Haryana State Commission holds Exide Life Insurance Co. responsible for wrongful termination of its insurance policy

THE National Consumer Disputes Redressal Commission, Haryana bench of Shri Naresh Katyal (Judicial Member) held “Exide Life Insurance Company” liable for unfair trade practice for unfairly terminating the insurance policy without allowing the policyholder to make a declaration. It also did not examine the medical history of the policyholder between the policy application and the effective time.

Brief facts:

The complainant’s husband (“deceased”) held the “Exide Life Guaranteed Income Insurance Plan” of Exide Life Insurance Company Ltd. (“Insurance Company”). During the term of his policy, he was involved in a fatal road accident. An FIR was registered in connection with the accident. After the victim succumbed to his injuries, the plaintiff filed a death claim with the insurance company. She was asked to complete certain formalities, which she did by subsequently submitting a complaint.

However, instead of paying the sum assured of Rs. 22,48,382/-, which included the guaranteed death benefit and additional benefits, the insurance company refunded the premium amount to the bank account of the deceased without inform him. Later, the insurance company refused to accept the plaintiff’s documents to settle the claim in accordance with the insurance contract. No resolution was provided by the insurance company, even after the plaintiff sent a legal notice. Feeling aggrieved, the complainant filed a consumer complaint with the National Consumer Disputes Redressal Commission, Haryana (“State Commission”).

In response, the insurance company argued that no valid insurance policy existed at the time of the deceased’s death. He said the policy had already been canceled under section 45 (2) of the Insurance Act due to the deceased’s failure to disclose his two-year-old liver disease. The insurance company claimed that it informed the deceased about the cancellation and refunded the premium amount of Rs.56,686/- to his bank account.

Commission observations:

The State Commission found that the insurance company failed to provide substantial evidence of the deceased’s health. His report from the “Fraud Detection and Prevention Unit” was deemed unreliable because it lacked signatures or official stamps.

Additionally, the State Commission emphasized that the insurance company had sufficient time between the policy’s proposal and its inception to investigate the medical history, but it failed to do so. He pointed out that the insurance company did not allow the deceased to be heard before terminating the contract, thereby violating the principles of natural justice.

Therefore, the State Commission found that the termination of this policy was arbitrary and constituted an unfair trade practice. She declared the termination letter illegal and non-binding. The complaint was upheld and the insurance company was directed to pay Rs. 22,24,191/- to the Complainant along with 7% interest. Further, he was ordered to pay Rs. 30,000/- as compensation for mental agony and Rs. 20,000/- as litigation costs.

Case title: Anjali Devi v Exide Life Insurance Company Ltd. and others

Case number: CC/390/2018

Defender of the complainant: Mr. Sudhir Gupta

Defender of the defendant: Mr. Inderjeet Singh

Date of decision: September 24, 2024

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