BEFORE THE TELANGANA STATE CONSUMER DISPUTES REDRESSAL COMMISSION: AT HYDERABAD

F.A.No. 14 OF 2016 AGAINST C.C.NO.204 OF 2013 DISTRICT CONSUMER FORUM RANGAREDDY

Between

1. SBI Life Insurance Co.Ltd.,

     Central Processing Unit,

Kapas Bhavan, Plot No.3A,

Sector -10, CBD Belapur,

Navi Mumbai – 400 614.

2.SBI Life Insurance Co.Ltd.,

     6th Floor, United India Towers,

          Opp. Police Commissionerate,

          Basheerbagh, Hyderabad – 500 029.

Appellants/opposite parties no.2&3  

          A N D

1. Mrs.D.Padma, W/o Late D.Sai Kumar,

Aged about 44 years, Occ: Housewife,

Indian, R/o H.No.16-9-945, Old Malakpet,

          Hyderabad – 500 079

                                                                   Respondent/complainant

2.The Branch Manager,

          State Bank of Hyderabad,

     Jillellaguda Branch, Karmanghat,

Saroornagar, Hyderabad – 500 079.

                                                          Respondent/opposite party no.1

Counsel for the Appellants                          Sri Srinivas Karra

Counsel for the Respondent No.1               Sri K.Visweswara Rao

Counsel for the Respondent No.2               Sri AVS Ramakrishna

QUORUM             :

HON’BLE SRI JUSTICE B.N.RAO NALLA, PRESIDENT

&

SRI PATIL VITHAL RAO, MEMBER

 FRIDAY THE EIGHTEENTH DAY OF AUGUST

TWO THOUSAND SEVENTEEN

Oral Order : (per Hon’ble Sri Justice B.N.Rao Nalla, Hon’ble President)

***

          This is an appeal filed by the opposite parties no.2 and 3 aggrieved by the orders   of District Consumer Forum, Ranga Reddy dated 30.11.2015 made in CC No.14 of 2016   in allowing the   complaint directing the opposite parties no.2 and 3 to pay Rs.14,46,314/- with interest @ 9% per annum from the date of the claim i.e., 03.01.2013 till the date of realization together with costs of Rs.5,000/-.  

2.                For the sake of convenience, the parties are referred to as arrayed in the complaint.

 3.               The case of the complainant, in brief, is that     her husband Mr.D.Sai Kumar had availed housing loan from the Opposite Party No.1 vide A/c No.62128020657 and obtained risk cover of his life as a member through Group Insurance Scheme under Master Policy No.93000001610 issued by State Bank of India Life Insurance Company Limited and paid the single premium of Rs.1,02,300/- on 19.07.2010 to the first Opposite Party. The risk was commenced from 17.08.2010 for an assured sum of Rs.15,85,300/- at inception. He was also issued a certificate of insurance with the said details. The doctors of the Opposite Parties have medically examined her husband before granting insurance coverage and he was found to be in good health.   While so on 24.11.2012 her husband died due to cardio respiratory arrest leaving behind her and 3 daughters and the outstanding loan amount was Rs.14,46,314/- as on the date of his death.   Being nominee the complainant applied to the insurer  for settlement of the death claim but the opposite parties repudiated her claim 28.02.2013 on the ground that her husband suppressed the material facts with regard to his health.     Therefore,  she made a representation before the Review Committee for re-consideration on 22.03.2013. The matter was referred to the   Insurance Ombudsman who also dismissed her complaint on 13.06.2013 without considering the medical record properly. Hence the complaint praying to direct the opposite parties to set aside the award dated 13.06.2013 passed by the Insurance Ombudsman and the rejection letter dated 22.03.2013 of SBI Life Insurance, to pay the entire amount of the claim of Rs.15,85,300/- with interest, compensation of Rs.4,00,000/- and costs. 

4.                Opposite party no.1 resisted the case contending that it  has no liability to pay any compensation and the complainant has to approach against the SBI Life Insurance Company Limited. There is no ‘deficiency in service’ on the part of their bank. The  Insurance Ombudsman also dismissed the complaint of the complainant. Therefore, it is prayed to dismiss the case with costs.

