The National Consumer Disputes Redressal Commission has reaffirmed that insurers cannot repudiate life insurance claims based on speculative allegations of non-disclosure. The judgment underscores that the burden of proving deliberate suppression of material facts rests entirely on the insurer, and mere suspicion or internal reports are insufficient to override concurrent findings of fact by lower forums.
Background & Facts
The Dispute
The complainant, Nandlal Tiwari, sought payment of Rs. 2,51,000 under three life insurance policies issued by the Life Insurance Corporation of India (LIC) on the life of his wife, Kamala Devi, who died on 25.09.2004, just two days after the third policy commenced. He submitted the death certificate, claim form, and nominee affidavit. LIC refused payment, alleging suppression of pre-existing heart ailment, inconsistent age and occupation details, and non-disclosure of prior policies.
Procedural History
The case progressed through three forums:
- 2010: Complaint filed before District Consumer Disputes Redressal Forum, Rohtas-Sasaram
- 2015: District Forum partly allowed the complaint, directing payment of Rs. 2,76,000 including compensation and costs
- 2017: Bihar State Commission dismissed LIC’s appeal, upholding the District Forum’s findings
- 2018: LIC filed Revision Petition before NCDRC challenging the State Commission’s order
Relief Sought
LIC sought to set aside the orders of the lower forums and reject the claim on grounds of material suppression and limitation. The complainant sought dismissal of the revision petition with exemplary costs.
The Legal Issue
The central question was whether the insurer discharged its burden of proving deliberate and material suppression of facts by the life assured under a contract of utmost good faith, and whether internal investigation reports without corroborative evidence suffice to justify repudiation of a claim.
Arguments Presented
For the Petitioner
LIC contended that the deceased concealed a pre-existing heart condition treated in Varanasi, misrepresented her occupation as agriculturalist/tailor to qualify for higher coverage, and failed to disclose prior policies. It relied on an internal report dated 15.01.2009, which stated, "I felt the case is not genuine. But could not gather any evidence." It argued that the policies were voidable under Section 45 of the Insurance Act, 1938, and that the complaint was time-barred under the Limitation Act, 1963.
For the Respondent
The complainant asserted that the insured was illiterate and the proposal forms were filled by LIC’s authorized agent. He submitted all required documents promptly and cooperated with investigations. He relied on the concurrent findings of the District Forum and State Commission that no evidence established intentional suppression. He cited United India Insurance Co. Ltd. v. M/s Hyundai Engineering & Construction Co Ltd to emphasize that exclusion clauses must be strictly construed against the insurer.
The Court's Analysis
The NCDRC examined the legal framework governing insurance contracts, emphasizing that insurance is a contract of utmost good faith, but the burden of proving suppression lies exclusively on the insurer. The Commission relied on United India Insurance Co. Ltd. v. M/s Hyundai Engineering & Construction Co Ltd (2024 LiveLaw 409), which held that exclusionary clauses must be pleaded and proved with cogent, reliable evidence. The Court noted that the insurer’s internal report was speculative and lacked contemporaneous medical records, witness statements, or documentary proof of prior treatment.
"The evidence must unequivocally establish that the event sought to be excluded is specifically covered by the exclusionary clause."
The Commission further held that the concurrent findings of fact by two lower forums, based on detailed appreciation of evidence, could not be disturbed under Section 21(b) of the Consumer Protection Act, 1986, unless perverse or jurisdictionally flawed. The Court observed that LIC’s delay in seeking documents - first requesting them in 2006 and again in 2011 - after the claim was made in 2004, undermined its claim of urgency or suspicion. The absence of any medical records or independent verification rendered the repudiation arbitrary.
The Commission also rejected the limitation argument, noting that the claim was made within a reasonable time after the death, and the delay in investigation was attributable to LIC’s own inaction.
The Verdict
The revision petition was dismissed. The Court held that the insurer failed to discharge its burden of proving material suppression, and the concurrent findings of the lower forums were valid, well-reasoned, and based on evidence. The claim for Rs. 2,76,000 was upheld.
What This Means For Similar Cases
Burden of Proof Rests Entirely on the Insurer
- Practitioners must insist that insurers produce contemporaneous medical records, independent verification reports, or documented admissions to prove suppression
- Internal memos or subjective opinions like "I felt the case is not genuine" are legally insufficient
- The insurer cannot rely on post-claim scrutiny to justify repudiation if due diligence was not exercised at underwriting
Concurrent Findings Are Binding Unless Perverse
- Revision petitions under Section 21(b) are not appeals; they cannot re-appreciate evidence
- Lawyers should argue that any challenge to factual findings must demonstrate perversity or jurisdictional error
- Courts will not interfere merely because they would have decided differently
Delay in Investigation Undermines Repudiation Claims
- Unexplained delays in seeking documents or initiating investigations weaken the insurer’s position
- Courts view such delays as inconsistent with genuine suspicion of fraud
- Practitioners should highlight timing gaps between policy issuance, death, and investigation as evidence of bad faith
