Insurer’s ‘hidden illness’ excuse backfires: Consumer court orders Rs 50.60 lakh payout

The Assam Consumer Commission has held HDFC Life liable for deficiency in service after a son was denied Rs 50 lakh insurance claim on the ground of pre-existing illnesses of his father and ordered the HDFC Standard Life Insurance Company Ltd. to pay Rs 50.60 lakh as the claim amount and compensation.

President Justice Malasri Nandi and member Tapas Kumar Ghosh were hearing the complaint filed by the son of the policyholder, who was also the nominee in the said policy, against HDFC Life over the rejection of his father’s insurance claim.

“Due to their faulty findings and investigation, the complainant had to suffer a lot for his claim unnecessarily. Hence, such conduct of the opposite parties (HDFC) amounts to deficiency in their service,” the commission observed on 29 June, adding that the medical tests done before the policy was issued left no room for concealment.

The commission found that the insurer’s own witness, a pharmacist at a rural health centre, could not confirm whether the earlier treatment records, which the insurer used to reject the claim, belonged to the same patient or not, and it was also noted that no doctor was even posted at the health centre at the time of the said medical records.

Events leading to claim denial

The counsel for the complainant, advocate G R Dutta, brought before the commission that the policyholder bought a policy, named HDFC Life Click-2 Protect Plus on 22 January, 2016 for an assured sum of Rs 50 lakhs, paying a premium of Rs 35,272. His son was named the nominee.

The policyholder died on July 17, 2017, of aspiration pneumonia. His son filed the death claim in October 2017. Still, HDFC Life rejected it in December 2017, saying that he had suffered from hepatitis C and a cerebrovascular accident (stroke) before taking the policy and had not disclosed this.

The insurer later said that the policyholder had answered “no” to questions in the proposal form about past illness and hospitalisation, which it called suppression of material facts. It also argued that only the policyholder’s legal heirs, not the nominee alone, could claim the money.

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Court rejects ‘hidden illness’ argument

The commission held that the nominee has every right to file the complaint alone; other legal heirs need not be joined.

The insurer’s own witness, a pharmacist, admitted no doctor was posted at the rural health centre in 2014-15 and could not confirm the patient’s age matched that of the policyholder.

The consumer body further added that the medicines listed in the treatment records did not indicate any serious disease like hepatitis C or stroke.

Before issuing the policy, the insurer itself got the policyholder to undergo several medical tests, including HIV and blood sugar tests, at its recognised hospital, and accepted the premium only after being satisfied with the results.

Since the tests were conducted by the insurer’s own chosen hospital, the commission found that there was no scope for the policyholder to hide any pre-existing illness.

The death certificate showed the cause of death was aspiration pneumonia, unconnected to the illnesses cited for rejecting the claim.

Penalty imposed on insurer

The commission held that HDFC Life’s repudiation of the claim was incorrect and directed it to pay Rs 50 lakh as the death claim, along with Rs 50,000 as compensation for deficiency in service and Rs 10,000 as litigation cost.

The court further said that the insurer must deposit the total amount, Rs 50,60,000, within three months, failing which it will attract 6 percent annual interest from the date of filing the complaint.

Insurer arguments for rejection

Advocate P P Dutta, counsel for HDFC, argued that the policyholder’s death claim was rightly rejected because he had concealed pre-existing conditions, namely hepatitis C and a cerebrovascular accident (stroke), at the time of buying the policy, in breach of the duty of utmost good faith that governs insurance contracts.

The insurer said an investigation after his death revealed he had been treated for these ailments at a local health sub-centre before the policy was issued, and that this suppression of material facts was enough to justify denying the claim.

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It further contended that the complaint itself could not proceed, since the policyholder had left behind several legal heirs besides his son, none of whom had been made a party to the case, and that only the legal heirs, not the nominee alone, were entitled to the insurance money.

Consumers facing similar grievances may contact the consumer helpline in their state (Assam –1800-345-3611) or dial the National Consumer Helpline at 1915 for assistance.

Written by Avinash Verma (Avinash is an intern with The Indian Express)