Can't reject claims due to discrepancies in proposal

Harbir Singh had taken 21 life insurance policies from an Life Insurance Corporation (LIC) agent. The sum insured under these policies ranged from Rs 1 lakh to Rs 7 lakh. Singh was murdered on September 28, 2015. His mother, Rani Devi, who was the nominee under all the policies, lodged claims. When the claims were scrutinised, LIC found that in 20 proposal forms, Singh had declared that he was an employee while in one proposal form he had claimed to be an estate agent and businessman assessed for taxation.

Considering the discrepancies in the statements regarding the source of his income and livelihood, LIC repudiated the claim in respect of some of the policies while for others it paid only a meagre amount of about Rs 25,000. Aggrieved, Rani Devi filed a complaint before the District Forum to recover the entire benefits promised under the policies.

The Forum upheld the complaint and directed LIC to settle the claims in full according to the terms of the policy. Interest was also awarded on this amount at 6 per cent from the date of the complaint. Additionally, the Forum also awarded Rs 5,000 towards compensation and Rs 3,000 as costs.

LIC challenged the Forum's orders by appealing to the Haryana State Commission, which observed that the proposal forms bore the same date and were submitted together by the same agent. It considered that the LIC was obliged to scrutinise the proposal forms, but this had not been done, so the discrepancy went unnoticed. So it dismissed LIC's appeal.

LIC went in revision to the National Commission which noticed that all the 21 proposal form were dated January 1, 2015, and simultaneously submitted by the same agent to a single branch of the LIC. It was the duty of the LIC to check the proposal forms instead of blindly accepting the same to be in order. Having failed in its obligation to scrutinise the proposals at the stage of acceptance and issuance of the policies, the Commission considered it to be inappropriate to later find fault with varying statements made in the proposal forms.

The Commission did not agree with LIC's argument that Singh had misrepresented facts, as there was no concealment of facts and the discrepancy could have easily been detected if LIC had only bothered to scrutinise the proposal forms. It noted that having failed to discharge its duty properly, it would be inappropriate to deprive the mother of the dues when the claims arose.

The Commission also relied on the Supreme Court decision in the Rubi (Chandra) Dutta v/s M/s United India Insurance wherein it had been laid down that the powers and scope in revision jurisdiction is limited and the evidence could not reappraised after the District Forum and State Commission had given concurrent findings on merits.

Accordingly, the National Commission, through its order dated June 6, 2020, delivered by Justice R K Agrawal and Dr S M Kantikar, dismissed LIC's revision and held it liable to settle the claims in full as directed by the Forum and also pay interest and costs.

The author is a consumer activist


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