Can’t deny insurance claim over alcohol habit, rules consumer commission
Insurance claim disputes over alcohol use must be supported by clear evidence, the consumer commission has ruled. The order reinforces policyholders’ rights against unjustified claim rejections.
Insurance claim rejection over an alleged alcohol habit has been challenged by the consumer commission. The ruling underscores that insurers cannot deny claims solely on unproven lifestyle allegations.
Insurance Claim: The District Consumer Disputes Redressal Commission, Nagpur, has directed Edelweiss Tokio Life Insurance Company Limited to pay over Rs 50 lakh to a widow after ruling that the insurer wrongfully rejected her husband’s life insurance claim despite his having disclosed his alcohol consumption habit before the policy was issued.
In an order passed last month, the commission held the insurer guilty of deficiency in service, directing it to pay the full claim amount along with interest and compensation.
Insurance Claim: What happened
According to the complainant, her husband purchased a life insurance policy from Edelweiss Tokio Life in April 2021. He died suddenly on January 26, 2023, following which his widow filed a claim with the insurer.
The insurance company rejected the claim, cancelled the policy, and in September 2023 sent the widow a cheque refunding her husband’s premium of Rs 18,713.
The widow then approached the Nagpur district consumer commission, seeking the claim amount along with compensation for mental harassment.
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Insurance Claim: Insurer’s defence
During the hearings, Edelweiss Tokio Life argued that the deceased had concealed a history of chronic alcoholism, hypertension, and diabetes mellitus at the time of buying the policy. The insurer contended that this non-disclosure violated the principle of utmost good faith, or uberrima fides, which requires policyholders to disclose all material facts to the insurer.
The doctrine of uberrima fides is a foundational principle in insurance contracts, distinguishing them from ordinary commercial agreements. Under this principle, both the insurer and the policyholder are expected to disclose all facts material to the risk being insured, with the onus placed heavily on the applicant at the proposal stage. Insurers routinely rely on this principle to contest claims where a policyholder’s medical history, habits, or pre-existing conditions were allegedly withheld at the time of underwriting, on the ground that full disclosure would have altered the insurer’s risk assessment, premium calculation, or decision to issue the policy at all.
In its submissions, Edelweiss Tokio Life maintained that had the deceased’s complete medical history, including his alleged alcoholism and lifestyle conditions, been disclosed, it may have affected the underwriting outcome. The insurer’s position rested on the argument that concealment of such material facts, irrespective of the cause of death, entitled it to treat the policy as void and repudiate the claim. This line of defence is commonly invoked by insurers across life insurance claim disputes involving alleged non-disclosure at the proposal stage.
Insurance Claim: What the commission found
The commission examined the medical examination form submitted on May 20, 2021, ahead of the policy’s issuance, and found that it clearly recorded the insured’s alcohol consumption as “whisky of 90 ml twice in a month since 15 years.”
The commission also noted that the pre-policy medical examination, conducted by the insurance company’s own panel doctor, did not record any mention of hypertension or diabetes in the insured.
On this basis, the commission held that since the alcohol consumption habit had already been disclosed before the policy was issued, the insurer’s rejection of the claim amounted to a deficiency in service.
The commission also referred to Supreme Court orders that have classified hypertension and diabetes mellitus as lifestyle diseases, noting that a claim cannot be denied merely because a policyholder did not mention such pre-existing conditions before taking the policy.
Insurance Claim: The order
The commission directed Edelweiss Tokio Life Insurance Company Limited to pay the widow the claim amount of Rs 50 lakh, along with 9 per cent annual interest calculated from September 30, 2023.
It further directed the insurer to pay Rs 10,000 as compensation for physical and mental harassment, and an additional Rs 10,000 towards litigation costs.
