Chandigarh

StateCommission

A/385/2024

SHRIRAM LIFE INSURANCE COMPANY LIMITED - Complainant(s)

Versus

KANCHAN VERMA - Opp.Party(s)

PRADEEP SHARMA

19 Dec 2024

ORDER

STATE CONSUMER DISPUTES REDRESSAL COMMISSION,

U.T., CHANDIGARH

 

Appeal No.	:	385 of 2024
Date of Institution	:	02.12.2024
Date of Decision	:	19.12.2024

 

 

 

 

 

 

1]      Shriram Life Insurance Co. Limited, SCO No.16-17, 2nd Floor, near BSNL Office, Sector 34-A, Chandigarh through its Managing Director.

2]      Shriram Life Insurance Co. Ltd., Plot No.31-32, Ramky, Selenium, Finance District, Gachi Bowli, Hyderabad (Telangana) 500032 through its Managing Director.

….Appellants/Opposite Parties No.2 & 4.

 

Versus

1]      Kanchan Verma aged 42 years wife of Late Sh.Ajay Kumar, resident of House No.762, Ward No.10, Rani Mohalla, Derabassi, Distt. SAS Nagar Mohali (wife and nominee of deceased Late Ajay Kumar).

….Respondent/Complainant.

2]      Shriram Housing Finance Company Limited, SCO No. 362-363, 2nd Floor, Sector-34, Chandigarh through its Managing Director.

3]      Shriram Housing Finance Limited, Level 3, Wockhardt Tower, East Wing, Bandra-Kurla Complex, Mumbai 400051 through its Managing Director.

...Respondents/Opposite Parties No.1 & 3.

 

BEFORE:   JUSTICE RAJ SHEKHAR ATTRI, PRESIDENT

                MR. RAJESH K. ARYA, MEMBER

 

ARGUED BY :-  

Sh. Pradeep Sharma, Advocate for the appellants.

 

PER  RAJESH  K. ARYA,  MEMBER

                   The instant appeal has been filed by opposite parties No.2 & 4 - Shriram Life Insurance Co. Limited (appellants herein) against order dated 08.10.2024 passed by District Consumer Disputes Redressal Commission-II, U.T., Chandigarh (in short ‘District Commission), vide which, consumer complaint bearing No.518 of 2020 filed by the complainant (respondent No.1 herein) – Kanchan Verma has been partly allowed against opposite parties No.2  & 4 in the following manner:-

15]    In view of the above discussion, it can be safely concluded that OP No.2 & 4-Insurance Company have committed deficiency in service by wrongly and illegally rejecting the claim of the complainant. Consequently, the present complaint deserves to be partly allowed and the same is accordingly partly allowed with directions that whatever is due towards OP No.1 & 3 shall be paid by OP No.2 & 4 as OP No.2 & 4 insured the complainant against the loan amount advanced by OP No.1 & 3. If, in case OP No.1 & 3 Financier is successful in recovering the amount from the complainant then the same shall be refunded to the complainant alongwith interest @ 10% per annum from the date of recovery by OP No.1 & 3 till the date of its actual realization. Further, OPs are directed to return the original documents concerning property to the complainant. OPs are directed also to pay compensation of Rs.20,000/- to the complainant alongwith costs of Rs.10,000/- as litigation expenses to the complainant in equal share.

          The above said order shall be complied with by the OPs within a period of 45 days from the date of receipt of certified copy of this order.”

2]                The facts, in brief, as narrated in the impugned order passed by the District Commission read thus:-

“1]     The complainant has filed the present complaint pleading that her husband Sh.Ajay Kumar (now deceased) availed housing loan of Rs. 16,70,000/- from OP No.1 on 22.08.2018. The loan was availed for purchase of property situated at Gulabgarh Road within M.C. limit of Derabassi. In the loan document, complainant was principal loanee and her husband was shown as co-applicant. The installment of the loan was deducted from the account of husband of complainant and he was also provided death claim policy by the OPs. The loan was repaid in 20 years in installment of Rs.19,472/- per month.

          It is stated that the official of OP No.1 allured the husband of complainant to avail life insurance on the said account and also allured to pay installment of Rs.20,695/- and loan amount was extended to Rs.17,67,115/. The OPs deducted premium amount of Rs.83,148/- at the time of granting of said loan vide member policy No. MN181026031712053. The policy of health insurance was issued by the OPs under the policy ‘Shri Ram Life Group Life Protector Plan SP’ and complainant was shown as nominee of Late Sh.Ajay Kumar. At the time of granting loan as well as purchasing life insurance policy, all the requisite documents were supplied by the complainant to the OPs. It is stated that it was told by OPs that in case of death of principal loanee, the amount of life insurance will be adjusted in housing loan.

