Can't reject claims based on new issues

An insured who is aggrieved by the repudiation of this claim can challenge the repudiation by filing a consumer complaint. While defending the case, can the insurer raise new grounds to justify the repudiation? No, as per the National Commission's recent judgement delivered on March 11, 2019, by Justice V K Jain.

Sanjay Kumar had taken a policy from Aviva Life Insurance under which his life was insured for Rs 30 lakh. The half-yearly premium payable was Rs 7,219. The policy commenced in May 2012. The last premium paid was in May 2014. Sanjay expired on October 11, 2014, before the next half-yearly became due in November 2014.

His widow, Mamta Rani lodged a claim under the policy. It was repudiated on January 19, 2015, on the ground that the driving licence submitted as proof of age was a fake one. Rani challenged this by filing a complaint before the Haryana State Commission.

The insurer contested the case, contending that the submission of a fake licence constituted fraud and violated the requirement of ‘utmost good faith’ for an insurance contract. The State Commission overruled the insurer's contentions and ordered it to settle the claim. This order was challenged by the insurer in appeal.

The National Commission observed that the purportedly fake driving license was not submitted by Rani who was the claimant. So the insurer was wrong in accusing her of submitting a fake document. The Commission considered that the role of the fake document would have to be considered on the basis of its relevance. It observed that the fake licence had been submitted to establish proof of age and identity. There was no dispute raised by the insurer, either about the identity of the insured or his age, so it was irrelevant whether the driving licence was fake or genuine. Even if the licence was fake, it did not result in misrepresentation or concealment about any material fact with respect to the identity or age of the insured.

The insurer attempted to rely on the report of its investigator that Kumar was a beggar and did not have the resources to take the policy. The Commission outright refused to consider this allegation, observing that this was not a ground for repudiating the claim. It relied on the judgement of the Supreme Court in Galada Power and Telecommunication Limited vs United India Insurance that an insurer cannot be allowed to raise any new ground, and would have to restrict its defence to the reason set out in the repudiation letter. It also pointed out that the investigator's report revealed that the premium was about 15 per cent of the income earned by Kumar and Rani, so it was wrong to allege that the premium amount exceeded their financial resources. The National Commission dismissed the appeal and held Aviva liable to settle the claim.

The writer is a consumer activist