National Consumer Commission Upholds Insurance Payout in Landmark Health Disclosure Case
The National Consumer Disputes Redressal Commission (NCDRC) has delivered a significant judgment dismissing an insurance company's attempt to repudiate a life insurance claim worth Rs 10 lakh. The commission upheld concurrent findings from lower consumer courts that the insurer failed to prove suppression of material facts regarding the insured's health and alleged alcoholism.
Case Background and Insurance Dispute
The case originated from a complaint filed by M. Charan Reddy against the Life Insurance Corporation of India (LIC). The complainant's father, Shri Dharmendra Reddy, had purchased five life insurance policies in 2009, each valued at Rs 2,00,000, totaling Rs 10,00,000 in coverage. The complainant was nominated as beneficiary with his mother designated as guardian during his minority.
Following the insured's death on December 20, 2010, while all policies remained in force, the beneficiary's mother filed claims as legal guardian. The insurance company repudiated these claims, alleging the insured had suppressed material information about pre-existing health conditions and chronic alcoholism at the time of policy application.
Legal Proceedings Through Consumer Courts
The District Consumer Forum initially examined the case and found merit in the complainant's arguments. The forum noted that the insurer had failed to establish deliberate suppression of material facts and identified deficiencies in the insurance company's service. Consequently, the District Forum directed LIC to pay the full sum assured of Rs 10,00,000 with 9% annual interest from March 31, 2011, along with Rs 50,000 in compensation and Rs 2,000 for litigation costs.
When the insurance company appealed this decision to the State Consumer Commission, the appellate body thoroughly reviewed the evidence and legal arguments before affirming the District Forum's order in its entirety. Dissatisfied with this outcome, LIC filed a revision petition before the National Consumer Disputes Redressal Commission, seeking to overturn the lower courts' decisions.
Critical Examination of Evidence and Legal Standards
The National Commission, comprising Presiding Member Hon'ble AVM Jonnalagadda Rajendra and Member Hon'ble Mr. Justice Anoop Kumar Mendiratta, conducted a meticulous review of the case records. The bench identified several critical evidentiary issues that undermined the insurer's position.
Medical Documentation Deficiencies: The commission noted significant discrepancies in the medical records presented by the insurance company. Documents labeled Ex.B-2 and Ex.B-3 contained contradictory dates regarding medical consultations. Particularly, Ex.B-3—an outpatient card from NIMHANS indicating alcoholism—lacked the insured's signature in the declaration column and was unsupported by affidavits from its issuers.
Failure to Prove Conscious Suppression: The commission emphasized that the insurer bore the burden of proving the insured had knowingly suppressed material information when completing proposal forms in August 2009. Medical records from March 2008 and December 2010, while indicating health issues at those times, failed to establish the insured's awareness of any pre-existing condition at the policy application date.
IRDA Guidelines Compliance: The judgment highlighted that the insurance company had not adhered to Insurance Regulatory and Development Authority (IRDA) guidelines during policy issuance. This regulatory non-compliance further weakened the insurer's position regarding proper disclosure verification procedures.
Legal Reasoning and Final Determination
The National Commission's decision rested on several key legal principles. The bench clarified that revisional jurisdiction under Section 21(b) of the Consumer Protection Act, 1986, cannot be invoked merely for re-appreciation of evidence when concurrent findings exist from lower forums.
The commission determined that the insurer had not discharged its burden of proving material suppression or deliberate misrepresentation by the deceased policyholder. Medical documents suggesting alcoholism and liver disease at later stages were insufficient to establish conscious withholding of information during the August 2009 proposal process.
Furthermore, the absence of complete proposal forms before the consumer forums, combined with unsigned declarations and unsubstantiated medical records, created fatal evidentiary gaps in the insurer's case. The commission found no illegality, perversity, or material irregularity in the concurrent findings of the District Forum and State Commission.
Broader Implications for Insurance Practices
This judgment reinforces important consumer protection principles in insurance disputes. It establishes that insurers must provide concrete, substantiated evidence—not merely suggestive medical records—to prove deliberate suppression of material facts. The decision underscores the requirement for insurance companies to follow IRDA guidelines meticulously during policy issuance and claims processing.
The ruling also clarifies the high evidentiary standard required for claim repudiation based on alleged non-disclosure. Insurers cannot rely on medical records from periods substantially removed from policy application dates without establishing the insured's contemporaneous knowledge of such conditions.
With the dismissal of Revision Petition No. 176 of 2020, the National Commission has delivered finality to this decade-long insurance dispute, ensuring the beneficiary receives the entitled insurance proceeds with accrued interest and compensation for the insurer's deficient service.
