Consumer protection: Insurer must prove, not infer, pre-existing ailments

The State Commission noted it could not be inferred from the medical certificate that these ailments were present when the policyholder purchased the policies

Banku Bihari Das was an employee of the Hugli River Bridge Commission, West Bengal. He purchased five insurance policies from Life Insurance Corporation (LIC) of India. 

At the age of 43, he was hospitalised on September 13, 2011, at Northland Nursing Home in Kolkata. He was discharged on September 22, 2011. The fitness certificate stated that he would be able to resume normal duties from November 4, 2011.  However, before he could return to work, he fell seriously ill and was admitted to the ICU of the same nursing home, where he ultimately died on December 2, 2011. 

His sister, Anita, who was the nominee, lodged claims under the policies. Of the five policies, LIC did not settle the claims for two — one issued on August 28, 2009, for ₹1,25,000, and the other issued on November 28, 2010. LIC cited that the insured had given a false response in the proposal, stating he was enjoying good health. LIC relied on the leave record to show that the insured had frequently taken sick leave at work. The repudiation letter also mentioned that the medical certificate stated the cause of death as septicaemia caused by Type-II diabetes. 

Anita filed a complaint before the District Consumer Commission challenging the repudiation. The insurer contested the case. It justified the repudiation and forfeiture of premium, alleging that the insured had withheld material facts about his health. The District Commission considered the leave record and hospitalisation as proof that the insured had a pre-existing disease, which he had suppressed. Hence, it upheld the repudiation and dismissed the complaint. 

Anita challenged the dismissal of her complaint. The West Bengal State Commission observed that the leave record did not mention any specific illness for which leave was taken. It noted that an incorrect inference had been drawn by concluding that leave was taken due to hypertension and high blood sugar. The Commission further noted that the medical certificate stating the cause of death as septicaemia due to diabetes did not mention the time from which the insured was suffering from these ailments, so it could not lead to the conclusion that the ailments were present when the policy was purchased. It also observed that no clinical or pathological report had been produced to substantiate the pre-existence of hypertension and diabetes. In the absence of evidence to establish the pre-existence of ailments, the Commission concluded that the alleged suppression of facts was merely a presumption. Hence, it set aside the order of the District Commission and ordered the insurer to settle the claims by paying the sum insured along with 9 per cent interest. 

LIC challenged the order through a revision petition. The National Commission observed that the leave record indicated that leave was occasionally taken for a few days at a time. However, there was no mention of diabetes or hypertension in the leave record. The National Commission clarified that the existence of diabetes and hypertension at the time of death was irrelevant and that what had to be proved was that these ailments pre-existed when the policy was taken. It observed that LIC had failed to discharge the burden of proof that the insured suffered from these diseases, but had suppressed the information at the time of taking the policy. 

Accordingly, by its order of May 21, 2025, delivered by a Bench of Justice A P Sahi and Bharatkumar Pandya, the National Commission dismissed LIC’s revision and confirmed the liability to settle the claims as directed by the State Commission. 

The writer is a consumer activist