5.                Opposite parties no.2 and 3 equally resisted the case contending that  the District Forum has no territorial jurisdiction to entertain the present complaint as the office of Opposite Party No.2 is at Navi Mumbai. Moreover the   Ombudsman Hyderabad, a quasi-judicial body established by Central Government has already heard the case and given its award. Hence the complaint is hit by Sec.11 of CPC under the principle of Res Judicata.    The Life Insurance Contract is a contract of “utmost good faith” wherein the proponent is duty bound to disclose everything concerning his health habits and other related matters which are within his knowledge at the time of making the proposal for insurance cover, failing which the insurer has every right to repudiate the claim.   In the instant case, the deceased life assured Sri Sai Kumar committed the breach of the principle of utmost good faith by suppressing the material fact that he was suffering from liver disease prior to the enrollment into the insurance cover.   The deceased life assured had availed housing loan from Opposite Party No.1 branch and had applied for Group Insurance Scheme under Master Policy issued to State Bank of Hyderabad through membership form dt.12.07.2010. The risk was commenced from 17.08.2010 for a sum assured of Rs.15,85,300/- at inception. The insured was also issued certificate of insurance. As per clause-c, the death benefit of schedule-1 of the Master Policy, “in the vent of death of the member, the sum assured will be payable”. The sum assured is the loan amount outstanding for the month during which the death occurs as specified in the certificate of insurance issued to each member on his admission. Thus in the instant case, it is clear that the outstanding loan amount as on the date of death is Rs.14,46,314/- since the insured died on 24.11.2012.

6.                The life assured submitted a declaration of good health along with other reliefs confirming that he is in  sound health and does not suffer from any illness or critical illness. The member is duty bound to disclose every factual information in the declaration of good health whether he considers it as material or not. The declaration of good health is sole basis to decide the liability as to whether a member can be granted insurance cover. Thus if the life assured does not reveal correct information and subsequently the insurer comes to know about the suppression of any material fact, the insurer is well within his rights to repudiate the claim. The policy resulted in a claim in 2 years 3 months and 7 days and hence they enquired into the matter and found that the insured Sai Kumar was suffering from liver disease prior to issuance of the insurance cover. It is noted in the discharge summary of Yashoda Hospital, Secunderabad that the insured was admitted in their hospital on 18.07.2009 for Cirrhosis with Portal Hypertension. It is also noted in the past history that the insured was a known case of chronic liver disease with portal hypertension on regular treatment. The death summary of Yashoda Hospital dt.24.11.2012 discloses that the insured was diagnosed for ARF with Sepsis, CLD with Decompensation with UGI Bleed, Refractory Septic Shock. The primary cause of death is shown as Cardiac Arrest and Cirrhosis of Liver. Hence it is clear that the insured was suffering from liver disease prior to the date of enrollment into the scheme. The insured had suppressed his past medical history of liver disease and gave a false declaration at the time of applying for insurance cover. Thus the insured had deliberately suppressed the material facts and obtained the insurance cover fraudulently. Hence, the opposite parties no.2 and 3 prayed for dismissal of the complaint.

7.                The complainant in proof of her case  filed her  affidavit evidence and got Exs.A1 to A8 marked.  While on behalf of the opposite party no.1, the Branch Manager and on behalf of the opposite parties, the Manager-Legal have filed their respective evidence affidavits and got Exs.B1 to B13 marked. 

8.                The District Forum after considering the material available on record, allowed the complaint bearing CC No.204 of 2013 by orders dated 30.11.2015 granting the reliefs, as stated in paragraph No.1, supra.

