Case: Branch Manager, Bajaj Allianz Life Insurance Company Ltd. vs. Dalbir Kaur [ CA 3397/2020]
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
A proposer who intends to acquire a life insurance policy is required to disclose any pre-existing medical conditions to the insurer, as the Supreme Court has noted.
In this instance, the insurance proposal form included inquiries regarding the proposer’s health and medical history. It also necessitated a specific disclosure regarding any illness, hospitalization, or treatment that the proposer had undergone, as well as a declaration of excellent health. The proposer responded to the inquiries with a negative response, indicating that he was not afflicted with any illness or condition and had not undertaken any medical treatment or hospitalization. A policy of insurance was issued to the proposer in accordance with the proposal submitted. The insured passed away one month later. The insurance claim submitted by his mother was rejected due to the investigation reports, which indicated that the deceased had been experiencing gastrointestinal pain and bloody vomiting in the days leading up to his death. Consequently, he had been receiving treatment at the hospital.
The claimant’s complaint was permitted by the District Consumer Forum. The State Consumer Disputes Redressal Commission dismissed the Insurance Company’s initial appeal. The National Consumer Disputes Redressal Commission dismissed the Revision Petition, concluding that the death was the result of natural causes and that there was no reasonable connection between the cause of death and the non-disclosure of the disease.
The Apex Court bench, which consisted of Justices DY Chandrachud, Indu Malhotra, and Indira Banerjee, observed that the medical records obtained during the investigation clearly demonstrate that the deceased was suffering from a severe pre-existing medical condition that was not disclosed to the insurer. The bench stated that the NCDRC judgment does not establish the correct legal position.
“A contract of insurance is a testament to the highest degree of good faith.” The proposer of a life insurance policy is obligated to disclose all relevant information that could influence the insurer’s decision to incur the risk. In order to facilitate the insurer’s ability to make an informed decision based on the actuarial risk, the proposal form necessitates a specific disclosure of pre-existing conditions. In the present instance, as we have previously mentioned, the proposer neglected to disclose the hospitalization that resulted from the vomiting of blood that occurred scarcely a month prior to the issuance of the insurance policy. The insurer’s investigation revealed that the affirmed was afflicted by a pre-existing condition that was the result of alcohol abuse. Additionally, the facts that were known to the proposer had not been disclosed. This places the basis for repudiation squarely within the principles that have been established by this Court in the decisions to which reference has been made previously.”
The court also cited previous judgments, such as the one in Reliance Life Insurance Co. Ltd. vs Rekhaben Nareshbhai, which established that the insurer was entitled to repudiate the claim under the policy if the insured failed to disclose the policy of insurance obtained earlier in the proposal form.
Nevertheless, the tribunal invoked Article 142 of the Constitution to specify that the claimant, who is seventy years old, could not be reimbursed for the amount that had been paid.
