Insurer has to prove pre-existing disease

A mere allegation by the insurer would not suffice to oust the claim, and the allegation would have to be substantiated by furnishing evidence

Pratap Singh had taken a term assurance policy from HDFC Life. The policy provided a cover of Rs 50 lakh, for which the annual premium was Rs 24,046. The policy commenced from December 5, 2008, and had a term of 20 years. Prior to issuance of the policy, the insurer had subjected Singh to a medical examination at Apex Diagnostics and Polyclinic, which had reported him to be fit.
 
However, Singh expired on January 1, 2009. His brother Virpal Nagar who was the nominee lodged a claim under the policy. Even though all the documents were submitted, HDFC Life delayed processing the claim and finally repudiated it on April 19, 2010.

 
The reason stated for the repudiation was intentional non-disclosure of material facts at the time of applying for the policy.
 

Nagar filed a complaint before the Delhi State Commission. HDFC Life opposed the case on technical issues as well as on merits. It contended that Nagar could not be termed a consumer, so he was not entitled to file a complaint under the Consumer Protection Act. On merits, it was contended that Singh had concealed material facts by not disclosing his pre-existing ailments. HDFC Life also stated that Singh had not furnished proper proof of his occupation and disputed his declaration that he was working with Deepak General Store and his annual income was Rs 2.5 lakh.

 
The State Commission overruled the objections raised and ordered the claim of Rs 50 lakh to be paid within two months along with 6 per cent interest. HDFC Life appealed against this order.

The National Commission relied on its earlier judgement in Pradeep Kumar Garg vs National Insurance [III (2008) CPJ 423], to interpret that pre-existing disease would mean an ailment for which the insured is under treatment or has been hospitalised or undergone surgery in near proximity to the date when he applied for a policy.
 
The National Commission also pointed out that the law was well settled that the burden of proof is on the insurer who alleges that the insured has concealed prior illness and pre-existing disease. A mere allegation by the insurer would not suffice to oust the claim, and the allegation would have to be substantiated by furnishing cogent evidence. It noted that even though the insurer was given an opportunity to show the basis on which it was alleging suppression of pre-existing respiratory disorder, paralysis and multiple sclerosis, it was unable to furnish even an iota of evidence in support.

 
Accordingly, by its order of July 19, 2019, delivered by C Viswanath for the Bench headed by Justice Deepa Sharma, the National Commission dismissed the revision petition and confirmed the decision of the State Commission holding HDFC Life liable to settle the claim.

The writer is a consumer activist