Case Summary
The National Consumer Disputes Redressal Commission, led by AVM J. Rajendra, ruled that an insurance policy can be declared voidable by the insurer if there is suppression of facts in the proposal form.
Case Background
Max Life Insurance issued a life insurance policy to a policyholder, who subsequently passed away shortly after the policy was issued. A bank, which acted as an agent for the insurance company, facilitated the issuance of the policy in connection with a loan granted to the complainant. The complainant, who was the policyholder’s nominee, filed a claim which was denied by the insurer due to the non-disclosure of a pre-existing medical condition. The complainant argued that there was no deliberate concealment of the illness and considered the claim denial a service deficiency. As a result, the complainant filed a complaint with the State Commission of Andhra Pradesh seeking the payment of the sum assured along with interest and costs. The State Commission dismissed the complaint, leading the complainant to appeal to the National Commission.
Insurer’s Response
The insurer contended that the policy was issued with a single premium payment. They denied that the bank had pressured the policyholder to purchase the policy and maintained that the claim was denied due to the non-disclosure of a pre-existing medical condition, supported by medical records. The insurer had refunded the premium and argued that the claim denial was consistent with the policy terms, thus there was no service deficiency. The bank also refuted the allegations, stating it had no contractual involvement with the insurance policy and only facilitated the loan. The bank sought dismissal from the proceedings, claiming it was wrongfully implicated.
National Commission’s Observations
The National Commission identified the central issue as the insurer’s denial of the claim due to alleged concealment of pre-existing medical conditions. It was noted that the insured had received treatment for non-Hodgkin lymphoma before applying for the policy and that the cause of death was related to this pre-existing condition. The Commission found that the insured failed to disclose their medical history, citing the Supreme Court’s decisions in Bajaj Allianz Life Insurance Company Ltd. v. Dalbir Kaur and Reliance Life Insurance Co. Ltd. v. Rekhaben Nareshbhai Rathod. These decisions affirm that insurance contracts are based on utmost good faith, and non-disclosure of material facts renders the policy voidable. Consequently, the National Commission upheld the State Commission’s decision, finding no error in the original ruling.
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