Case Title: M Chellammal v Office of the Insurance Ombudsman
Summary
The Supreme Court has ruled that a proposer of a life insurance policy must disclose any pre-existing medical conditions to the insurer. In this case, the proposer failed to disclose the hospitalization resulting from bloody vomiting, which was a result of alcohol abuse. The insurance company’s initial appeal was dismissed by the State Consumer Disputes Redressal Commission, which concluded that the death was due to natural causes and there was no reasonable connection between the cause of death and the non-disclosure of the disease. The Apex Court bench argued that the NCDRC judgment does not establish the correct legal position, stating that a contract of insurance is a testament to the highest degree of good faith. The court also cited previous judgments, such as Reliance Life Insurance Co. Ltd. vs Rekhaben Nareshbhai, which established that insurers could repudiate a claim under the policy if the insured failed to disclose the policy obtained earlier in the proposal form.
About the case
The Madras High Court recently stated that the provisions of the policy must be interpreted in a manner that is advantageous to the beneficiary when addressing claims under the Pradhan Mantri Jeevan Jyoti Bima Yojana.
Justice GR Swaminathan of the Madurai bench was addressing a petition that contested the Office of the Insurance Ombudsman’s decision to dismiss a complaint against the Life Insurance Corporation of India for denying a death claim.
The petitioner disclosed to the court that her spouse was a member of the Pradhan Mantri Jeevan Jyoti Bima Yojana and maintained a savings bank account with the City Union Bank. The petitioner’s spouse passed away on June 1, 2018. She stated that the policy was initiated on June 1, 2015, and the annual renewal date was May 31, 2018. However, no deduction was made from the savings account to cover the premium amount on that date. Subsequently, the petitioner was informed that the claim could not be admitted or honored as a result of the non-payment of premiums when she addressed the insurance company to request payment under the death benefit clause.The insurance company informed the court that the premium amount had not been debited from the savings account due to a lack of funds. It was also contended that the grace period could not be taken advantage of in the current situation and was exclusively available to the designated branch office of the master policyholder for the purpose of paying the premium.
The court observed that the renewal premium is required to be paid by the 31st of May each year, as stipulated in the policy. In the event that payment is not made by the deadline, a grace period of 30 days is granted. The court observed that the policy must be deemed to be in force with the risk cover until the grace period expires. The insurance company’s assertion that it issues a new policy annually was rejected by the court. The court further stated that the provisions should be interpreted in the policyholder’s favor in situations such as this.
The court observed that the petitioner’s spouse had passed away during the grace period while the policy was in effect in the current case. The court further stated that the insurance form and the ombudsman had incorrectly assumed that the amnesty period was exclusively available to the designated branch of the master policyholder. The court subsequently revoked the award and ordered the insurance company to pay the policy amount within eight weeks.
