Chandigarh

StateCommission

A/118/2024

DHFL PRAMERICA LIFE INSURANCE COMPANY LTD. - Complainant(s)

Versus

MS. JASWINDER KAUR - Opp.Party(s)

S.R. BANSAL, ADVOCATE

27 Sep 2024

ORDER

STATE CONSUMER DISPUTES REDRESSAL COMMISSION,

UNION TERRITORY, CHANDIGARH

 

Appeal No.	118 of 2024
Date of Institution	14.03.2024
Date of Decision	27.09.2024

DHFL Pramerica Life Insurance Company Ltd., Now known as Pramerica Life Insurance Limited,  4^th Floor, Building No.9B, Cyber City, DLF City, Phase-III, Gurugram, Haryana – 122002.

.…..Appellant/Opposite Party No.1.

Versus

1]      Ms. Jaswinder Kaur W/o Late Sh. Ashok Kumar, R/o H.No.263/2, Gali No.5, Shanti Nagar, Mani Majra, U.T., Chandigarh.

...Respondent/Complainant.

 

2]      Indusind Bank through its Branch Head, Plot No.25, Industrial Area, Phase-I, Chandigarh.

                                                ...Respondent/Opposite Party No.2.

 

BEFORE:  JUSTICE RAJ SHEKHAR ATTRI, PRESIDENT

                SH. RAJESH K. ARYA, MEMBER

               

Argued by:- 

 

Sh. S. R. Bansal, Advocate for the appellant.

Sh. N. S. Jagdeva, Advocate for respondent No.1.

Sh. Parminder Singh, Advocate for respondent No.2-on VC.

 

PER RAJESH K. ARYA, MEMBER

              The instant appeal has been filed by opposite party No.1 -  DHFL Pramerica Life Insurance Company Ltd. (Now known as Pramerica Life Insurance Limited), appellant herein, against order dated 22.12.2023, rendered by District Consumer Disputes Redressal Commission-I, U.T., Chandigarh, (hereinafter to be called as the District Commission only), vide which, Consumer Complaint No.604 of 2021 filed by the complainant – Ms. Jaswinder Kaur (respondent No.1 herein) has been partly allowed against the appellant/ opposite party No.1 in the following manner:-

“17. In view of the above discussion, the present consumer complaint succeeds and the same is accordingly allowed. OP No.1 is directed as under:-

1. to pay Rs.2,66,986/- with interest @9% P.A.from the date of repudiation of claim i.e. 29.6.2020 till onwards.
2. to pay Rs.20,000/- to the complainant as compensation for causing mental agony and harassment to her;
3. to pay Rs.10,000/- to the complainant as costs of litigation.

18.     This order be complied with by the OP No.1 within 45 days from the date of receipt of its certified copy, failing which, they shall make the payment of the amounts mentioned at Sr.No.(i) & (ii) above, with interest @ 12% per annum from the date of this order, till realization, apart from compliance of direction at Sr.No.(iii) above.

              However, it is made clear that the financier i.e. OP No.2 from whom  admittedly the  complainant’s husband availed loan shall have first charge over the aforesaid awarded amount, to the extent the same is due to be paid by the complainant towards the discharge of loan liability, if any.”

