Bombay High Court: The instant writ petition was filed by Tata AIG General Insurance Co Ltd. (insurance company) against the award passed by the Insurance Ombudsman in the favour of Respondent 2-wife, for the repayment of home loan due after her husband’s (insured person) death. A Single Judge Bench of Sandeep V. Marne, J., opined that the conduct of the insurance company was far from bona fide as the insurance was rejected due to lack of medical reports, even though the letter by the doctor treating the husband specified the cause of death. Thus, the insurance company had attempted to find loopholes with a view to wriggle out of the obligation to disburse claim amount to the wife. The Court held that the award passed by the Insurance Ombudsman did not warrant any interference and dismissed the petition directing the insurance company to discharge the insurance amount of Rs. 27 lakhs within 4 weeks.
Background
In the present case, the wife and her husband, planned to purchase a flat in Thane, Maharashtra and the consideration for the flat was fixed at Rs. 30,70,000. They both approached India Infoline Housing Finance Limited (IIFL) for disbursement of the housing loan. IIFL sanctioned a load amount of Rs. 27,00,000 to them with a condition of compulsory availing an insurance policy. The sanction letter specified the premium of Rs. 84,767 for the same, which was included in the loan amount. After receipt of insurance premium from IIFL, the insurance company issued Group Credit Secure Insurance Policy in the name of the husband. This insurance policy included coverage for specified and defined critical illnesses for Rs. 27,00,000.
On 10-4-2021, the husband started suffering from fever and visited a doctor. Since there was no improvement in his condition, he was brought to Bhiwandi and was hospitalized for further treatment. On 15-4-2021, the husband allegedly suffered from a severe cardiac arrest and passed away within few minutes. Thus, after securing a copy of the insurance policy, the wife lodged a claim from the petitioner.
The insurance company asked for certain medical documents particularly ECG report, to process the claim. The wife informed that the ECG and other tests could not be conducted and forwarded all other medical documents of the husband to the panel doctor of the insurance company. Thus, the panel doctor repudiated wife’s claim on the ground of absence of any medical documents to substantiate the cause of death due to any critical illness as specified and defined under the insurance policy. Therefore, the wife submitted the letter of the doctor who had treated the husband, to the insurance company which certified that the husband had suffered a heart attack but the same was not considered.
Thus, the wife filed a complaint before the Insurance Ombudsman under Rule 13(1)(b) of the Insurance Ombudsman Rules, 2017, challenging repudiation of her claim. The Insurance Ombudsman passed award directing insurance company to pay to the wife, the entire claim of amount of Rs. 27,00,000. Aggrieved by this award, the insurance company filed the petition before the present Court.
Analysis, Law and Decision
The Court observed there was a tie-up between insurance company and IIFL, where IIFL included a condition while sanctioning the loan for compulsory availing of insurance policy of the husband, and even the copy of the insurance policy was not provided to the parties. This showed that they did not have any choice but to avail the insurance policy as a part of sanction and disbursement of loan by IIFL. Even the intermediary’s name in the policy and the name of the lending institution was indicated as IIFL. Thus, this was not a standalone insurance policy which the insured had voluntarily applied for, and the policy was a part of housing loan package and a compulsory condition for availing the loan from IIFL.
Furthermore, the Court observed that insured sum was payable if the insured person experienced a critical illness, which was specifically listed and defined under the policy. It also covered accidental death and accidental permanent total disability and the coverage of educational benefits was also included in the policy. In the event of involuntary loss of employment, coverage to the extent of payment of 3 EMIs was included. Additional coverage in respect of fire, earthquake, etc. was also included to the extent of the sum insured.
Thus, the Court pointed out that if the insured person suffered from the critical illness and recovered after 3 to 4 months and was able to repay his EMIs, he would receive the claim amount though he was capable of repaying the loan amount. On the other hand, if death of the insured person was caused due to illness which was not specified, nothing would become payable to the nominee though the nominee might not be in the position to repay the housing loan outstanding amount.
The Court also stated that a person secures an insurance policy so that his nominee would receive the claim amount after his death and use the same for repayment of the home loan. However, if the policy, upon its plain reading, did not cover death of the insured due to 15 specified illnesses, but covered survival of the insured after suffering from the 15 specified illnesses, the policy becomes absurd, especially when considered from the objective why the same was bundled with the home loan package. Hence, there was ambiguity in the terms and conditions of the insurance policy.
The Court observed that there was a difference of opinion on the cause of death between the panel doctor and the doctor who did the treatment of the husband. While the panel doctor attributed the death to sepsis and septicaemia based on the fact that various medical tests could not be conducted, the doctor who treated the husband, certified that the cause of death was cardiac arrest. The insurance Ombudsman thus stated that merely because tests were not conducted on account of sudden death, it could not be concluded that cardiac arrest could not be a cause for death.
The Court applied the principle of contra proferentem since there was some evidence to indicate that the husband did suffer from cardiac arrest which was one of the critical illnesses covered under the insurance policy. Therefore, the Court opined that the view taken by the Ombudsman was a possible view and no interference was warranted in the said order.
Based on these observations, the Court opined that the conduct of the IIFL and the insurance company to be far from bona-fide as they entered into internal business arrangement where IIFL had virtually acted as an insurance agent of the insurance company while selling the policy to its borrower. The Court stated that the present case did not involve voluntary application by the husband for insurance policy, and ince insurance policy was bundled with the home loan package, the insurance company ought to have sanctioned the claim after death of the husband by accepting the opinion of the doctor who had treated him.
Accordingly, the Court dismissed the petition, upheld the award passed by the Insurance Ombudsman and directed the insurance company to pay the insurance amount to the wife within 4 weeks. The Court held that the insurance Company had attempted to find loopholes with a view to wriggle out of the obligation to disburse claim amount to the wife. Thus, the conduct of the insurance company was far from bona fide, and the award passed by the Insurance Ombudsman did not warrant any interference.
[Tata AIG General Insurance Co. Ltd. v. Vinay Sah, W.P. No. 1244 of 2023, decided on: 3-9-2025]
Advocates who appeared in this case:
Advocate for the Petitioner- Maithili Parikh, Nabeel Malik, Sanjana Sapra i/b. Tuli & Co., Advocates
Advocate for the Respondents- Avinash Fatangare, Archana Shelar, Advocates