9.                Aggrieved by the said decision, the opposite party preferred the appeal contending that the Dist. Forum did not appreciate the facts in correct perspective.  The District Forum failed to appreciate the evidence adduced by the parties in proper perspective.  The District Forum failed to see that as per Clause ‘C’ of Schedule-1 of the terms and conditions of the Group Master Policy the death benefit adjustable to the outstanding loan amount.  The contract of insurance is a contract basing on the principle ‘ ubberimae fides’ wherein the proponent is duty bound to disclose all the facts concerning his health and other related matters within his knowledge failing which the insurar has every right to repudiate the claim.  Whereas the deceased life assured  suppressed the material fact that he was suffering form liver disease at the time of submitting the membership form.  The District Forum failed to see   Exs.B1, B6 to B11 which are not disputed by the complainant.  It is settled law that undisputed documents  need not be proved and the decisions in Smt Promila Malhotra Vs Badri Nageswaramma and the Judgment of the Hon’ble Supreme Court in GM Channabasemma case have no application to the facts of the case.

10.               Counsel for the appellants and the respondent no.1 present and were heard.  No representation for the respondent no.2.  Both parties have filed their respective written arguments.

11.               The point that arises for consideration is whether the impugned orders as passed by the District Forum suffer from any error or irregularity or whether they are liable to be set aside, modified or interfered with, in any manner?  To what relief.

 12.                The case of the complainant was that pursuant to such approach, opposite party no.1, i.e., the State Bank of India, sanctioned housing loan and as a protection against the risk of death due to any reason obtained Group Insurance Scheme under  Dhana Raksha Plus LPPT Group Insurance Scheme under Master Policy.         The   husband of the complainant paid the single premium amount of Rs.1,02,300/- on 19.07.2010.    The risk was commenced from 17.08.2010 for an assured sum of Rs.15,85,300/- at inception. After examining the husband of the complainant by the doctors before granting insurance coverage issued certificate  of insurance with the details.     While so on 14.11.2012 the husband of the complainant died  and the outstanding loan amount as on the date of his death was Rs.14,46,314/-.  Being the nominee under the policy applied to the insurer for settlement of the death claim but the opposite parties repudiated her claim on 28.02.2013 on the ground that her husband had not disclosed the material facts with regard to his health.  Though the complainant made representation before the Review Committee for reconsideration and referred the matter to the Insurance Ombudsman they become futile. 

13.               On the other hand the case of the opposite parties no.2 and 3 is that as per clause-c, death benefit of schedule-1 of the Master Policy, the death benefit adjustable to the outstanding loan amount and the complainant’s claiming amount of Rs.15,85,300/- together with interest is not maintainable. They also contended that the contract of insurance is a contract based on utmost good faith wherein the proponent is duty bound to disclose all the facts concerning his health and other related mater within his knowledge failing which the insurer has every right to repudiate the claim.

14.              There is no dispute that the deceased prior to obtaining the said policy had signed what is known as the housing loan insurance consent cum authorization cum - good health declaration and also health questionnaire. The deceased had given good health declaration wherein he had stated that he was in sound health, did not have any physical defect/ deformity, was performing his routine activities independently and he had never suffered or was suffering or was hospitalized or in critical illness or a condition requiring medical treatment for a critical illness, as on date. Critical illness is defined therein. The deceased had further certified that the said declaration was to be the basis of this admission into the Group Insurance Scheme and if any untrue averments be contained therein, he, his heirs, executors, administrators and assignees would not be entitled to receive any benefits under the said Group Insurance Scheme.

15.              In the medical questionnaire, the deceased had given negative answers to question nos. 3, 4, 9 (a)and (b). The said questions are as follows:

Quest.

QUESTION ANSWER

3. Have you ever been treated for or told that you have diabetes or raised blood sugar, high blood pressure, heart attack, chest pain or any heart disease, stroke/paralysis or any other disorders of the circulatory system, HIV Infection or a positive test to HIV?

 No

4. Have you been treated or told that you have cancer, tumor, growth or cyst of any kind, genitourinary or kidney disorder, hepatitis B, C or any other liver disease, and digestion disorders (eg. ulcer, colitis etc.) disease of the gall bladder or spleen, any musculoskeletal disorders, any blood disorder, or disorder of any gland (e.g. thyroid), asthma, tuberculosis, pneumonia, or any other disease of the lungs, any psychiatric disorder, mental or nervous disorder.