1.            However, consumer complaint against opposite party No.2 (respondent No.2 herein) was dismissed by the Ld. District Commission.
2.            The case of responded No.1/complainant before the Ld. District Commission was that the complainant’s husband purchased a tractor for his livelihood by securing a loan of Rs.2,82,573/- from opposite party No.2. To safeguard the loan, he also availed of an insurance policy from opposite party No.1 by paying a premium of Rs.1,760.54, which was deducted from his account. The loan tenure was from 26.08.2019 to 25.08.2021, with the coverage amount matching the loan sum of Rs.2,82,573/-. According to the insurance cover, in the event of the insured’s death, the insurance company was liable to reimburse the loan amount. Tragically, on 01.02.2020, the complainant’s husband passed away due to a sudden heart attack. Following his death, opposite party No.2 informed the complainant that they were processing the insurance claim with opposite party No.1 (insurance company). However, even after several months, the claim remained unprocessed. Despite the husband having already paid Rs.87,486/- towards the loan’s EMIs, opposite party No.2 demanded the outstanding loan amount of Rs.2,66,000/- nearly a year after his death. On 22.06.2021, the complainant received a notice from the bank stating that the loan agreement dated 27.08.2019 had been terminated. The complainant alleged that at no point was she informed by the insurance company about the status or repudiation of the claim.
3.            On the other hand, the appellant/opposite party No.1 contested the complaint pleading that the complainant’s claim was justifiably repudiated on the grounds of suppression of material facts. It was stated that at the time of obtaining the insurance policy, the complainant’s deceased husband failed to disclose critical health conditions including chronic kidney disease, hypertension and type-2 diabetes mellitus. It was further stated that the medical records show that he was admitted to PGI from 05.06.2017 to 14.06.2017 as a known case of diabetes and hypertension with complaints of swelling in both legs. It was further stated that a renal biopsy conducted on 13.06.2017 confirmed the diagnosis of chronic kidney disease. It was further stated that these significant health conditions were not disclosed by the deceased when applying for the policy. It was further stated that the insurance company rightfully repudiated the claim based on the non-disclosure of these material facts.
4. Opposite Party No.2, in its response, stated that it is solely a banking institution providing financial assistance to its customers and has no control over the settlement of insurance claims. It maintained that it fulfilled its responsibilities by offering satisfactory services to the complainant both in granting the loan and appropriately managing the loan repayments. It was further stated that there was no deficiency in service on its part and the complaint against it was not maintainable.
5.            After hearing the Counsel for the parties and going through the evidence and record of the case, the Ld. District Commission allowed the complaint against the appellant/opposite party No.1 only and dismissed the same against opposite party No.2, as stated above.
6. The order of the Ld. District Commission has been assailed by the appellant/opposite party No.1 on the ground that the insured namely Late Ashok Kumar at the proposal stage did not disclose his past medical history that he was suffering from chronic kidney disease, hypertension and diabetic mellitus type-2 and such a non-disclosure goes to the root of the matter vitiating the subject policy. It has further been stated that the Ld. District Commission has erred in holding that the insured died due to heart attack and not due to the chronic disease of kidney. It has further been stated that the contract of insurance is based on the principle of utmost good faith and the insured/proposer is bound to disclose all the material facts in the proposal form at proposal stage. It has further been stated that the Ld. District Commission wrongly interpreted the facts and evidence on record. It has further been stated that the Ld. District Commission failed to appreciate the fact in Clause-I (f, g & h) under medical questionnaire in the proposal form, a specific query was raised with regard to the insured as to whether he was suffering from diabetes, hypertension or kidney disease, to which, he replied in the negative i.e. “No”. Contending that the contract of insurance including contract of life assurance are contracts uberrimafides and every fact of materiality must be disclosed, otherwise there is good ground to rescind and that a contract of insurance is contract uberrimafides and there must be complete good faith on the part of the assured. The appellant has placed reliance on the judgments of Hon’ble Supreme Court of India in case ‘P.C. Chacko & Anr. Vs. Chairman Life Insurance Corporation of India & Others’, AIR 2008 SC 424 and Life Insurance Corporation of India Vs. Smt. G.M. Channabasamma, AIR 1991 SC 392. The appellant also filed written arguments in support of its case. Lastly prayer for setting aside of the impugned order and dismissal of consumer complaint has been made by the appellant.
7. Respondent No.2/opposite party No.2, in its written arguments stated that this appeal deserves to be dismissed against it as no relief has been sought by the appellant/opposite party No.1 against respondent No.2.
8.            On the other hand, on behalf of respondent No.1/complainant, it has been argued that the Ld. District Commission rightly allowed the consumer complaint after appreciating the facts and evidence before it and as such, the appeal filed by the appellant is liable to be dismissed.
9.           It may be stated here that there is a minor delay of 28 days as per the appellant and 23 days as per the office of this Commission in filing the appeal, for condonation whereof, a Miscellaneous Application bearing No.282 of 2024 has been moved. Neither the application was contested nor any reply was filed to the same. After going through the contents of the application, which is supported by an affidavit and in view of law settled by Hon’ble Supreme Court of India in Pundlik Jalam Patil Vs. Executive Engineer, Jalgaon Medium Project, (2008) 17 SCC 448 and Basawaraj and Anr. Vs. Special Land Acquisition Officer, (2013) 14 SCC 81, the appellant has shown rational reason for the delay, which has been caused due to bonafide reasons. Therefore, for the reasons given in the application which is supported by an affidavit and finding sufficient cause, the delay in filing the appeal is condoned. MA/282/2024 stands disposed of accordingly.
10.          After giving our thoughtful consideration to the contentions advanced by the parties, the impugned order and the documentary evidence on record, we are of the considered opinion, that the appeal is liable to be dismissed for the reasons to be recorded hereinafter. Upon careful examination of the terms and conditions of the insurance policy, specifically under the section titled "Benefits Under Plan A," sub-clause (a), it is explicitly stated that if an insured member passes away while their insurance coverage is in force, the coverage amount becomes payable to the claimant. This fundamental condition highlights the obligation of the insurance company to honor its commitment in the event of the insured’s death, provided the policy was active at the time of the incident. In the case in hand, the insured tragically passed away due to a heart attack. It is important to emphasize that the cause of death, as verified, was not related to chronic kidney disease. Even though the appellant has argued that the insured suffered from chronic kidney disease prior to his death, this alone does not provide sufficient grounds for the rejection of the claim. The insurance company contended that the pre-existing kidney condition should exempt them from liability. However, this position fails to address a crucial legal and factual principle: the burden of proof lies squarely on the insurance company to demonstrate that the insured’s death was directly caused by the chronic kidney disease.

