Claim Denied: Death Before Commencement of Risk Cover Justifies Rejection, Says NCDRC
Pranav B Prem
The National Consumer Disputes Redressal Commission (NCDRC), comprising Presiding Member Subhash Chandra and Member AVM J. Rajendra, upheld the repudiation of an insurance claim by SBI Life Insurance, ruling that death occurring within the 45-day exclusion period from the commencement of risk under a group insurance policy does not entitle the nominee to the assured sum. The Commission dismissed the appeal filed by the wife and minor son of the deceased insured person, affirming the well-reasoned order of the Kerala State Consumer Commission.
Background
Late Mr. Antony Issac and his wife, Sophia (the first complainant), had jointly availed a home loan of ₹18,94,000 from State Bank of Travancore (SBT) on 24.02.2007 to purchase a flat constructed by Artech Realtors Pvt. Ltd., Thiruvananthapuram. A tripartite agreement was executed among the borrowers, the bank, and the builder. The loan was to be repaid in 180 monthly installments of ₹21,715, and an initial amount of ₹11 lakhs was released to the builder.
To secure the outstanding loan in case of unforeseen death, the bank recommended that Mr. Issac opt for SBI Life’s “Super Suraksha Home Loan Scheme”—a group insurance policy tailored for State Bank borrowers. The scheme was structured such that, in the event of the borrower’s death, the insurer would settle the outstanding loan amount and pay any surplus to the nominee.
Mr. Issac submitted the filled insurance proposal form on 31.07.2007 from Dubai, with the understanding that the insurance would commence within 15 days. However, the Certificate of Insurance was issued only on 09.10.2007, following the deduction of a one-time premium of ₹70,482 from his loan account. Tragically, Mr. Issac died due to intracerebral hemorrhage on 05.11.2007, just 27 days after the commencement of risk coverage.
When the complainant submitted the claim, the insurer repudiated it by citing Clause 6 of Schedule II of the group policy, which excluded liability for non-accidental death occurring within the first 45 days from the commencement of the policy.
Proceedings Before the State Commission
The complainants filed a consumer complaint before the Kerala State Consumer Commission, arguing that both the bank and the insurer were liable due to gross delay in processing the insurance, failure to inform them about the exclusion clause, and unjust denial of coverage. It was submitted that the policy terms were not furnished to the deceased and that both bank and insurer failed in their duty to process the proposal within the 15-day period mandated by IRDA guidelines.
The State Commission partially allowed the complaint. It held that while the insurer was entitled to reject the claim under the 45-day exclusion clause, there was unexplained delay and negligence in issuing the policy certificate. It ordered SBT to refund ₹6,53,260.84 (outstanding loan amount as per bank records), along with 12% interest from the date of repayment, ₹15,000 as compensation for harassment, and ₹10,000 as litigation costs. The Commission absolved the insurer of liability for claim repudiation.
Submissions Before the NCDRC
The complainants appealed, contending that:
The insurance policy should have come into force earlier since the proposal was submitted on 31.07.2007, and the premium was fixed and accepted.
The insurer and bank failed to communicate the exclusion clause and did not issue the policy document until after the insured's death.
The 45-day exclusion clause could not apply since there was no proof of policy terms being delivered or accepted by the insured.
They argued that the insurer and bank operated as counterparts and should be jointly and severally liable for the loss and trauma caused to the family.
The bank argued that:
The policy was intended to protect the bank’s interest in recovering the outstanding loan and was not a general life insurance policy payable to the nominee.
The proposal form submitted by the insured lacked the required joint signature of both borrowers, which delayed its forwarding.
The risk commenced only upon premium deduction on 09.10.2007, and the bank had no role in policy issuance or contractual liability under the insurance agreement.
SBI Life Insurance (the insurer) submitted that:
The policy was a group insurance contract governed by the terms of a master policy, with the bank as the master policyholder.
Clause 6 of Schedule II clearly stipulated that no claim would be entertained if non-accidental death occurred within 45 days of commencement of the policy.
The risk cover began only after premium payment, and in this case, death occurred just 27 days after policy commencement.
The 45-day waiting period was standard practice and had been properly applied.
Observations of the NCDRC
The NCDRC, after reviewing the record, held that the State Commission had rightly found:
There was no insurance coverage in force at the time of Mr. Issac’s death.
Clause 6 of the policy excluded risk during the first 45 days except in cases of accidental death.
The delay in issuance of the Certificate of Insurance could not override the express terms of the contract.
The Commission observed: “As per Schedule II, Condition No. 6 of the policy terms, in the event of death within 45 days from the commencement of risk, the claim is excluded unless it is accidental in nature. The death in this case occurred within 27 days of commencement and was due to natural causes. Thus, the insurer rightly repudiated the claim.”
While noting procedural lapses and delays in processing the insurance proposal, the Commission declined to interfere with the finding of the State Commission that only the bank could be held liable to the limited extent of the disbursed loan amount and not the entire sum assured.
Verdict
Dismissing the appeal, the NCDRC affirmed:
The insurer was justified in repudiating the claim under the 45-day exclusion clause.
The bank’s delay in processing the proposal justified partial relief to the complainants for deficiency in service.
No further compensation or refund beyond what was already awarded by the State Commission was warranted.
Thus, the NCDRC held that no deficiency in service could be fastened upon the insurer and upheld the partial relief granted against the bank.
Appearance
For the Appellants: Shyam Pdman, with Jaimon Andrews, Piyo Harold Jaimon and Aswati Shyam
For the Bank: Ritesh Khare, Siddharth Sangal, Saksha Jha and Namrat Chandorkar
For the Insurer: Bharat Malhotra and Taksh Suri
Cause Title: Sophia & Anr. vs State Bank of Travancore & Anr.
Case No: First Appeal No. 34/2012
Coram: Hon’ble Mr. Subash Chandra [Presiding Member], Hon’ble AVM J. Rajendra, AVSM VSM (Retd.) [Member]
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