Uttarakhand State Commission: Insurance Claim Rightly Denied Due To Misrepresentation Of No Claim Bonus
Pranav B Prem
The Uttarakhand State Consumer Disputes Redressal Commission, presided by Ms. Kumkum Rani and Mr. C.M. Singh, allowed the appeal filed by National Insurance Company and dismissed the deficiency in service complaint filed against it. The Commission held that the complainant had misrepresented material facts while purchasing the policy, thus justifying the insurer’s repudiation of the claim.
Background of the Case
The complainant, Sandeep Garg, owned a Tata Indigo car (Reg. No. UK08-AB-5007), which was insured by National Insurance Company for the period from 11.04.2014 to 10.04.2015. During the subsistence of the policy, the vehicle met with an accident on 12.10.2014. The insurer was informed, and after an inspection by the surveyor, the complainant was directed to repair the vehicle at an authorised service centre. He incurred repair expenses amounting to ₹51,216 and submitted the bill for reimbursement.
However, before the insurer settled this claim, the vehicle again met with another accident on 05.12.2014 at Bareilly. Once again, the insurer was informed and the surveyor inspected the vehicle. The complainant was advised to tow the car to an authorised service centre, which incurred him an additional ₹10,000 in towing charges. The service centre estimated the damage to be ₹4,32,401, with ₹40,000 in garage charges. The insurer’s surveyor assessed the car as a total loss and assured a settlement amount of ₹3,50,000. However, no payment was made despite repeated requests, leading the complainant to send a legal notice and eventually file a consumer complaint.
The District Consumer Commission, Haridwar, allowed the complaint and directed the insurer to pay ₹4,32,701 with 6% annual interest and ₹5,000 towards litigation expenses. Aggrieved by this decision, National Insurance Company preferred an appeal before the State Commission.
Contentions by the Insurer
The insurer contended that while filling the proposal form, the complainant had falsely declared that no claim had been made under the previous year’s policy, thereby availing a 20% No Claim Bonus (NCB). However, upon verification with the previous insurer—New India Assurance—it was revealed that the complainant had indeed filed a claim in the previous policy year, entitling him to 0% NCB. Based on this misrepresentation, the insurer treated the insurance contract as void and repudiated the claim.
Findings and Analysis by the State Commission
The State Commission reviewed the documents and noted that the insurance policy had indeed been issued for the relevant period after the premium payment of ₹8,820. The complainant had been granted a 20% NCB, amounting to ₹2,184.97, based on his self-declaration. However, the insurer had later received confirmation from New India Assurance stating that a claim was made in the previous policy period (11.04.2013 to 10.04.2014), making the complainant ineligible for any NCB.
The Commission examined the insurer's repudiation letter, which stated that due to the complainant's misrepresentation regarding the NCB, the claim was treated as “No Claim.” The Commission further acknowledged that the proposal form is an essential part of the insurance contract and the declaration made therein forms the basis for issuing the policy.
The appellant cited the decision in Sh. Anjani Gupta vs. Future Generali India Insurance Co. Ltd [Revision Petition No. 1051 of 2017], where it was held that if the insurer had the means to verify the NCB through ordinary diligence but failed to do so, the claim should be paid on a non-standard basis with proportional deductions. However, the State Commission chose to rely more heavily on the ratio laid down in Rajeshwari Devi Garg vs. United India Insurance Co. Ltd [II (2024) CPJ 484 (NC)] and LIC of India vs. G.M. Channabasamma [(1991) 1 SCC 357], where it was held that insurance contracts are governed by the principle of utmost good faith (uberrimae fides), and suppression of material facts is a valid ground for repudiation.
The Commission held that the complainant knowingly made a false declaration to gain an undue advantage and misled the insurer. As such, this amounted to a breach of the principle of utmost good faith, and the insurer was justified in repudiating the claim.
The Uttarakhand State Commission concluded that there was no deficiency in service on the part of National Insurance Company. It allowed the appeal, set aside the order passed by the District Consumer Commission, and dismissed the consumer complaint filed by Sandeep Garg.
Appearance
Appellant: Sh. Deepak Ahluwalia, Advocate
Cause Title: National Insurance Co. Ltd. V. Mr. Sandeep Garg
Case No: SC/5/A/231/2018
Coram: Ms. Kumkum Rani [President], Mr. C.M. Singh [Member]