          It is stated that husband of complainant Sh.Ajay Kumar died on 20.07.2020. After death of her husband, the complainant approached the OPs and requested life insurance amount and also requested to adjust the said amount in loan account but the OPs flatly refused to adjust the claim amount in loan account and told the complainant to pay the loan amount to OPs. It is stated that husband of complainant Ajay Kumar when availed the loan as well as health claim policy, the OPs never opt to conduct any medical examination but they simply satisfied with the documents submitted but now OPs raised issue regarding the ailment of Ajay Kumar i.e. his pre existing diseases and health ailments, which is totally against the bye-laws and terms & conditions of the legal procedure. It is stated that at the time of taking insurance policy, complainant's husband did not withhold any information and his previous health history shows that he was not suffering from such type of disease earlier. Alleging the aforesaid acts on the part of OPs amount to deficiency in service and unfair trade practice, the complainant has filed the present complaint with a prayer to direct the OPs to adjust the insurance policy amount in housing loan account or to forfeit the loan amount; to release all other benefits of policy; pay compensation for mental agony and harassment and litigation expenses.

2]      OP No.1 & 3 filed their joint written version and while admitting the factual matrix of the case stated that OP No.1 never allured the complainant to avail the insurance policy or payment of the installments. The complainant himself duly read the policy papers and agreed to sign the same with his free will. It is stated that OP No.1 & 3 only provided the financial assistance after the requisite documents were provided by the complainant and her deceased husband. It is stated that OP No.1 & 3 are merely aggrieved against the conduct of the complainant towards the default in payment of the said loan account. It is further stated that loan account has become a bad debt due to the regular defaults in the EMI payments and the said account was classified as NPA on 05.01.2021 and OP No.1 & 3 had issued a demand notice to the complainant for the recovery of dues against the home loan account. Denying any deficiency in service or unfair trade practice as well as all other allegations, the OP No.1 & 3 have prayed for dismissal of the complaint.

3]      OP No.2 & 4 filed their joint written version and while admitting the factual matrix of the case stated that the investigation was got conducted from private investigator and as per the investigation report dated 31.07.2020, it was found by the investigator that the cause of death of deceased life assured was Acute Liver Failure and during the enquiry it came out that deceased life assured was diabetic from 6 to 7 years and he was taking medicine of diabetes on regular basis. It is stated that it was also found from medical papers of deceased life assured that he was a patient of Chronic Calcific Pancreatitis and other related ailments. It is stated that cause of death as mentioned in the death summary is "Hypovolemic Shock, Massive Upper Gastrointestinal Bleeding, Acute Kidney Injury, Acute on Chronic Liver Failure and Type-II Diabetes Mellitus".

          It is stated that on investigation, it was found that deceased life assured suffered from Chronic Liver Disease since 2017, which is prior to the policy commencement date which he did not disclose in the declaration of good health form. It is further stated that by referring to the principle of Uberrima Fide i.e. utmost good faith and Section 45 of Insurance Act, 1938, the claim was legally repudiated. Denying any deficiency in service or unfair trade practice as well as all other allegations, the OP No.2 & 4 have prayed for dismissal of the complaint.”

3]                After hearing the parties and going through the material available on record, the District Commission partly allowed the complaint, as stated above.

4]                The appellants - Insurance Company have challenged the District Commission’s order, arguing that the repudiation of the claim was legal, as the policy explicitly states that fraud and misrepresentation would be handled according to Section 45 of the Insurance Act, 1938. It has further been stated that the District Commission incorrectly disregarded the investigation report dated 31/07/2020, which is relevant documentary evidence in consumer proceedings. The appellants claim that the absence of a medical affidavit or original records does not invalidate the report, as strict rules of evidence do not apply in Consumer Fora. It has further been stated that the investigation revealed that the deceased had undisclosed chronic health conditions including diabetes and liver disease, prior to the policy commencement, which led to the repudiation. The appellants also argue that the District Commission wrongly directed the payment of all outstanding loan amounts to the complainants as the claim amount due, had the death been genuine, should have been Rs.17,37,528/-, based on the policy terms for deaths occurring between 22/06/2020 and 21/07/2020.

5]             After hearing the rival contentions raised by the Counsel for the appellants and going through the impugned order and the material available on record very carefully, we are of the considered view that the appeal is liable to be dismissed, at the preliminary stage, for the reasons to be recorded hereinafter. The fact that the complainant’s husband, the deceased, passed away while the insurance policy was active is indisputable. However, the insurance claim filed by the complainant was rejected by the appellants insurance company through a letter dated 29.08.2020, on the grounds of alleged non-disclosure of material facts in the Declaration of Good Health Form. The insurer contended that the deceased had failed to disclose his pre-existing medical conditions, specifically Chronic Calcific Pancreatitis and Diabetes Mellitus, at the time of applying for the insurance policy. The insurer's position, that the deceased did not disclose these pre-existing medical conditions, is fundamentally flawed and untenable. The burden of proof to establish that the deceased willfully concealed material facts lies with the insurer. It was the responsibility of the insurance company to provide concrete evidence that the deceased was aware of his health conditions at the time of applying for the policy and intentionally chose to withhold this information. In this case, the appellants failed to discharge this critical burden of proof. It is essential to understand that the responsibility for verifying the health status and medical history of the insured lies squarely with the appellants. They should have conducted a thorough and comprehensive investigation into the insured’s health prior to issuing the policy. This could have included a detailed medical check-up or additional inquiries regarding the insured’s past medical treatments. However, the appellants did not take these essential steps and instead chose to rely on an incomplete and unverified medical history, which was insufficient to justify the repudiation of the claim.

