Husband wins Rs 1.57 crore health insurance claim against LIC after a 5-year fight

Life Insurance Corporation of India (LIC) was ordered by National Consumer Disputes Redressal Commission (NCDRC) to pay Rs 1.57 crore to the husband of deceased policyholder. She died from Breast Cancer in April 2017 and in March 2018 LIC rejected her husband’s insurance claim. NCDRC said in its order that LIC provided a deficient service by rejecting the insurance claim in 2018 when it should have honoured it.

“The Policy was a health premium policy securing the insured for a sum of Rupees one crore on payment of Rs 7,00,000/- and odd as premium. The usual medical and eco tests before accepting the said policy were carried out and the policy was approved on 29th March 2016. Premium was paid and a receipt for the same was issued on 30th March 2016,” said LIC before NCDRC.

Timeline of events

Here’s a gist of the timelines which were relevant for this case:

• February 6, 2016: Deceased lady submits the proposal form to LIC.
• March 3, 2016: LIC orders an eco and other medical tests.
• March 29, 2016: LIC approves the policy. The policyholder was admitted in a hospital on this same date coincidentally.
• March 30, 2016: Premium amount of Rs 7 lakh was paid and LIC issued a receipt for the same. The hospital where she was admitted ordered a biopsy and other tests.
• March 31, 2016: Biopsy and other hospital mandated medical tests were conducted.
• April 6, 2016: She was discharged from the hospital.
• March 30, 2017: Policy was renewed for a year.
• April 28, 2017: She died due to Breast Cancer.
• March 8, 2018: LIC via a letter on this date intimated their decision to reject the insurance claim.

Why did LIC deny the health insurance claim?

The primary reason for rejection of the claim by LIC was that the policyholder had not informed the insurer about her having breast cancer at the time of taking the policy and also at the time of renewal. LIC said, “The ground taken is that the fact that the insured was undergoing treatment at NRI Hospital for suspected cancer and had not been disclosed in terms of the declaration which is required to be given during the interregnum of the pendency of the proposal. In the absence of any information about ill-health of the Life Assured, the policy was completed with utmost good faith on 30.03.2016. Had the ill-health of the Life proposed been brought to our notice immediately on 29.03.2016 or even prior to making the consideration payment for completion of the policy, we would have referred the matter to our Corporate Office and appropriate decision would have been taken.”

The husband of the deceased was disappointed with this rejection by the insurer in 2018 and filed an appeal against in NCDRC.

Fight starts in NCDRC

The medical tests were conducted on March 30, 2016, and on March 31, 2016, after which she was discharged from the hospital as per medical advice. As per complainant it was discovered later on that his wife was suffering from breast cancer.

“The claim was set up in the aforesaid background after she died on 28th April 2017. What is worth noticing is that the policy was renewed on 30th March 2017 by again making a payment of the premium to the tune of Rs 7,00,000/- and odd. On facts in this case, the insurance company has failed to establish that the insured has withheld any information that would violate the declaration clause. Consequently, the complainant or the insured had no knowledge about the adverse circumstance either on or prior to 30.03.2016,” said NCDRC.

Countering the argument made by NCDRC, lawyers representing LIC said that such declarations of medical conditions commence under the insurance proposal form itself. “If after the date of submission of the proposal such medical information is within the knowledge of the insured and is not disclosed the same would invite exclusion and repudiation under the insurance policy,” said LIC.

The complainant argued that even though his wife had been hospitalised on March 29, 2016, with a pain on the left side, on her discharge no adverse circumstance was available or reported by the hospital. Further there was no adverse circumstance made known to her particularly prior to the date of deposit and receipt of the premium policy i.e. March 30, 2016.

“As a matter of fact, there is no evidence at all to indicate that there were any adverse circumstances of the health which required a declaration in the proposal form. In the absence of any such evidence the aforesaid argument by the insurer does not hold water and therefore deserves rejection,” said NCDRC.

Order of NCDRC

After going through all the evidence and arguments NCDRC passed an order in favour of the policyholder. It read, “The allegations made by the complainants therefore clearly end up and proved in a clear deficiency of service by the Opposite Party- Insurance Company who are liable to indemnify the Complainant in terms of the policy.”

The following award was passed:

• Insured amount of Rs 1 crore with 9% interest from the date of liability incurred under the said insurance policy, and
• Rs 2 lakh along with 9% interest for mental agony and harassment, and
• Rs 50,000 as litigation cost.

In total he will get Rs 1 crore plus an interest of Rs 54 lakh (1 crorex9%x6 years). The complainant will also get Rs 2 lakh plus an interest of Rs 1.08 lakh (2 lakhx9%x6 years). Moreover, the complainant will also get Rs 50,000 as litigation cost which takes the total compensation to Rs 1.5758 crore (Rs 1,57,58,000).