LIC Cannot Reject Accidental Death Benefit on Hyper-Technical Grounds: Chandigarh Consumer Commission
Pranav B Prem
The District Consumer Disputes Redressal Commission, Chandigarh, comprising Amrinder Singh Sidhu (President) and B.M. Sharma (Member), has held that insurance companies cannot deny legitimate claims by relying on minor or hyper-technical objections, particularly when the insured has acted in good faith. Holding the Life Insurance Corporation of India (LIC) guilty of deficiency in service, the Commission directed LIC to pay the accidental death benefit wrongly denied under a life insurance policy.
The complaint was filed by Raj Kumari and Mahendra Singh, parents of the deceased Mandeep Singh, in whose name a life insurance policy had been taken when he was a minor. During the subsistence of the policy, Mandeep Singh died on October 12, 2020, due to electrocution caused by an open street-light wire, an incident that was not disputed by the insurer.
Following the death, the complainants approached LIC for settlement of the policy claim. As there was no nomination under the policy, the complainants obtained a succession certificate from the competent civil court. Thereafter, LIC released a sum of ₹2,41,500 towards the basic death benefit on February 7, 2023.
However, LIC refused to pay the accidental death benefit of ₹1,87,500, prompting the complainants to approach the Consumer Commission alleging deficiency in service and unfair trade practice. The complainants contended that the death was clearly accidental and occurred during the currency of the policy, entitling them to the accidental benefit. They argued that LIC had arbitrarily denied the benefit on technical grounds, despite honouring the basic death claim.
It was specifically argued that the policy did not contain any condition requiring the life assured to exercise a separate option for accidental benefit upon attaining majority. The complainants further submitted that no such requirement was ever communicated to the deceased or to them, and therefore denial of the accidental benefit was wholly unjustified.
LIC, while admitting issuance of the policy and payment of the basic death benefit, defended its decision to deny the accidental benefit. It contended that although the policy was taken when the life assured was a minor, he had attained majority before his death. According to LIC, upon attaining majority, the life assured was required to execute a nomination and specifically opt for the accidental benefit, which he had failed to do during his lifetime. On this basis, LIC argued that the accidental benefit was not payable.
After considering the rival submissions, the Commission observed that the death of the life assured was undisputedly accidental and had occurred during the validity of the policy. It noted that LIC had failed to place on record any policy condition mandating a fresh or separate option for accidental benefit upon attaining majority. The Commission further found that LIC had not produced any evidence to show that such a requirement was ever communicated to the life assured.
Rejecting LIC’s defence as hyper-technical, the Commission held that insurers cannot defeat genuine claims by raising technical objections when the insured has acted bona fide. Emphasising the welfare-oriented nature of insurance, the Commission observed that insurance is meant to protect policyholders and their families against unforeseen contingencies and is not a luxury.
The Commission held that denial of the accidental death benefit amounted to deficiency in service and unfair trade practice. It found that LIC’s conduct in releasing the basic death benefit while denying the accidental benefit, without any contractual or legal basis, was arbitrary and unjustified. Accordingly, the complaint was partly allowed, and LIC was directed to pay ₹1,87,500 towards the accidental death benefit along with interest at 9% per annum from February 7, 2023, the date on which the basic claim was settled. LIC was also directed to pay ₹20,000 as compensation and litigation costs. However, the Commission declined to award interest on the amount already paid towards the basic death benefit.
Cause Title: Raj Kumari and ors Vs. LIC
Case No: DC/AB1/44/CC/137/2023
Coram: Amrinder Singh Sidhu (President), B.M. Sharma (Member)