6]                In many instances, individuals may not be fully aware of their medical conditions, especially in the case of serious or life-threatening diseases. It is possible that the deceased was either unaware of his pre-existing medical conditions or was not informed of them by his doctors. In some situations, family members or close relatives may decide not to disclose a diagnosis of a severe or chronic illness to the patient, fearing that such information may cause emotional or psychological harm. This decision is often made with the intention of preserving the patient’s mental and emotional well-being. In light of this, it is unreasonable to assume that the insured, who may not have been fully aware of his medical conditions, deliberately concealed them when applying for the insurance policy. The complainant specifically denied that the deceased was aware of his pre-existing medical conditions when he applied for the insurance policy. The complainant also maintained that the insured did not intentionally conceal any medical history at the time of purchasing the policy. While it was acknowledged that the deceased might have been suffering from pre-existing conditions, there was no evidence before the District Commission to suggest that he was aware of these conditions or that he willfully chose to withhold this information from the insurance company. The primary purpose of obtaining an insurance policy is to provide financial protection to one’s family in the event of an untimely death. Denying a claim on the basis of a technicality undermines the very purpose of purchasing the policy, which is to secure the financial future of the policyholder’s family in case of unforeseen events.

7]                Despite the appellant’s reliance on the deceased’s medical records to support their claim of non-disclosure, they have failed to substantiate their allegations. The appellants did not summon the relevant medical records or examine the treating physician before the District Commission to confirm the accuracy of their claims. There was no affidavit from the treating doctor or any formal medical testimony to establish that the deceased was suffering from pre-existing conditions prior to taking out the insurance policy. Without such evidence, the appellant’s reliance on medical prescriptions or casual references in treatment notes cannot be considered sufficient proof of the deceased’s pre-existing conditions. The absence of verified testimony from the treating doctor further weakened the appellant’s case and casts doubt on the credibility of their allegations. As per New India Assurance Co. Ltd. v. Arun Krishan Puri, III (2009) CPJ 6, cited by the District Commission in its order, the insurer bears the burden of proving pre-existing medical conditions at the time of policy issuance. In this case, the appellants - insurer failed to provide sufficient evidence such as a verified discharge summary or an affidavit from the treating physician to establish the deceased’s pre-existing conditions. Relying on prescription slips or unclear treatment notes was unreasonable and insufficient to prove the claim. Furthermore, insurance companies are often criticized for their practices of denying claims, even after accepting premiums. In this regard, the District Commission relied upon the case of Dharmendra Goel Vs. Oriental Insurance Co. Ltd., III (2008) CPJ 63, which highlights, how insurance companies due to their dominant position often act unreasonably by avoiding claims through technicalities or pretexts, undermining public trust. Similarly, in New India Assurance Company Ltd. v. Smt. Usha Yadav & Others, 2008 (3) RCR (Civil) 111, the Hon’ble Punjab & Haryana High Court criticized insurers for relying on complex policy terms that customers may not understand, only to use these terms to deny claims. The Hon’ble High Court called for greater transparency and simplicity in policy documentation to ensure policyholders are fully aware of their rights.

8]                Thus, in our considered view, it is very much clear that the appellants - Insurance Company committed deficiency in service by unjustifiably rejecting the complainant’s claim and also failed to meet their burden of proving the existence of pre-existing conditions at the time of policy issuance and their failure to investigate the insured’s medical history or to verify the information provided by the complainant further exacerbates the situation. The appellant’s refusal to pay the claim was not only unjustifiable but was also against the very purpose of insurance - to provide financial protection to policyholders and their families. Therefore, the District Commission rightly held that the claim should be upheld in favour of the complainant and rightly directed the appellants to pay the claimed amount to the beneficiary along with appropriate compensation for the undue hardship caused by the wrongful repudiation of the claim.

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]                  For the reasons recorded above, the appeal stands dismissed, at the preliminary stage, being devoid of any merit with no orders as to costs.

10]              Pending application(s), if any, in this appeal also stands dismissed having been rendered infructous.

11]            Certified copy of this order be sent to the parties free of charge.

12]              File be consigned to the Record Room after completion.

Pronounced.

19.12.2024.

[JUSTICE RAJ SHEKHAR ATTRI]

PRESIDENT

 

 

 

[RAJESH  K. ARYA]

MEMBER

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