New Delhi: Leaving a column blank in the insurance form does not amount to giving a false answer and, hence, cannot be the basis to deny claim to an applicant, the National Consumer Disputes Redressal Commission has ruled, underlining the “settled proposition of law that the concealment must be with a fraudulent intent”.
The commission set aside an order of the Rajasthan State Consumer Disputes Redressal Commission (SCDRC) which dismissed a complaint by a woman named Chhoti Devi, now deceased, who had moved the commission after insurance company Bharti AXA refused to grant her claim.
In its order, the NCDRC said it was of “the considered view that action of the insurance company in repudiating the claim is not justified”.
“The State Commission committed an error in dismissing the complaint. Hence, the order of the State Commission cannot be sustained, and is hereby set aside. Complaint is allowed,” the bench of presiding member Inderjit Singh and member Sudhir Kumar Jain said.
The bench also directed the insurance company to pay the sum assured within 45 days.
“Leaving a column blank in the proposal form does not amount to giving the false answer and had this information been material, the Insurance Company ought to have insisted on getting these columns filled before issuing the policy,” the NCDRC said in its 11 August order.
ThePrint reached Bharti AXA through an email for a comment. The report will be updated if and when a response is received.
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Are NCDRC orders binding?
The NCDRC is a quasi-judicial body set up in 1988 under the Consumer Protection Act, 1986. Headquartered in New Delhi, it is headed by a sitting or a retired judge of the Supreme Court or a sitting or a retired chief justice of a high court. At present, Justice Amreshwar Pratap Sahi, a former chief justice of both Patna and Madras high courts, is its president.
NCDRC orders are binding and have the force of law behind them. Section 23 of the Consumer Protection Act, 1986, provides that any person aggrieved by an NCDRC order can challenge it in the Supreme Court within 30 days.
In September last year, the Delhi High Court clarified that the mere location of the NCDRC in Delhi does not imply that a challenge to an NCDRC decision always lies in Delhi. In some cases, these orders can be challenged under Article 227 of the Constitution, before the jurisdictional high court where the cause of action had first arisen.
The case & the decision
Chhoti Devi’s son purchased a life insurance policy with a sum assured of Rs 25 lakh 12 December 2015. He died of a heart attack in January 2017. Devi went to claim the policy after the incident, but Bharti AXA denied her, saying she hid information about the existing policies in her proposal form.
Bharti AXA’s case revolved around alleged suppression of facts by the complainant. The firm told the NCDRC the complainant had various insurance policies from different insurance companies. It claimed that not only did Devi conceal material facts but also twist them to suit her convenience and mislead the commission.
“The complainant did not declare the facts correctly and truthfully. The claim has rightly been repudiated since the policy in question was obtained on the basis of mis-statement. The insured intentionally had mis-stated about previous policies obtained from other insurance companies,” it said.
However, Devi’s heirs, who fought the case on her behalf after she too passed away, contended that the form was filled by the company’s agent digitally, and that’s why the column was left blank.
“The fact of existing policies was very much known to the Insurance Company and it had issued three policies to the deceased insured,” the commission noted.
The commission also said that the insurance company denied the death claim on the ground of concealment of this fact, when it was fully aware of this on account of issuing three policies to the deceased itself.
“It is a settled proposition of law that the concealment, if any made, must be with a fraudulent intent,” the commission said.
The burden of proving the fraudulent intent of the person who made the disclosures lies on the insurance company, the Commission said. “The Insurance Company failed to discharge its burden of proving to show that the insured fraudulently concealed fact of existing policies,” it added.
After examining the insurance form, the NCDRC took note of the complainant’s contention that she had not given any false answer in the proposal form.
“The said column in the proposal form is seen left blank. Leaving of blank column does not amount to giving false answer. If it was such material information, the Insurance Company ought to have insisted on filling of this information before issuing the Insurance Policy,” it ruled.
The NCDRC then allowed Chhoti Devi’s claim stating there was no willful intention to suppress or conceal information on their part.
The precedents
In the Lakhmi Chand Vs. Reliance General Insurance (2016) case, the Supreme Court held that to avoid its liability, an insurance company must not only establish the defense that the policy has been breached, but must also show that the breach is so fundamental in nature that it brings the contract to an end.
Since this wasn’t the case here, the commission’s decision tilted in the favour of Chhoti Devi.
In the 2020 Canara Bank vs. United India Insurance case, the top court ruled that an insurance policy must be read “holistically so as to give effect to reasonable expectations of all the parties including the insured and the beneficiaries”.
It must be interpreted in a commercially sensible manner, the court had said, while adding that the coverage clauses must be read broadly.
(Edited by Ajeet Tiwari)
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