Supreme Court Supports Rejection of Insurance Claim Due to Hidden Alcoholism

The Supreme Court has ruled that insurance companies can deny health claims if policyholders fail to disclose their alcoholism at the time of purchasing the policy. The judgment came in favor of the Life Insurance Corporation (LIC), which had rejected a claim under the “Jeevan Arogya” scheme, citing the policyholder’s failure to disclose his alcohol consumption.

Court Backs LIC’s Decision

A bench comprising Justice Vikram Nath and Justice Sandeep Mehta overturned a ruling by the National Consumer Disputes Redressal Commission (NCDRC), which had earlier ordered LIC to pay ₹5,21,650 to the claimant. The Supreme Court found that the deceased policyholder, Mahipal, had concealed his long-term alcoholism when purchasing the health insurance policy in 2013.

Mahipal was hospitalized a year after buying the policy due to severe abdominal pain and passed away after a month of treatment. LIC rejected his widow’s claim, citing Clause 7(xi) of the policy, which excludes coverage for conditions arising from alcohol or drug use. The claimant had initially won in consumer forums, which directed LIC to pay medical expenses.

Supreme Court Highlights Concealment of Alcoholism

The apex court disagreed with the Consumer Fora’s interpretation, noting that Jeevan Arogya is a hospital cash benefit plan, not a medical reimbursement scheme. Furthermore, medical records confirmed Mahipal’s history of chronic alcohol intake. LIC also presented the policy’s proposal form, where Mahipal had falsely declared that he did not consume alcohol.

The NCDRC had dismissed the hospital note on alcoholism, arguing it was issued a year after the policy was taken. However, the Supreme Court ruled that chronic liver disease, linked to long-term alcohol consumption, does not develop overnight.

Precedents and Key Legal Interpretations

The NCDRC had relied on the Supreme Court’s 2015 ruling in Sulbha Prakash Motegaoneker v. LIC, which held that merely concealing a pre-existing disease was insufficient grounds to reject a claim. However, the Supreme Court distinguished this case, stating that Mahipal’s cause of death—cardiac arrest—was directly linked to his chronic liver disease caused by alcoholism.

The Court further cited Bajaj Allianz Life Insurance Co. Ltd. v. Balbir Kaur, which established that if a concealed pre-existing disease directly leads to death, the insurer is justified in rejecting the claim.

Final Verdict: LIC’s Claim Rejection Justified

The Supreme Court ruled that Mahipal’s non-disclosure of his alcoholism constituted a material misrepresentation, validating LIC’s rejection of the claim. However, considering the claimant’s financial situation, the Court allowed her to retain ₹3 lakh, which LIC had already paid under the Consumer Commission’s order.

This landmark ruling reinforces the importance of full disclosure in insurance policies, particularly regarding lifestyle habits that impact health risks.

Source:- Live Law