Case Study - 8 - LIC asked to pay Death Compensation

Shri Kailash Chandra Dashora was working as a teacher in a State Government school in Jhalawar and had taken an insurance policy under salary savings scheme on 15.12.1993 for a sum of Rs.50,000/-. The insurance premium was being paid by the employer of the insured.

Shri Kailash Chandra Dashora fell sick on 16.06.1995 and was treated for fever from 16.6.1995 to 10.7.1995 at Jhalawar. He was thereafter referred to Medical College, Udaipur where he was diagnosed as suffering from liver tumour(Left Lobe Liver Tumor) and was given treatment from 11.7.1995 to 7.8.1995 in the hospital. He was then taken to Tata Memorial Hospital, Mumbai and he subsequently died on 29.08.1995.

Claim was submitted by Smt. Santosh Kanwar (Wife of the deceased Shri Kailash Chandra Dashora), but LIC repudiated the claim stating that in the Proposal/Personal Statement the deceased had answered in the negative to the questions:

(a) Whether he had consulted any doctor in the last five years in connection with some ailment which required treatment for more than a week

(b) Whether he had been on leave on the ground of sickness in the last 5 years and

(c) and whether he had been suffering from a decease related to stomach, heart, lever, brain and nerves or whether he was suffering then(at the time of proposing).

LIC further stated that that all these answers were false as they hold indisputable proof to show that before he proposed for above policy he had suffered from Myalgia, URI APD, Br. Dysp. Lsc, Urticaria, Neuritis, Amaenia, Pyrexia, Amoebic Colitis for which he had consulted a medical man and had taken treatment from him/in a Hospital and was also on medical leave for 3 days and 12 days from 20.8.90 to 22.8.90 and 7.12.90 to 18.12.90, and had also drawn medical reimbursement for the above diseases. He did not however, disclose these facts in his Proposal/Personal Statement. Instead he gave false answers therein as stated above.

The Complainant approached the District Forum at Jhalawar and the District Forum allowed the complaint and directed the LIC to pay the sum assured with interest @ 18% p.a and Rs. 5,000/- towards compensation and Rs.500/- as costs.

LIC filed an appeal before the State Commission, Rajasthan against District Forum’s judgement. The State Commission allowed the appeal on the ground allowed the appeal on the ground that the assured knowingly suppressed the facts of the state of his health while making the proposal for obtaining the policy in question, jointly with his wife. No doubt, the State Commission recorded that, considering the facts, even the LIC had offered to pay Rs.25,000/- as ex gracia to the complainant.

The State Commission’s order was challenged by Mrs. Santosh Kanwar by filing a Petition before the National Consumer Redressal Commission, New Delhi. Citing various earlier settled cases the Commission allowed the complaint’s petition and set aside the State Commission’s order in favour LIC. The Commission directed LIC to pay the insured an amount of Rs.50,000/- with interest @ 10% p.a. from 1.3.1996 (i.e. after a period of 6 months from the death of the insured) with cost of litigation at Rs.5,000/-

Following were the salient points considered by the Commission before giving its judgement in favour of the Petitioner:

(1) Section 45 of the Insurance Act 1938 allows repudiation within a period of two years. Therefore, a period of limitation of two years had, thus, been specified and on the expiry thereof the policy was not capable of being called in question on the ground that certain facts have been suppressed which were material to disclose.

(2) Keeping the provisions of law in mind, the insured deceased was not suffering from any serious disease at the time of filing up the proposal form and therefore there was no material suppression on his part.

(3) The treatment which was taken by the Complainant was for trivial ailments. Fever for some days, pain in abdomen, treatment for URI affecting the nasal passage or bronchitis at the relevant time, tenderness or pain muscles (in 1992), again URI in November, 1992 and February, 1993 or eruption some pimples on the skin in November, 1993 cannot be said to be serious ailments which are required to be noted at the time of taking the insurance cover. Admittedly, the insurance cover was taken under the salary saving scheme on 15.12.1993. Subsequent treatment would have no bearing in deciding this matter.

(4) The insured died due to ‘left lobe of liver tumor’ which was not noticed even by the doctor at Jhalawar where the deceased took first treatment. This fact was only clearly noticed by the Tata Memorial Hospital, Mumbai after 11.8.1995. The employees take medical leave for various purposes but that should not be made a ground for repudiation of the claim unless the suppression of the disease or ailment is material and that the insurance company arrives at a conclusion that it would not have granted insurance cover if the said facts were disclosed or would have taken larger premium.

(5) Moreover, the ailment referred to by LIC has no connection with the death of the insured. Death was because of liver tumor and not because of pain or fever for which the insured has taken leave from the school. There is nothing on record to show that the insured was required to take treatment for more than a week. No doubt, with regard to the question whether the insured has been on leave on the ground of sickness in last five years, the answer given by him was incorrect. With regard to the question whether insured had suffered from a disease relating to stomach, heart, liver, lungs, brain and nerves and whether he was suffering at the relevant time, the answer was ‘no’. Hence, it cannot be said that the insured was suffering from such diseases. As such, he attended the school continuously as a teacher.