Life insurer denied Rs 1 crore death claim over earlier policy postponement on medical grounds; here's why family wins in state commission

A life insurance policy is meant to give a family financial support and stability when the policyholder is no longer around to take care of them. But what do you do when an insurer rejects a death claim, alleging that the policyholder didn’t disclose an earlier insurance proposal or medical information?

A recent case before the Telangana State Consumer Disputes Redressal Commission shows the importance of disclosing relevant information while buying a life insurance, and why an insurer must also prove that the policyholder had knowingly concealed such information before repudiating a claim.

The case involved a Rs 1-crore Tata AIA Life Insurance policy taken by a retired Central Excise officer. After his death during the COVID-19 pandemic, his wife, who was the nominee, filed a claim. The insurer rejected the claim, alleging that the policyholder had failed to disclose that another insurer had previously postponed his insurance proposal due to medical findings.


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The policyholder died less than two years after taking the Rs 1 crore cover

The deceased policyholder had purchased a Tata AIA Life Insurance Samporna Raksha policy with a Rs 1 crore sum assured. The policy commenced on October 31, 2019, had a 25-year term and carried an annual premium of about Rs 58,800. His wife was the nominee.

He died on May 25, 2021 after contracting Covid-19. His wife subsequently submitted a death claim for the ₹1 crore sum assured. As the death occurred less than two years after the policy commenced, the insurer investigated the claim

Why did Tata AIA Life reject the Rs 1 crore death claim?

The insurer's investigation found that the policyholder had earlier approached ICICI Prudential Life Insurance for another Rs 1 crore policy.

According to the insurer, that proposal had been postponed following medical findings. Tata AIA alleged that the policyholder did not disclose this earlier proposal and its postponement when applying for the Tata AIA policy.

The Tata AIA proposal form had specifically asked whether any previous insurance application or reinstatement application on life, accident, medical or health, critical illness, or disability had ever been declined, postponed or accepted at extra premium or modified terms. The policyholder had answered "No".

The insurer argued that this amounted to suppression of a material fact and that it would have assessed the risk differently had the earlier proposal been disclosed.

It therefore repudiated the death claim and cancelled the policy from inception, while refunding the premiums received.

The family challenged the insurer's decision

The policyholder's wife and son challenged the repudiation before the District Consumer Commission.

They also pointed out that Tata AIA had conducted its own medical examination before issuing the policy and had declared the deceased fit and healthy. They argued that the alleged LVH condition also had no connection with his death, which was due to Covid-19.

The District Commission ruled in favour of the family and directed Tata AIA Life to pay the Rs 1 crore claim with 9% annual interest from the date of repudiation, along with Rs 50,000 compensation and Rs 10,000 towards litigation costs.

Tata AIA then appealed against the order before the State Consumer Commission.

Why did the Commission ‘distinguish’ (precedent doesn’t apply) the Supreme Court's ruling on non-disclosure?

The Commission relied on the Reliance Life Insurance Co. Ltd. v. Rekhaben Naresh Bhai Rathod case because the Supreme Court had ruled that previous insurance policies or proposals may constitute material facts requiring disclosure.

“Such information can influence an insurer’s assessment of risk. However, the Commission distinguished that case because Tata AIA failed to prove that the deceased knew about the earlier postponement before completing its proposal form. Thus, the precedent established the legal principle of full disclosure but did not automatically justify repudiation. The insurer still had to prove conscious and material suppression, which it failed to do,” says Alay Razvi, Managing Partner, Accord Juris.

In simple terms, the Commission's reasoning was:

Non-disclosure of a material fact can justify repudiation, but the insurer must first prove that the alleged suppression actually occurred and that the insured had the requisite knowledge of the fact being suppressed, explains Kumar.

The Commission found that Tata AIA had not discharged that burden. The medical reports alone did not establish that the deceased had been informed of the findings or the postponement. Consequently, the Commission held that the factual foundation necessary for applying the Rekhaben Rathod case verdict was absent, he adds.

An earlier insurance proposal alone was not enough to prove deliberate suppression

The Commission found a critical evidentiary gap in Tata AIA's case. According to Vivek Kumar, Advocate, Delhi High Court, although the insurer produced documents showing the earlier proposal and medical reports, it did not produce evidence establishing that:

• the earlier proposal had actually been postponed before the Tata AIA proposal was submitted;
• the postponement had been communicated to the deceased;
• the deceased knew about the adverse medical findings; and
• despite having such knowledge, he knowingly gave a false answer to Tata AIA.

Importantly, Tata AIA had also conducted its own medical examination before issuing the policy, giving it an opportunity to independently assess the insured's health. The Commission therefore held that the insurer could not rely merely on suspicion or assumptions to establish conscious suppression.

The Commission ultimately held that “suspicion that the insured must have known is not a substitute for evidence.” Since conscious non-disclosure was not proved, the repudiation could not be sustained, and the appeal was dismissed.

What did the Telangana State Consumer Commission finally rule?

The State Commission dismissed Tata AIA Life's appeal and confirmed the District Commission's order in full.

This means the insurer was required to honour the Rs 1 crore death claim, along with the interest, compensation, and litigation costs ordered by the District Commission. The judgment was pronounced on June 12, 2026.

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What Tata AIA Life said

Our investigation revealed that, prior to obtaining the Tata AIA policy, the DLA had applied for life insurance with another private insurer, where his proposal was postponed following a medical examination due to findings of Concentric Left Ventricular Hypertrophy (LVH) with an impaired left ventricular filling pattern.

We contended that the deceased had failed to disclose this prior postponement and had answered the relevant question in the proposal form in the negative, thereby amounting to suppression of material facts.

Accordingly, we treated the non-disclosure as a breach of the principle of utmost good faith and repudiated the claim. The premiums paid under the policy were subsequently refunded to the claimant’s bank account. The Company’s position is that knowledge of the earlier adverse underwriting decision and the associated medical findings would have materially affected its underwriting assessment.

The TSCDRC has held the Company liable to pay the death claim of ₹1,00,00,000, along with applicable interest and costs. The Company remains of the view that the earlier proposal postponement and the related medical findings constituted material facts that warranted repudiation of the claim and intends to challenge the order before the NCDRC, New Delhi.

What lessons should other consumers take away from this judgment?

The case offers an important lesson for both policyholders and insurers. The biggest lesson is that consumers should be extremely careful and completely transparent while filling insurance proposal forms.

“Even though the policyholder ultimately succeeded in this case, the judgment should not be understood as saying that non-disclosure of previous insurance proposals is harmless. The Commission itself recognised that information concerning previous insurance proposals can be material to an insurer's assessment of risk,” says Kumar.

At the same time, the judgment provides an important protection for consumers:

“This case establishes that an insurer seeking to repudiate a life insurance claim on grounds of suppression of a material fact bears the burden of proving not merely that an earlier proposal was postponed by another insurer, but also that the insured had actual knowledge of such postponement and its adverse findings at the time of filling the subsequent proposal form - mere non-disclosure, without proof of conscious concealment, cannot sustain repudiation,” says Vishal Jain, Founder & Senior Partner at Ayaam Legal.

“Further, when an insurer conducts an independent medical examination and certifies a proposer as healthy, the insurer cannot then argue that the same is irrelevant and reject the claim,” says Sohil Shah, Partner at Pioneer Legal.