Policyholder dies by suicide, insurer rejects full claim of father, who wins Rs 11.76 lakh

The Delhi consumer commission recently upheld an order directing Star Union Dai-ichi Life Insurance to pay Rs 11.76 lakh to the father of a man who died by suicide before paying the fifth and final installment of the policy. The commission rejected the insurer’s argument that only 80 per cent of the premiums paid were payable because the insured had died by suicide within 12 months of the policy’s alleged revival.

President Sangita Dhingra Sehgal and member Bimla Kumari were hearing an appeal filed by Star Union Dai-ichi Life Insurance challenging the district commission’s March 2023 order, which had directed it to pay the balance insured amount of Rs 11.61 lakh, along with interest, damages and litigation costs, to the policyholder’s father.

“Further, it is not disputed that the insured had regularly paid four annual premiums under the policy since its inception in the year 2016. In the absence of satisfactory proof regarding lapse and valid reinstatement of the policy, the appellant (Star Union Dai-ichi Life Insurance) could not have invoked Clause-9(b) pertaining to suicide within 12 months of reinstatement. Consequently, the district commission rightly concluded that the case would not fall under the reinstatement clause and the complainant was entitled to the balance insured amount in terms of the policy,” the June 22 order read.

Agreeing with the district commission’s findings, the state commission held that the insurer had failed to produce any evidence on record to show that the policy had validly lapsed and was subsequently reinstated in accordance with the policy terms.

Man died before 5th premium installment

According to the complainant, his son, Manoj Kumar Sharma, purchased a life insurance policy from Star Union Dai-Ichi Life Insurance in July 2016, with the sum assured fixed at Rs 16.38 lakh and premiums payable in five annual installments. The insured paid four annual premiums of Rs 1.54 lakh each but died by suicide on December 11, 2019, before the fifth instalment became due.

Following his son’s death, the complainant, who was the nominee under the policy, lodged a claim for the full sum assured. However, the insurer paid only Rs 4.76 lakh, equivalent to 80 per cent of the premiums paid, citing the policy’s suicide clause. Alleging a deficiency in service, the father sought payment of the remaining insured amount.

The insurance company defended its decision by arguing that the policy had lapsed due to non-payment of the premium due on July 30, 2019, and was subsequently reinstated on September 13, 2019. Since the insured died by suicide within three months of the alleged reinstatement, the company argued that the relevant clause of the policy entitled the nominee only to 80 per cent of the premiums paid.

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The company maintained that there was no deficiency of service on its part and that Manoj Kumar’s policy had lapsed, but he got his policy reinstated on September 13, 2019. It was added that he died by suicide within 3 months of the reinstatement of the policy, and the evaluated amount was settled to the claim of the complainant.

The father later approached the district commission, which directed the insurance company to pay Rs 11.61 lakh along with simple interest at the rate of 4 per cent per annum from the date of complaint till realisation of the amount, apart from damages of Rs 10,000 and litigation costs of Rs 5000.

The complainant was represented by advocate Himanshu Wadhwa in the matter, who denied all the submissions of the insurance company and submitted that there is no error in the previous order as the entire material available on record was properly scrutinised before passing the same.

Star Union Dai-ichi Life Insurance’s defence

The counsel for the insurance company, advocate Nishant Gaurav Gupta, argued that the district commission erred in holding a deficiency of service on the insurance company’s part and failed to consider that the policy of the insured had lapsed due to non-deposit of the premium on the due date and that the same was reinstated on September 13, 2019.

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It was further submitted that the district commission had erroneously interpreted the relevant clause of the policy terms and conditions and sought to set aside the previous order.

Significance of ruling

The ruling underscores that insurers cannot rely on some clauses relating to revival or reinstatement of policies unless they can establish, through clear documentary evidence, that the policy had actually lapsed and was subsequently revived in accordance with the contractual terms.

For consumer-related grievances, individuals may contact the consumer helpline in their respective states or call the National Consumer Helpline at 1915 or 1800-11-4000 for assistance.