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Introduction
The variability of life does make one cautious. Hence a person always wants to protect his family in case some untoward incident may happen to him or his family. And that is the reason why the insurance sector came into picture. To provide one with solace that the variabilities will be taken care of. Be it medical insurance or life insurance it is always the aim of a person to protect him/her and his/her family from financial upheavels.
So, in essence the aim of a person who takes a policy of insurance is to protect his/her loved ones. But alas! more often than not it is seen that the insurance companies take unjust exceptions in providing the insurance claim to the family members of the deceased or they take some grounds that a medical illness is not covered by the insurance plan. In My Article I have dealt with the issue as to how a party aggrieved by such conduct of the insurance company can directly approach the High Court of a particular state, that too in a Writ Petition.
As most of the nitty gritties of insurance procedures have been explained by me in the Article mentioned above, let’s come straight to the facts of the case which shows that the insurance claim of the family of the deceased cannot be denied on small and trifle grounds.
Brief Facts
In the year 1975 Dipashri’s (hereinafter called the Petitioner) husband proposed to LIC for issuing him an insurance policy on his life (When someone applies for a life insurance policy, he is called Proposer as he have to propose to the Insurer (like LIC etc.) to give him a life insurance. On such proposal the Insurer asks the Proposer to fill up some forms and undergo relevant medical examination in order to see if he is suffering from some ailments like Diabetes, Hypertension or Blood Pressure etc. If everything is in order then the Insurer accepts the proposal and the Proposer becomes the Insured i.e. now his life is insured with the Insurer). As Petitioner’s husband was found healthy in the medical examination, he was given life cover/insurance by the LIC on 7/7/1975 and a Life Insurance Policy was issued to him. As seen in most of the cases the Policy Holder/Insured made his wife i.e. the Petitioner, nominee in case something unfortunate happens to him.
In 1977 due an unfortunate accident, Petitioner’s husband suffered severe burns injury and finally succumbed to these injuries. As the Petitioner was from a poor family who worked as a maid in order to take care of her 3 minor children, Petitioner applied for release of the sum insured by her husband with LIC.
The LIC, as is the case with most of the Insurance Companies, denied the insurance claim of the Petitioner and declined to pay any money to the Petitioner on the ground that the Petitioner’s husband had withheld important information before taking out the Life Insurance Policy and hence the policy was obtained by fraud ( In Krishna Wanti Puri V/s LIC [AIR 1975 Del. 19] it has been held that if a policy of life insurance is obtained by fraud like by concealment of a chronic disease then such fraud entitles LIC not to pay anything, not even the premiums, to the nominee. Section45 of the LIC Act, 1938allows LIC to do this. In essence it means that if A who is an Insured, despite knowing that he is suffering from let’s say Thalassemia, hides it from the Insurance company, then on A’s demise the Insurer can deny the payment of the money to his dependants).
As when LIC denies you the payment of the insurance money you have a right to directly approach High Court the Petitioner did so and approached Bombay High Court to get his money which she truly deserved. (How can you approach High Court in case LIC denies your claim has been dealt by me in a separate Article )
In the present case LIC’s argument was that the Petitioner’s husband has taken many sick leaves from his office and if he had taken so many sick leaves he must be suffering from some disease which he did not disclose at the time of taking out the policy (at the time of proposing).
There are two important arguments which defies LIC’s logic. First is that LIC is missing an important ingredient which is required for the application of the Section 45 mandating that the person who is applying for a policy “knew at the time” of applying for Insurance Policy, that he is suffering from a disease because only then it will be called a fraud. Here it is important to differentiate between Fraud and Error. When a person knows about his disease and then hides it, it is called Fraud and this allows Insurance Company to deny payment to him on maturity or his nomine of his death. But if a person does not know that he is suffering from a disease (though he is suffering from one) and therefore unable to tell the Insurer about it, then the Insurer cannot deny the payment to the Insured or his family member or nominee of the insurance money .
But in this case it was never proved that Petitioner’s husband was ever aware about any disease from which he may be suffering. Also in the doctor’s report, which was submitted to LIC before the grant of Insurance Policy, did not find any ailments inflicting the Petitioner’s husband.
Secondly, for the application of Section 45 the information which has been hidden must be in relation to a “material matter”. Here material matter means the disease which is hidden must be of such nature which affects the life expectancy of the Policy Holder.
But it is very much possible that Petitioner’s husband took sick leaves for mild illnesses like cough, fever, ear infection etc. These small diseases need not to be disclosed in the proposal form, as virtually everyone has suffered from these diseases at least once in their life.
Also what is important to note is not every single visit to a doctor need to be disclosed or intimated to the insurance authorities and only severe illnesses needed to be mentioned. So if a person visits a doctor because of a common cold or flu in the past then he need not to cite every such visit in insurance proposal form.
Based on these grounds the Petitioner was held right by the Court and LIC was asked to pay the insurance money to the Petitioner.
Conclusion
After this discussion it is important to observe that it is happening more often than not that the insurance companies are deliberately denying insurance claims of the deceased’s family on petty grounds. Same is the case with Medical Insurance where the claim is denied on the ground that a particular procedure is not sanctioned by the insurance company for insurance claim. Denying Life Insurance or Medical Insruance on these grounds is not only morally wrong but also illegal as it’s an “Unfair Trade Practice” under Section 2(47) of Consumer Protection Act, 2019. On the demise of the Policy Holder the full insurance money should be given to the deceased person’s family because when a person takes a policy he does not do so for the well-being of his own but for the well-being of his family which includes his spouse, children, parents and his dependants. Denying the money to Policy Holder’s dependants, after his death, when the family needs the financial assistance the most as a breadwinner for the family is not alive, is not only against the moral and business ethics but also against law. This is the why the Bombay High Court in the above mentioned case not only directed LIC to pay the policy amount, but also asked it to give a whopping interest of 15% on it from 1977 onwards till the date of payment. Further Rs. 1000 were awarded as Compensatory Cost to the wife of the deceased from LIC.
Parveen Semwal
Advocate, High Court of Delhi and Supreme Court of India