12]        To legitimately reject the claim, the appellant must establish two key points. First, it needed to prove that the insured did not die from the heart attack itself but from the pre-existing kidney condition. Second, it was obligated to show that the kidney disease was not only present but was the direct cause of the heart attack that ultimately led to the insured’s death. In essence, the insurance company would be required to provide clear medical evidence showing an undeniable link between the kidney disease and the heart attack proving that the former directly triggered the latter. In this case, the insurance company has failed to meet this burden of proof. It was unable to provide any convincing medical records, expert testimony or other forms of evidence that would demonstrate that the insured’s chronic kidney disease was either the primary or contributing factor to the heart attack. Furthermore, the insurance company failed to establish that the heart attack and the kidney disease were interrelated to such an extent that the claim could be justifiably denied. Without adequate proof that the kidney disease was the cause of death, the insurance company’s decision to repudiate the claim was baseless. The fact remained that the insured passed away due to a heart attack, an event that should have triggered the payment of the coverage sum to the complainant as stipulated under the terms of the policy. By failing to substantiate their claim of a pre-existing condition being the cause of death, the insurance company has unjustly repudiated the complainant’s rightful claim as has been rightly held by the Ld. District Commission. In our considered view, the appellant failed to demonstrate that the insured’s death was due to the chronic kidney disease or that it contributed to the heart attack. As such, the refusal to honor the insurance policy was without merit. The complainant’s claim, which squarely fell within the policy’s coverage, was wrongfully denied and the insurance company’s action in this regard was both unjustified and in violation of the policies terms.

