakar was aware of or treated for any such heart condition prior to purchasing the policy. It held Max Life Insurance's claim repudiation unjustified and directed the insurer to pay Rs25 lakh with 9% interest from September 2013, Rs1 lakh for mental harassment, and Rs10,000 as litigation costs.
Max Life Insurance appealed the decision before NCDRC, but the national commission upheld the earlier order. It observed that Max Life Insurance failed to provide conclusive proof that the deceased had knowingly suppressed a serious health condition.
The commission pointed out that key medical documents submitted by Max Life Insurance lacked signatures, were unauthenticated photocopies and were not backed by affidavits from treating doctors or relevant witnesses. It also noted contradictions in Max Life Insurance’s evidence, such as references to a hospital admission facilitated by one Lata Zode, an individual whose relationship with Mr Shastrakar, the DLA, was never established.
The commission cited the Supreme Court’s ruling in Mahakali Sujatha vs Future Generali India Life Insurance Co and reiterated the principle of contra proferentem, stating that any ambiguity in insurance documents must be interpreted against the insurer. It also reaffirmed that the burden of proving material non-disclosure rests with the insurance company which Max Life Insurance failed to do.
In a strong observation, NCDRC stated that “there is a good possibility that the deceased was unaware of any such medical condition prior to filling the insurance proposal form,” and thus could not be held guilty of suppressing material facts.
With this ruling, Max Life Insurance must now pay the full policy amount of Rs25 lakh along with interest and compensation, totalling more than Rs26.1 lakh, to Ms Shastrakar. The decision serves as a stern reminder to insurers about the importance of fair practices and the heavy burden of proof required to justify claim repudiation.
(First Appeal No1653 of 2016 Date: 21 May 2025)
