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2025 Supreme(Online)(SCDRC) 2976
STATE CONSUMER DISPUTES REDRESSAL COMMISSION
Sri K. Ranga Rao, MEMBER (JUDICIAL), Smt. R. Rajeshree, MEMBER (NON JUDICIAL)
SBI Life Insurance Co. – Appellant
Versus
Smt. P. Sarojana – Respondent
F.A. No.444/2021
For the Appellants: M/s. SrinivasKarra
For the Respondent No.1: Notice Served
The principle of utmost good faith in insurance requires full disclosure of health conditions; failure to disclose justifies claim repudiation.
Headnote:(A) Consumer Protection Act, 1986 - Section 15 - Appeal against orders passed by District Consumer Commission - Claim for insurance repudiated on grounds of non-disclosure of pre-existing medical conditions - The commission allowed the complaint awarding Rs.6,50,000/- but was set aside on appeal - The principle of utmost good faith requires complete disclosure by proposer regarding health - The deceased had significant health issues not disclosed during the policy application. (Paras 1-16)
(B) Principles of Insurance Law - The courts emphasize the need for transparency and honesty in obtaining insurance coverage - Insurance claims can be repudiated if there is evidence of material non-disclosure or misrepresentation - The burden of proof lies with the complainant to counter the insurance company's claims of suppression. (Paras 11-14)
Facts of the case:
The complainant's husband obtained a life insurance policy for Rs.6,00,000/- and died less than a year later. The insurance company repudiated the claim citing non-disclosure of chronic medical conditions. The District Commission ruled in favor of the complainant.
Findings of Court:
The insurance company's evidence showed the deceased had chronic health conditions prior to obtaining the policy and failed to disclose these, justifying the repudiation. The District Commission erred by not considering this evidence properly.
Issues: Whether the repudiation of the insurance claim was justified based on the deceased's non-disclosure of health conditions when applying for the insurance policy?
Ratio Decidendi: The court found that the deceased had indeed suppressed relevant health information which justified the insurance company's refusal to pay the claim, emphasizing that the principle of utmost good faith applies strictly in insurance contracts.
Result: Appeal allowed, order of the District Commission set aside.
| Table of Content |
|---|
| 1. final determination based on principles of good faith and judicial error. (Para 2 , 5 , 7) |
| 2. claim filed under the consumer protection act for insurance denial. (Para 3) |
| 3. opposite party claims non-disclosure of health conditions led to valid repudiation. (Para 4 , 14) |
| 4. arguments regarding the insurance contract's basis on utmost good faith. (Para 6 , 11) |
| 5. final conclusion on evidence and impact on the decision. (Para 8 , 12) |
| 6. court’s reasoning on evidence and justification for overruling district commission's decision. (Para 9 , 13) |
| 7. court's observations on the error of the district commission. (Para 10) |
QUORUM: HON’BLE SRI K.RANGA RAO - PRESIDING OFFICER-
MEMBER - (JUDICIAL).
&
HON’BLE SMT.R.S.RAJESHREE, MEMBER (NON JUDICIAL).
WEDNESDAY, THE NINETEENTH DAY OF MARCH, TWO THOUSAND TWENTY FIVE Order : (Per Hon’ble Smt.R.S.Rajeshree, Member-Non-Judicial) 1. This appeal is filed u/s.15 of the Consumer Protection Act,1986 by the opposite parties being aggrieved by the order dt.01.07.2021 passed in C.C.NO.297/2018 by District Consumer Commission, Adilabad wherein the District Commission had passed the following orders:-
“In the result, the complaint is allowed against Opposite Party NO.1 to 3 and against Opposite Party No.4 dismissed. The Opposite Parties No.1 to 3 are directed to pay the claim amount of Rs.6,00,000/- with interest @18% p.a., from the date of death of the policy, holder till its realization, to award compensation of Rs.50,000/- a total amount of Rs.6,50,000/- apart from interest. The cost of the complaint being Rs.5,000/- awarded. Compliance within (4) weeks from the date of receipt of this order, failing which the Complainant is at liberty to proceed against the Opposite Parties as per laws found under C.P. Act, 2019.”
2. For the sake of convenience, the parties are described as complainants and opposite parties as arrayed in the original complaint.
3. The case of the complainant is that her deceased husband Polampalli Sammaiah during his lifetime has obtained a SBI Life Insurance Policy for a assured sum of Rs.6,00,000/- and he had paid a premium of Rs.27,086/-, that on 12.11.2017 he died a natural death. That the Complainant being a nominee and legal heir had submitted an application for settlement of the claim by submitting all the relevant documents along with the claim. But, however, the Opposite Party had repudiated the claim without any valid reasons and had transferred a sum of Rs.26,490/- to the account of the complainant towards refund of the premium amount. That her husband was hale and healthy and has not suffered any disease before or after obtaining the policy. The Opposite Party conducted all the medical tests before issuing the policy despite the same the Opposite Party had repudiated the claim without any reason. This act of repudiation of the insurance claim amounts to deficiency of service. Hence, the complaint was filed.
4. The opposite parties filed their written version while admitting issuance of policy, but had opposed the complaint on the ground that the life insurance contract is based on utmost good faith and the proposers are expected to disclose everything correctly with regard to their health, income, age, habits and other related questions sought in the proposal form. That the deceased husband of the complainant had suffered from chronic kidney disease, severe anemia and hypertension and was treated for the same before taking the policy.But, however, suppressing the said fact the deceased life assured had taken the policy. The deceased life assured has committed a fraud with an intention to obtain the insurance cover even though the pre-existing disease was well within the knowledge of the deceased life assured.That the proposer had answered in negative to all the questions relating to his health condition. The death of the deceased life assured occurred on 12.11.2017 and the policy was taken on 26.10.2016 i.e., just within one year and one month of taking of the polic
