Delhi Consumer Commission Holds LIC Liable for Wrongful Repudiation; Orders Payment of Insured Sum with Interest from Date of Repudiation
Pranav B Prem
The Delhi State Consumer Disputes Redressal Commission has held the Life Insurance Corporation of India (LIC) guilty of deficiency in service for wrongfully repudiating an insurance claim and has directed the insurer to pay the insured amount of ₹8,00,000 with interest at 9% per annum from the date of repudiation. The Bench comprising Justice Sangita Dhingra Sehgal (President) and Ms. Bimla Kumari (Member Judicial) modified the District Commission’s order only on the aspect of interest while upholding all other findings.
The case arose from the death of Mr. Vikram Razdan, who had purchased a LIC Jeevan Anand Policy commencing on 28 September 2007, for a term of 21 years. He passed away on 15 February 2010 due to cardiac arrest at Batra Hospital. His mother, Mrs. Shyama Razdan, the nominee under the policy, informed LIC about the death on 2 December 2010 and again on 7 February 2011, requesting settlement of the claim. However, LIC repudiated the claim on 28 July 2011, alleging that the deceased had suppressed material information about suffering from chronic kidney disease and having a solitary kidney prior to taking the policy.
The appellant disputed these allegations and maintained that her son was in good health at the time of submitting the proposal form. She asserted that the condition of a solitary kidney was discovered only after October–November 2007, well after the policy commencement date. She argued that LIC failed to produce any credible medical evidence to show that the deceased had knowledge of kidney-related problems before issuing the policy. She also emphasized that LIC did not file any medical examination report conducted at the time of proposal, which should have been the insurer’s primary basis for deciding whether the deceased had pre-existing health concerns.
After LIC’s repudiation, the complainant approached the District Consumer Commission in 2013. The District Commission held LIC liable and directed payment of the insured amount along with interest from the date of filing the complaint. Dissatisfied only with the interest commencement date, the appellant filed the present appeal seeking interest from the date of repudiation.
LIC defended its action by claiming that the deceased had intentionally concealed critical medical information while filling out the proposal form. It reiterated that the repudiation was justified and argued that interest should not run from the date of repudiation.
The State Commission, after considering the submissions, observed that LIC had failed to substantiate its allegations of suppression of material facts. The insurer relied solely on hospital notes recorded during a later hospitalisation, but did not provide any proof of pre-policy medical records showing that the deceased had a known kidney ailment when the policy was purchased. The Commission noted that the repudiation of the claim on such unverified grounds amounted to clear deficiency in service.
On the issue of interest, the Commission held that once the repudiation letter dated 28 July 2011 was on record, interest must logically accrue from that date, as the cause of action arose then and not from the date of filing the complaint. It referred to settled principles where insurers are obligated to compensate policyholders promptly after wrongful repudiation.
Accordingly, the Commission modified the District Commission’s order to direct LIC to pay the insured sum of ₹8,00,000 along with interest at 9% per annum from 28 July 2011 until realisation. All other directions, including compensation and costs, were left undisturbed. The appeal was allowed partly to that extent.
Cause Title: Shyama Razdan vs. LIC of India
Case No: First Appeal No. 247/2024
Coram: Justice Sangita Dhingra Sehgal (President), Ms. Bimla Kumari (Member Judicial)
