Bombay High Court has delivered a landmark ruling directing Tata AIG General Insurance to pay Rs 27 lakh with interest to the widow of a deceased borrower after rejecting her late husband’s housing loan insurance claim. The case centred on a compulsory insurance policy bundled with a ₹27 lakh home loan taken by the late husband from India Infoline Housing Finance Ltd. (IIFL).
The insurer had initially denied the claim citing lack of medical proof that the death was due to a covered critical illness, triggering four years of legal battles. The court dismissed Tata AIG’s plea against an Insurance Ombudsman award favouring the widow, underscoring the insurer’s attempt to evade responsibility as unfair.
This judgement restores financial relief to a grieving family on the brink of losing their home due to unpaid loan dues.
Court Condemns Insurance Company’s Conduct
On September 3, Justice Sandeep V. Marne ruled firmly against Tata AIG. He said the insurance policy’s noble purpose, to secure repayment of the loan in case of borrower’s death or incapacitation, had been “completely frustrated” by the insurer’s refusal to pay.
The court rejected Tata AIG’s reliance on a panel doctor’s paper review, which attributed death to Covid-19 and sepsis, instead accepting the attending doctor’s certification that the husband died suddenly from cardiac arrest within minutes of chest pain.
The judge emphasised that ambiguous terms in such loan-linked insurance policies must be interpreted in favour of the insured under the legal principle of contra proferentem. He criticised the insurer for “attempting to wriggle out” of its obligations, highlighting the inadequate choice given to borrowers who must compulsorily buy such bundled insurance.
Background of the Case and Its Human Impact
The late Vishal Raut, a schoolteacher, had taken the housing loan from IIFL in June 2017, which mandated purchase of the insurance policy costing ₹84,767, bundled with the loan amount. After his sudden cardiac arrest and death in April 2021, Tata AIG denied the claim on grounds of insufficient proof for critical illness coverage.
The widow, Gauri Raut, filed a complaint with the Insurance Ombudsman who ruled in her favour in November 2022, ordering Tata AIG to pay the full amount. However, facing IIFL’s symbolic possession of their home for unpaid loans, the widow was forced into further litigation when Tata AIG challenged the ruling.
The High Court upheld the Ombudsman’s award and directed the insurer to pay within four weeks, including interest. The court also noted the business arrangement between Tata AIG and IIFL, where the lender effectively acted as the insurer’s agent, depriving the borrower of genuine policy choice.
The Logical Indian’s Perspective
This ruling is a powerful affirmation that empathy and accountability must be integral to financial and insurance services, especially when families face loss and vulnerability. Compulsory bundled insurance policies should not become tools for corporations to evade responsibility through legal escapism or ambiguous contract terms.
The Logical Indian applauds the court’s insistence on fairness, transparency, and justice, which sustain public trust and social harmony. It reminds all stakeholders, insurers, lenders, and regulators, to act ethically and conscientiously in safeguarding consumer rights.
