Home Loan Borrower’s death – Policy Ambiguity & Contra Proferentem
Judgment dated 3.9.2025 of the Bombay High Court in Writ Petition No.1244 of 2023 of TATA AIG General Insurance Co. Ltd Vs. Vinay Sah, Insurance Ombudsman, Pune and Gauri V. Raut
Insurance – Home Loan – Death of Borrower – Repudiation of Claim
The husband of the respondent no.2 had purchased the flat of Rs.30,70,000/- vide registered agreement for sale with the developer on 31.3.2017. The respondent no.2 and her husband had taken housing loan of Rs.27 lakhs from IIFL including Rs.87,767/- for insurance. They had no choice but to avail the insurance as part of the sanction and disbursement of home loan.
The said amount of Rs.87,767/- was directly paid to the petitioner and balance home loan was disbursed to the couple.
The petitioner had issued the GS Insurance policy in the name of husband of the respondent no.2 for Rs.27 lakhs. However, copy of the policy was never supplied to them.
On 15.4.2021, the husband of the respondent no.2 passed away.
The Doctor who actually treated the insured has certified the cause of death as cardiac arrest. However, the medical expert of the Petitioner has attributed the death to sepsis and septicaemia for want of reports or case papers suggesting treatment for heart ailment.
However, there is a direct opinion of the treating Doctor that the insured suffered massive and sudden cardiac arrest resulting in his death in 15-20 minutes leave no time for any tests. However, it was certified that the insured was put on Bipap Machine.
The Insurance Ombudsman held that merely because the tests are not conducted on account of sudden death it cannot be concluded that the cardiac arrest was not the cause of death.
On 21.11.2022, the respondent no.1 Insurance Ombudsman passed the award in favour of the respondent no.2 for the entire claim.
Ambiguity in the policy and Doctrine of Contra Proferentem
The policy coverage provided for full claim on account of critical illness and accidental death. However, the policy did not provide for full claim if death is caused by illness or critical illness.
Insured who suffers from critical illness of cardiac arrest but recovers after treatment and able to pay home loan, can be paid full insurance claim. However, the insured whose death was due to ailment not covered by the policy and whose nominee is unable to bear EMIS, is forced to hand over possession of the flat to the finance company.
The rule of contra proferentem protected the insured from vagaries of an unfavourable interpretation of an ambiguous term to which it did not agree.
