HC: Insurers must prove fraud to reject claims

Mahir Haneef TNN 

Kochi: The burden of producing proof for rejecting an insurance claim lies with the insurance company, the Kerala high court has ruled. The court gave the order while quashing the ruling of the insurance ombudsman upholding LIC’s rejection of a claim on the grounds that the policy holder, who died of cervical cancer, had suppressed the fact that she had undergone ayurvedic treatment for rheumatoid arthritis before taking the policy. 

    Hearing a petition by P V Suresh, the husband of the policy holder Lalitha, the court said an insurance company’s duty doesn’t end with proving a claim false. It said the company must prove that the statement of the policy holder was fraudulently made or involved suppression of facts. Suresh had approached the high court after the Kochi insurance ombudsman upheld LIC’s decision to reject the claim on Lalitha’s policy. She had bought the policy for Rs 50,000 in February 2002 but passed away in September 2004. 


HC: Protecting policy holders’ interest crucial 


W hile filling up the policy form, Lalitha had stated she had never been admitted to a hospital or a nursing home. The company rejected the claim saying she had undergone treatment for rheumatoid arthritis and had even taken ayurvedic treatment at a hospital. 

    LIC alleged that this was a deliberate attempt to withhold information at the time of signing of the policy. 
The court, however, put the onus on the insurance company, saying it did not fulfill its burden of proving that Lalitha’s statement was fraudulent or that she had suppressed facts. Stressing on the social aspect of insurance, the judge said the legislature wanted to safeguard the beneficiary of the policy from unreasonable repudiation from the insurer and has consciously cast the burden of proving certain facts squarely on the insurer.


Source::: The Times of India, 13-07-2012, p.01. http://epaper.timesofindia.com/Default/Client.asp?Daily=TOIM&showST=true&login=default&pub=TOI&Enter=true&Skin=TOINEW