A long-running insurance dispute has ended with a clear reminder that transparency is central to life insurance contracts, regardless of the policy type or premium size.
The National Consumer Disputes Redressal Commission has rejected the claim of a Mumbai widow seeking over Rs 78 lakh from a Rs 90 lakh life insurance policy. The commission upheld the principle of “uberrimae fidei” or utmost good faith, ruling that all material facts must be disclosed at the time of purchasing an insurance policy.
The bench, comprising Presiding Member AVM Jonnalagadda Rajendra AVSM, VSM (Retd) and Member Justice Anoop Kumar Mendiratta, was hearing a complaint against the rejection of the remaining assured amount, along with interest at 18% per annum, compensation of Rs 15 lakh for harassment, and litigation costs of Rs 10 lakh.
“Life insurance contracts are based on uberrimae fidei, i.e. founded on the doctrine of utmost good faith, which impose a strict duty upon the proposer to make full, true and complete disclosure of all material facts within his knowledge,” the commission said in its order dated January 16.
The commission found that the deceased policyholder had failed to disclose serious and long-standing medical conditions while answering specific health-related questions in the proposal form. These included cancer, repeated hospitalisations, major surgeries, and prolonged treatment. The bench held that this amounted to suppression of material facts, which went to the core of risk assessment and underwriting.
It ruled that such medical history could not be treated as minor or trivial. A proposer is presumed to know all facts relating to the proposed insurance and has a duty to disclose not only what he actually knows, but also what he ought to know in the ordinary course of business. However, the duty does not extend to facts that the insured did not know and could not reasonably be expected to know.
The commission rejected the argument that the policy being a “wealth” or “non-medical” policy diluted the duty of disclosure. It clarified that disclosure is assessed at the proposal stage and is not dependent on whether the insurer conducts a medical examination or whether the cause of death is linked to the undisclosed illness. The bench also referred to Supreme Court rulings to reinforce this position.
The case was filed by Arati Dhananjay Deshmukh, widow of late Dhananjay Bhanudas Deshmukh, under Section 21 of the Consumer Protection Act, 1986. She challenged the rejection of a death claim under an ICICI Pru Elite Wealth-II ULIP issued by ICICI Prudential Life Insurance Company Limited.
The policy was purchased on December 2, 2015, for a 10-year term with a sum assured of Rs 90 lakh and an annual premium of Rs 9 lakh. It was issued on December 11, 2015. Deshmukh died on August 15, 2016, at Lilavati Hospital, Mumbai, just 8 months and 4 days after the policy began. The death certificate was issued on August 19, 2016.
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