Insurer can't reject claim if alcohol habit disclosed before policy purchase: Consumer commission

MUMBAI: A Nagpur consumer commission has directed a life insurance company to pay over Rs 50 lakh to a widow, ruling that rejecting a claim when the deceased had already disclosed his alcohol consumption habit prior to buying the policy amounts to deficiency in service.

Further, relying on Supreme Court orders that termed hypertension and diabetes mellitus as lifestyle diseases, the forum noted that the claim cannot be denied merely because a person did not mention these pre-existing diseases before taking the policy.

The District Consumer Disputes Redressal Commission (Nagpur), in an order passed last month, held Edelweiss Tokio Life Insurance Company Limited guilty of deficiency in service for rejecting the legally payable insurance claim of the complainant's husband.

As per the complainant, her husband had purchased the insurance company's policy in April 2021. Following his sudden death on January 26, 2023, the widow filed an insurance claim.

However, the insurance firm subsequently rejected the claim, cancelled the policy, and sent a premium refund cheque of Rs 18,713 in September 2023.

The woman then approached the District Consumer Disputes Redressal Commission, seeking claim as well as compensation for mental harassment.

During the hearings, the insurance company contended that the deceased had concealed his history of chronic alcoholism, hypertension, and diabetes mellitus. The insurer claimed this violated the principle of utmost good faith (uberrima fides).

The commission, however, pointed out that the medical examination form submitted on May 20, 2021, before the policy issuance, clearly stated the insured consumed "whisky of 90 ml twice in a month since 15 years".

Additionally, a pre-policy medical examination conducted by the insurance company's panel doctor did not mention hypertension or diabetes, the commission said.

"Consequently, even though it was clearly mentioned before taking the policy that the complainant's husband consumes alcohol/whisky, it is clear that the opposite party has caused deficiency in service by rejecting the legally payable insurance claim of the complainant's husband," the commission ruled.

It then directed the firm to pay the claim amount of Rs 50 lakh to the woman, along with a 9 per cent annual interest, calculated from September 30, 2023.

The commission also directed the insurer to pay Rs 10,000 as compensation for physical and mental harassment, and an additional Rs 10,000 towards litigation costs.