Case Law Title : Nirmala Devi vs Reliance Life Insurance Com
Summary
The National Consumer Disputes Redressal Commission (NCDRC) has ordered Reliance Life Insurance Company to reimburse the nominee of the deceased life assured (DLA) for Rs. 1 crore, plus Rs. 50,000 for litigation costs. The insurance company claimed that the deceased policyholder had omitted important evidence from the proposal form, but the NCDRC rejected that claim. The NCDRC emphasized that hospitalization for a car accident that was not disclosed on the application form does not imply that a prior illness or disease was hidden. Nirmala Devi, the complainant, was Vijay Kumar Verma’s (dead) candidate. She filed an insurance claim for the accidental death benefit with the insurance company after her son’s death, but the claim was denied. The insurance company accused the company of providing inadequate service and that the complainant could not qualify as a “consumer” under the customer Protection Act since they were not beneficiaries under the insurance policy. The NCDRC refuted the claim, stating that the nominee under an insurance policy is the legitimate recipient of the benefits under the policy. The NCDRC also noted that the purpose of the complainant’s son’s medical examination was to find out about any pre-existing conditions, and that failing to disclose a prior auto accident did not constitute fraudulent concealment. The insurance company was ordered to pay the complainant Rs. 1,00,00,000, which is equal to ten times the annualized premium or 105% of the premium paid as of the date of death, plus interest at the rate of 9% per year starting from the date the claim was submitted.
About the case
Reliance Life Insurance Company was recently ordered by the National Consumer Disputes Redressal Commission (NCDRC) bench, which is presided over by Subhash Chandra, to reimburse the nominee of the deceased life assured (DLA) for the sum of Rs. 1 crore, plus Rs. 50,000 for litigation costs. The insurance company claimed that the deceased policyholder had omitted important evidence from the proposal form, but the NCDRC rejected that claim. The NCDRC emphasized that hospitalization for a car accident that was not disclosed on the application form does not imply that a prior illness or disease was hidden.
Nirmala Devi, also known as the “Complainant,” was Vijay Kumar Verma’s (dead) candidate. On October 14, 2015, her son, who works for Oriental Bank of Commerce (OBC), bought a Rs. 1 crore life insurance policy from Reliance Life Insurance Company (the “Insurance Company”). Following an assessment of medical fitness performed by the insurance provider, the policy was issued. Sadly, on October 27, 2015, the complainant’s kid suffered serious head injuries in a car accident. He was given medical attention, but on November 9, 2015, he passed away. The complaint filed an insurance claim for the accidental death benefit with the insurance company after he passed away, but the claim was denied. The National Consumer Disputes Redressal Commission (“NCDRC”) received a consumer complaint from the aggrieved party.
The insurance firm was accused by the complainant of providing inadequate service. She contended that since her son, the policyholder who passed away, had paid the required payment, she should be eligible to get the policy’s benefit. She further mentioned that her son was insured by various Life Insurance Corporation of India (LIC) policies, and that LIC had settled her son’s accidental death claim without raising any issues. She demanded Rs. 50,000 for harassment, Rs. 2 crores for accidental death, and Rs. 51,000 for legal fees.
The insurance company said that the policyholder who passed away had concealed a past brain injury from a car accident that occurred a year before the policy was obtained. The insurance provider also contended that failure to provide this important information constituted a breach of the 1938 Insurance Act and the terms of the insurance contract. Section 45 of the Insurance Act, which permits repudiation of a policy within three years of the date of issuance in circumstances of fraud or non-disclosure, was used by the insurance company as justification for its rejection of the claim. Moreover, the insurance contended that the complainant could not qualify as a “consumer” under the customer Protection Act since they were not beneficiaries under the insurance policy. Additionally, the insurance company produced documentation of the deceased’s hospitalization for a brain injury sustained in an earlier accident, arguing that this history had not been revealed when the policy was obtained. The insurance provider stressed that the repudiation of the claim was in compliance with the regulations and the conditions of the insurance policy. It claimed that because the policy only covered Rs. 1 crore instead of Rs. 2 crore in the event of an accidental death, the complaint had exaggerated the claim amount.
The insurance company claimed that the complainant was not a “consumer” as defined by the customer Protection Act; however, the NCDRC refuted this claim. According to the terms of the agreement between the insured and the insurer, the NCDRC determined that the nominee under an insurance policy is the legitimate recipient of the benefits under the policy. The NCDRC supported the idea that beneficiaries of policies taken out by the insured are also ‘consumers’ under the Act, even though they are not parties to the insurance contract, by citing the Canara Bank Vs. M/s. United India Insurance Co. Ltd. & Ors. CA No.1042 of 2020 in SLP (Civil) No.20393 of 2018 case. The NCDRC noted that hospitalization for a car accident—which was not disclosed in the application form—should not be interpreted as a way to hide a prior sickness or condition. The NCDRC stressed that the purpose of the complainant’s son’s medical examination was to find out about any pre-existing conditions, and that failing to disclose a prior auto accident did not constitute fraudulent concealment. The NCDRC observed that the insurance claim pertaining to the same incident had been authorized by Life Insurance Corporation of India (LIC), another insurance firm, without any objections. This information suggested that the claim could not be rejected on the grounds that the prior accident had not been disclosed. The insurance company’s argument for repudiating the claim based on section 45 of the Insurance Act of 1938 was denied by the NCDRC. The NCDRC ruled that Section 45, which deals with the repudiation of claims owing to fraudulent behavior, did not apply to the concealment of a prior hospitalization resulting from a car accident. As a result, the insurance company was ordered to pay the complainant Rs. 1,00,00,000, which is equal to ten times the annualized premium or 105% of the premium paid as of the date of death, plus interest at the rate of 9% per year starting on the date the claim was submitted.