13]        Not only above, as per established legal principles and the guidelines set forth by the Insurance Regulatory and Development Authority of India (IRDAI), it is the clear and binding duty of an insurance company to ensure that the insured undergoes a thorough medical examination for any existing illnesses or health conditions at the time of applying for a policy. This process is vital because it allows the insurer to assess the risk accurately, identify any pre-existing medical conditions, and determine the appropriate terms and coverage for the policy. Failure to conduct a proper medical examination at the proposal stage not only undermines the insurer’s ability to assess risk but also constitutes a deficiency in service on their part. By neglecting to arrange a medical examination, the insurer leaves room for potential disputes in the future, particularly in cases where a claim is filed and later repudiated due to alleged non-disclosure of pre-existing conditions. This oversight places an unfair burden on the insured or their beneficiaries, as they face claim rejections based on medical conditions that were either not identified or properly evaluated at the time of policy issuance. It is unjust for an insurer to argue non-disclosure of medical facts when they failed to exercise due diligence in conducting a medical examination themselves. Therefore, the contentions of the appellant that the Ld. District Commission failed to appreciate the fact that the insured replied in negative to the medical questionnaire cannot be accepted.

14]         It may be stated here that it is a common practice among insurance agents, when filling out proposal forms on behalf of prospective policyholders, to simply mark "NO" against the health-related questions in the questionnaire. This is often done to expedite the process and secure more policies without adhering to the proper protocols of having the proposer undergo a required medical examination. This approach bypasses a crucial step in the underwriting process. The deliberate omission of accurate health information or failure to properly assess the applicant’s medical condition can lead to severe consequences for the policyholder or their beneficiaries down the line. When claims are made, the insurance company may later repudiate them based on non-disclosure or concealment of pre-existing conditions —conditions that could have been identified if a proper medical examination had been conducted at the proposal stage. In many cases, policyholders are not even informed that they are required to disclose specific medical conditions or undergo medical tests as the process is hurried along to secure the policy issuance. The Insurance Regulatory and Development Authority of India (IRDAI) has put in place clear guidelines that emphasize the importance of transparency and thoroughness during the proposal process, including the medical examination of the proposer when necessary. Ignoring these guidelines in favor of speeding up the sales process and achieving sales targets is a serious lapse in service and a breach of the insurer’s duty of care towards the policyholder. Therefore, insurance companies must enforce stricter adherence to due processes and ensure their agents act in the best interest of the client following all regulatory requirements and ethical standards. Thus, in our considered view, the appellant - insurance company cannot exploit the negative answers provided in the proposal form regarding medical conditions, particularly on the grounds of non-disclosure, when it itself neglected to fulfill its duty of getting the proposer medically examined. Thus, it cannot later claim that the proposer withheld vital medical information or misrepresented their health status. The responsibility for verifying the health condition of the proposer lies with the insurance company. By not ensuring a proper medical assessment, the appellant effectively waived its right to question the accuracy of the information provided in the proposal form. Therefore, any attempt by the appellant to deny a claim based on non-disclosure of medical conditions, when no medical examination was conducted, was both unfair and a breach of the insurer's duty of care. In such instances, the onus was on the appellant to demonstrate that it took reasonable steps to assess the risk associated with issuing the policy. Since the appellant failed to do so, therefore, it precluded the appellant from taking advantage of any alleged non-disclosure, making it liable to honor the terms of the policy in good faith. No doubt the judgments in cases ‘P.C. Chacko & Anr. (supra) and Life Insurance Corporation of India (supra) relied upon by the appellant, laid down the law that contract of insurance including contract of life assurance are contracts uberrimafides and every fact of materiality must be disclosed, otherwise there is good ground of recision and that a contract of insurance is contract uberrimafides and there must be complete good faith on the part of the assured but the fact remains that the appellant – insurance company itself failed to adhere to the guidelines laid down by IRDAI and as such, it cannot derive any benefit out of these judgments.

1.          In views of the facts and circumstances of the case, we do not find any infirmity or material irregularity in the impugned order passed by the Ld. District Commission, which is legal, just and fair.
2.          For the reasons recorded above, this appeal bearing, being devoid of merit, must fail and the same is dismissed with no order as to costs.
3.          Certified copies of this order be sent to the parties free of charge.
4.          File be consigned to Record Room after completion.

Pronounced.

27.09.2024.

                           [JUSTICE RAJ SHEKHAR ATTRI]

PRESIDENT

 

 

                                                                               

 [RAJESH K. ARYA]

MEMBER

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