No 9(a) Do you consume more than 10 cigarettes, bidis per day, or chew more than 5 pouches tobacco per day?

 No

(b) Do you consume more than 2 pegs of alcohol per day in any form, if yes, please provide the type of alcohol and daily quantity consumed?

 No (emphasis supplied)

16.              We are   unable to uphold the findings given by the Lr. District Forum.   It is by now, fairly well settled, that three conditions are required to be fulfilled to invoke the second part of section 45 of the Insurance Act, 1938, and, they are as follows:

a) The statement must be on material matter or must suppress facts which it was material to disclose.

b) The suppression must be fraudulently made by the policy holder; and

c) The policy holder must have known at the time of making the statement that it was false or that it suppressed facts which it was material to disclose.

17.              The crucial question before us is whether these three conditions were fulfilled in the present case and we think that they are fulfilled. It is also well settled that a contract of insurance is based on the principle of utmost good faith - uberrimae fidei applicable to both the parties. The rule of non-disclosure of material facts vitiating a policy still holds the field. The bargaining position of the parties in a contract of insurance is unequal. The insured knows all the facts, the insurer is unaware of anything which may be material to the risk. Very often, it is the insured who is the sole person who has this knowledge. The insurer may not even have the means to find out facts which would materially affect the risk. The law, therefore, enjoins on the insured an absolute duty to disclose correctly all material facts which are within his personal knowledge or which he ought to have known had he made reasonable inquiries. A contract of insurance, therefore, can be repudiated for non-disclosure of material facts. What are material facts? Every circumstance and the law leans in favour of the insurer is material which would be relevant for a prudent insurer to fix the premium or to decide whether he should take the risk at all. That a proposer does not consider certain facts as not material is not relevant and if it is relevant for the insurer, it must be disclosed.

18.               The Apex Court in LIC vs. Smt. G.M. Channabasemma AIR 1991 SC 392, has held that it is well settled that a contract of Insurance is a contract of uberrimae fide and there must be good faith on the part of the assured. The assured is thus under a solemn obligation to make full disclosure of material facts which may be relevant for the Insurer to take into account while deciding whether the proposal should be accepted or not. While making a disclosure of the relevant facts, the duty of the insured to state them correctly cannot be diluted.

 19.              The Apex Court in Satwant Kaur Sandhu vs. New India Assurance Company Ltd., CDJ Law Journal, SC 1391/IV/2009 CPJ 08 has held that:

thus it needs little emphasis that when an information on specific aspect is asked for in the proposal form, an assured is under solemn obligation to make a true and full disclosure of the information on the subject which is within his knowledge. It is not for the proposer to determine whether the information sought for is material for the purpose of the policy or not. Of course, obligation to disclose extends only to facts which are known to the applicant and not to what he ought to have known. The obligation to disclose necessarily depends upon the knowledge one possesses.

 20.             Referring to Carter vs. Boehm, the Apex Court noted:

Insurance is a contract of speculation. The special facts upon which the contingent chance is to be computed lie most commonly in the knowledge of the assured only; the underwriter trusts to his representation, and proceeds upon confidence that he does not keep back any circumstance in his knowledge to mislead the underwriter into a belief that the circumstances does not exist. The keep back such circumstance is a fraud and therefore the policy is void Although the suppression should happen through mistake, without any fraudulent intention, yet still the underwriter is deceived and the policy is void; because the risqu (risk?) run is really different from the risqui understood and intended to be run at the time of the agreement The policy would be equally void against the underwriter if he concealed Good faith forbids either party, by concealing what he privately knows, to draw the other into a bargain from his ignorance of the fact, and his believing the contrary.

 21.             Referring to the expression material fact, the Apex Court noted that the expression was not defined in the Act. It has been understood and explained by the Courts in general terms to mean as any fact which would influence the judgment of a prudent insurer in fixing the premium or determining whether he would like to accept the risk. Any fact which goes to the root of the Contract of Insurance and has a bearing on the risk involved would be material and if the proposer has knowledge of such facts, he is obliged to disclose it particularly while answering questions in the proposal form and any inaccurate answers would be entitle the Insurer to repudiate his liability because there is clear presumption that any information sought for in the proposal form is material for the purpose of entering into a contract of Insurance.

