In a significant ruling, the Allahabad High Court’s Lucknow Bench dismissed a petition by Bajaj Allianz Life Insurance Co. Ltd., thereby upholding the Permanent Lok Adalat’s order directing the insurer to pay Rs. 50 lakh to the nominee of a deceased policyholder. The case revolved around the repudiation of a life insurance claim on grounds of alleged non-disclosure of pre-existing medical conditions.
Case Background
The case, MATTERS UNDER ARTICLE 227 No. – 7467 of 2021, was filed by Bajaj Allianz Life Insurance Co. Ltd. against Shradha Padmaja Awasthi & Ors. The dispute arose from the insurance company’s refusal to honor a claim filed by the nominee of Praveen Awasthi, who was insured under a group insurance policy issued by Yes Bank in collaboration with Bajaj Allianz. The policy, valid from September 28, 2012, to September 27, 2013, assured a sum of Rs. 50 lakh.*
After Awasthi’s unfortunate demise on January 26, 2013, his widow and nominee, Shradha Padmaja Awasthi, lodged a claim. However, the insurer rejected the claim on January 9, 2014, citing non-disclosure of his medical history, specifically hospitalization for renal calculi and coagulopathy in 2011. A review appeal was also denied on May 9, 2014. Subsequently, the nominee approached the Permanent Lok Adalat, Lucknow, which ruled in her favor and ordered the insurer to pay the full claim amount with 9% interest per annum, along with Rs. 5,000 as litigation cost.
Key Legal Issues
Whether the insurance claim was valid despite allegations of non-disclosure of medical history?
Whether Yes Bank, as the Master Policy Holder, was an agent of the insurer and liable for non-disclosure?
Whether the Permanent Lok Adalat’s award required interference?
Court’s Observations and Ruling
Presiding over the case, Justice Pankaj Bhatia rejected Bajaj Allianz’s plea and upheld the Permanent Lok Adalat’s ruling, emphasizing the following key points:
Non-Disclosure Allegation Not Substantiated
The court held that the insurer failed to prove a direct correlation between Awasthi’s 2011 hospitalization and his 2013 death due to cardiac arrest.
Citing Section 45(4) of the Insurance Act, the court emphasized that material misstatement or suppression must be directly linked to the cause of death.
The insurer’s failure to refund the premium violated the second proviso of Section 45(4).
Yes Bank Deemed an Agent of the Insurer
The court dismissed Bajaj Allianz’s argument that Yes Bank was merely a Master Policy Holder and not its agent.
Relying on the explanation to Section 45(3) of the Insurance Act, the court ruled that any entity soliciting and negotiating an insurance contract is deemed an agent.
Violation of IRDA Regulations
The court noted that Bajaj Allianz failed to provide a copy of the proposal form to the nominee despite requests, violating IRDA (Protection of Policyholders’ Interest) Regulations, 2002.
Citing the Supreme Court ruling in M/s Texco Marketing Pvt. Ltd. v. Tata AIG General Insurance Co. Ltd., the court observed that non-compliance with these regulations negates an insurer’s right to repudiate claims.
Permanent Lok Adalat’s Award Justified
The judgment affirmed that the Permanent Lok Adalat followed due process, attempted reconciliation, and adjudicated the matter fairly.
The court found no reason to interfere with the award, directing that the insurer must pay the full amount as awarded.
Final Judgment and Directions
The High Court dismissed Bajaj Allianz’s petition, affirming the Rs. 50 lakh award with 9% interest.
The court directed the Senior Registrar to release the deposited amount with accrued interest to the nominee upon application.
The ruling reinforced the principle that insurers cannot arbitrarily reject claims without fulfilling statutory obligations.
