IMPORTANT POINTS
(1) Contract of Insurance – A contract of insurance is one of utmost good faith. A proposer who seeks to obtain a policy of life insurance is duty bound to disclose all material facts bearing upon the issue as to whether the insurer would consider it appropriate to assume the risk which is proposed.
(2) Disclosure – It is with this principle in view that the proposal form requires a specific disclosure of pre-existing ailments, so as to enable the insurer to arrive at a considered decision based on the actuarial risk.

ORDER

The present First Appeal has been filed under Section 19 of the Consumer Protection Act, 1986 (“the Act”) against the Order dated 25.07.2022 passed by the State Consumer Disputes Redressal Commission, A.P., Vijayawada (“the State Commission”), in CC No. 1 of 2020 wherein the State Commission dismissed the Complaint.

2. For Convenience, the parties in the present matter being referred to as mentioned in the Complaint before the State Commission. “Isnaka Devasenamma” is identified as the Complainant (Appellant herein) is the wife and nominee of Venku Reddy (Deceased Life Assured- DLA). Meanwhile, “M/s. Max Life Insurance Company Limited” is referred to as the Opposite Parties No.1&2/Respondents No.1&2/Insurer and Axis Bank Ltd is referred to as the Opposite Party No.3/Respondent No.3.

3. Brief facts of the case, as per the Complainant, are that the OP-1 Max Life Insurance Company Ltd and its 2nd Branch Office/OP-2 issued a life insurance policy to Venku Reddy, referred to as the life assured, under Policy No. 35003246, for Rs.45,00,000/- as sum assured. The OP-3 bank, sanctioned a loan of Rs.45,00,000/- to the life assured with an interest rate of 10.5%. The life assured was required to pay Rs. 69,480/- per month for 8 years. OP-3, as the agent of OP-1, facilitated the insurance policy. The policy certificate was issued on 13.02.2019. The life assured passed away on 28.02.2019 while undergoing treatment at Basavatarakam Indo-American Cancer Hospital and Research Institute, Hyderabad. The complainant, being the nominee, submitted a claim to the insurance company, which was repudiated on 15.05.2019, citing non-disclosure of the life assured’s diagnosis of Non-Hodgkin Lymphoma. She requested reconsideration, but the claim was again rejected on 11.06.2019. She asserted that there was no prior knowledge or intentional non-disclosure of the illness by the life assured before submitting the insurance application and that the repudiation constitutes a deficiency in service. Being aggrieved, she filed a consumer complaint before the State Commission seeking payment of the sum assured of Rs. 45,00,000/- with interest and costs.

4. In their reply before the State Commission, OP-1 & 2 denied the allegations and contended that the life assured obtained the policy on payment of a single premium of Rs. 78,747/-. They refuted the claim that OP-3 induced the life assured to obtain the policy. They confirmed that the claim was repudiated due to the non-disclosure of material facts, specifically the life assured’s prior diagnosis of Non-Hodgkin Lymphoma as evidenced by medical records from Apollo Specialty Hospital, Chennai. The insurer refunded the premium to the Axis Bank account of the policyholder. They contended that there is no deficiency in service as the claim was repudiated per the policy terms.

5. In its reply before the State Commission, OP-3 denied the allegations and asserted that there is no privity of contract between the complainant and the bank regarding the insurance policy. The bank facilitated a loan against house property and had no role in the repudiation of the insurance claim by the insurance company. The bank contended that it was wrongly dragged into the proceedings without any cause of action and sought dismissal of the complaint against it.

6. The State Commission vide order dated 25.07.2022 dismissed the complaint with the following findings /reasons:—

“9) The entire controversy revolves around whether the life assured intentionally and willfully suppressed his health condition in Ex.B-1/A-12, Health Declaration Form by giving negative answers so far as the clauses relating to his health condition. A perusal of Ex.B-1 gives an impression to an ordinary prudent man that the life assured was not suffering from any ailment of any nature as on 25.01.2019. The burden of proof lies on the opposite parties to establish that the life assured is very much aware that he is suffering from cancer as on 25.01.2019. If the o