 22.               The learned counsel would contend that prior to issuance of policy the deceased was examined by the doctors and after that the insurance company issued the policy    Even if the deceased was examined by doctor, the examination would have been only clinical which would not have revealed   that the deceased was suffering from   cirrhosis unless requisite pathological tests were done. In this context we may refer to the case of Maya Devi Vs. LIC, Rev. Pet.No. 2091/2007 decided on 31/05/2011.  This was a case where the deceased was a patient of diabetes for 10 years. The contention that diabetes was not detected at the time of medical examination by the doctor of LIC was rejected observing that these checkups were general in nature and do not include pathological/ blood tests, etc.  In Panni Devi vs. LIC (2003 (3) CPJ 15) it was observed that the doctor records what the insured tells him. It is not the result of any test/ examination. If a person withholds any information, the doctor would not know it, unless it is visible.  The policy was issued on the basis of the declaration and the questionnaire filed by deceased and believing in his word and further making it clear that in the event the information given was found not to be true then the claim would be repudiated as null and void. Declarations to that effect were signed by the deceased below the health declaration as well as the questionnaire. 

23.                 Here was a case where the deceased had history of habitually drinking alcohol  and eventually had died of cirrhosis of liver. These facts were recorded on the   documents produced by the opposite parties no.2 and 3  including the Death Certificate of the deceased. These were the documents which were maintained by the hospitals in the due performance of their duty in treating of the patients and as such were relevant. The entries therein were made on the basis of the information given by the deceased or the relative accompanying him. Nobody gives false information regarding a patient at the time of admission or treatment in the hospital. The documents were not rebutted by the Complainant. As such maximum credibility was required to be given to them and they in turn prove that the deceased had given false answers in the declaration form as well as to the questionnaire and opposite parties no.2 and 3 therefore was entitled to repudiate the claim of the Complainant in terms of declaration made by the deceased at the foot of the said declaration/ questionnaire.   There was no need for the insurance company to have examined the doctors from  the two hospital in support of the medical records produced on record by the insurance company  which clearly showed that the deceased had given false answers to the said questions nos. 3, 4, 9 (a) & 9 (b).

 24.              Admittedly,  the deceased died due to Cardio Respiratory arrest  and cirrhosis of liver  which is supported by the Death Certificate.    The medical records show that the deceased was a regular  drinker,   and suffering from the cirrhosis of liver and as such was almost a physical wreck and yet obtained the said policy by suppressing vital information sought for by opposite parties and by committing fraud on the insurance company.   As already stated, the Apex Court in Satwant Kaur Sandhu (Supra) has also held that any inaccurate answers will entitle the Insurer to repudiate his liability because there is clear presumption that any information sought for in the proposal form is material for the purpose of entering into a contract of Insurance.

25.               To sum up, in the case at hand, the deceased obtained the Insurance policy by suppressing the information sought for by the insurance company   in question nos. 3, 4, 9 (a) & 9 (b) and or giving false answers   inspite of the fact that the deceased was a regular   a drinker  and on medication who eventually died of cirrhosis of the liver. Had he disclosed the said ailments or given positive answers to the said questions, the insurance company  would not have accepted the proposal as stated by them. The deceased having suppressed material facts in the said questionnaire, the insurance company could not be faulted in repudiating the claim of the Complainant and as such there was no   deficiency of service. The District Forum is not expected to make charity of public money when the contract/ policy was vitiated by the very acts of the insured

26.               For the above said reasons, since there was no negligence or deficiency on the part of the opposite parties, order of the District Forum is liable to be set aside, for which the appeal deserves to be allowed.   Accordingly the point at para no.11 is answered in favour of the opposite parties and against the complainant. 

 27.              In the result the appeal is allowed setting aside the order of the District Forum. Consequently, the complaint is dismissed.  There shall be no order as to costs. 

                                                                   PRESIDENT                             MEMBER                                                                                           18.08.2017