The Chandigarh State Consumer Commission has clarified that the suicide exclusion clause in life insurance policies is triggered from the date of policy revival, not the original issuance date. This ruling reinforces contractual interpretation in insurance claims and sets a precedent for how revival conditions affect benefit entitlements.
Background & Facts
The Dispute
The appellant, Vanita Sharma, filed a consumer complaint against the Life Insurance Corporation of India (LIC) seeking payment of the full sum assured of ₹5,00,000 under Policy No. 145716662, issued on 28.05.2020, with an Additional Death Benefit (ADDB) rider of ₹5,00,000. Her daughter, Ms. Tunisha Sharma, the life assured, died by suicide on 25.12.2022. LIC paid only ₹70,600, deducting ₹4,29,400, citing Clause 2 (Suicide Exclusion) of Part-F of the policy, which limits payout to 80% of premiums paid or surrender value, whichever is higher, if death occurs within one year of policy revival.
Key Facts
- Policy issued on 28.05.2020 with quarterly premium of ₹8,950
- Premium due on 28.05.2022 was paid on 10.07.2022 (beyond 30-day grace period)
- Premium due on 28.08.2022 was paid on 02.10.2022 (beyond grace period)
- Policy lapsed on 28.06.2022 and again on 28.09.2022 due to non-payment
- Policy revived on 02.10.2022 after payment of outstanding premiums and revival charges
- Life assured died by suicide on 25.12.2022 - 74 days after revival
- Claim submitted on 26.12.2022; payment of ₹70,600 made on 10.08.2023
- Appellant approached Insurance Ombudsman on 05.11.2023; legal notice dated 16.10.2023 went unanswered
- Total premiums paid: 10 quarterly installments (₹89,500)
- 80% of premiums = ₹71,600; LIC paid ₹70,600 (rounded down)
Procedural History
- 28.05.2020: Policy issued
- 28.05.2022: First premium default
- 10.07.2022: Late payment of premium due on 28.05.2022
- 28.06.2022: Policy lapsed
- 28.08.2022: Second premium default
- 02.10.2022: Late payment of premium due on 28.08.2022; policy revived
- 25.12.2022: Death of life assured
- 10.08.2023: LIC paid ₹70,600
- 16.10.2023: Legal notice sent by appellant
- 12.01.2024: Consumer complaint filed before District Consumer Disputes Redressal Commission-I, Chandigarh (CC/174/2024)
- 01.08.2025: District Commission dismissed complaint
- 08.09.2025: Appeal filed before State Consumer Commission
- 14.01.2026: Commission directed LIC to produce original policy
- 02.02.2026: LIC produced original policy
- 19.03.2026: State Commission dismissed appeal
Relief Sought
The appellant sought: (1) payment of full sum assured of ₹5,00,000; (2) compensation for mental agony and harassment; (3) costs of litigation; and (4) direction to treat the claim as valid under the policy terms.
The Legal Issue
The central question was whether the suicide exclusion clause in a life insurance policy applies from the date of original policy issuance or from the date of revival after lapse due to non-payment of premiums.
Arguments Presented
For the Appellant
The appellant contended that since the policy was originally issued on 28.05.2020 and death occurred on 25.12.2022 - over two years later - the suicide exclusion clause could not apply. She argued that revival merely reinstates the original contract and does not reset the exclusion period. She relied on Modern Insulator Limited v. Oriental Insurance Co. Ltd. and Mithoolal Nayak v. LIC to assert that exclusion clauses not communicated or not forming part of the contract are unenforceable. She further argued that Annexure R-1, relied upon by LIC, was a blank policy document and that adverse inference should have been drawn for non-production of the original policy until 02.02.2026.
For the Respondent
LIC contended that the policy had lapsed twice due to delayed premium payments beyond the 30-day grace period. Revival constituted a new contractual arrangement governed by the policy’s revival terms, including the suicide exclusion clause applicable for one year from revival. The claim settlement of ₹70,600 was calculated strictly in accordance with Clause 2 of Part-F, which permits 80% of premiums paid or surrender value. All notices regarding lapses and revival were sent via SMS and recorded in policy records. The original policy was produced before the State Commission as directed, negating any claim of prejudice.
The Court's Analysis
The Commission held that a revived policy is not a continuation of the original contract but a fresh agreement subject to the terms governing revival. The policy document explicitly states that the suicide exclusion applies if death occurs within one year of revival. The premium payment history (Annexure R-3) and revival confirmation (Form No. 3816, Annexure R-7) were undisputed and established that the policy lapsed twice and was revived on 02.10.2022. Death occurred on 25.12.2022 - within 12 months of revival - squarely triggering the exclusion clause.
"The revival of a lapsed policy is not a mere continuation of the original contract in its pristine form; rather, it constitutes a fresh contract subject to the terms and conditions governing such revival, including the specific stipulation relating to suicide within one year from the date of revival."
The Court rejected the appellant’s argument that Annexure R-1 was irrelevant, noting that the existence and terms of the policy were not disputed. The appellant failed to demonstrate that the exclusion clause was not part of the contract or was not communicated. The production of the original policy on 02.02.2026, after a specific direction, negated any basis for adverse inference. The precedents cited by the appellant were inapplicable, as they concerned non-disclosure or non-inclusion of exclusion clauses - not their application after revival.
The Commission emphasized that the insurer did not repudiate the claim but paid the exact benefit prescribed under the policy terms. The payment of ₹70,600 (80% of ₹89,500 paid premiums) was accurate and lawful. No deficiency in service or unfair trade practice was established.
The Verdict
The appeal was dismissed. The State Consumer Commission upheld the District Commission’s order dated 01.08.2025. The insurer’s payment of ₹70,600, calculated as 80% of the total premiums paid (₹89,500), was found to be in full compliance with the policy’s suicide exclusion clause applicable after revival. No compensation, interest, or costs were awarded. The original record of CC/174/2024 was directed to be returned to the District Commission.
What This Means For Similar Cases
Revival Resets the Suicide Exclusion Period
- Practitioners must advise clients that policy revival creates a new exclusion window - death within one year of revival triggers limited payout, regardless of original policy date
- Claims based on elapsed time from original issuance will fail if revival occurred within the prior two-year period
Documentary Evidence Controls Over Oral Assertions
- Premium payment records and revival confirmations are decisive; mere assertions of "regular payment" are insufficient if bank or insurer records show defaults
- Insurers must maintain and produce SMS logs, revival forms, and lapse notices to substantiate compliance
Adverse Inference Requires Proven Bad Faith
- Failure to produce original policy does not automatically trigger adverse inference if it is later produced upon direction
- Courts require proof of deliberate withholding, not mere delay
