DR. S. M. KANTIKAR, MEMBER

1       These two instant appeals have been filed under Section 19 read with Section 21(a)(ii) of the Consumer Protection Act, 1986 against the impugned order dated 23.09.2014 passed in Consumer Complaint No. 21 of 2013 by the Andhra Pradesh State Consumer Disputes Redressal Commission, Hyderabad (in short, ‘the State Commission’) whereby the State Commission allowed the complaint and directed the opposite parties to pay an amount of Rs.50,00,000/- to the complainant together with interest @ 7% per annum from the date of complaint till the date of realization.

2.      The relevant facts for the disposal of both the appeals are that Gudela Durgamma, the life assured took an insurance policy in ‘Platinum 3’ plus Plan of the OP (Birla Sun Life Insurance Co. Ltd.) for a period of 3 years on an annual premium of Rs.10 lakh, with sum assured of Rs.50 lakhs to be paid to the nominee (Gudela Siva, the complainant) after her death.  Before issuing the policy, the OP conducted several medical tests upon the life assured.  During the currency of policy on 30.03.2011, the life assured was admitted in a hospital with complaints of loose motions and shortness of breath.  She was treated immediately, but she expired on the next day i.e. 31.3.2011 at 3:05 p.m. due to cardio-respiratory arrest.  The complainant filed a claim before the insurance company, but the same was repudiated on the ground that the Deceased Life Assured (in short, ‘DLA’) had concealed some material facts about her health.   However, thereafter, the OP reconsidered the matter and offered Rs.15,70,470.46 as an ex-gratia amount to the complainant.   The complainant alleged that the OP had violated the terms of the contract and they were liable to pay the sum assured of Rs. 50 lakhs and consequential benefits.   On 5.12.2011, the complainant approached the Insurance Ombudsman to consider the repudiation of the claim, but the office of Ombudsman directed the complainant to approach the appellate authority i.e. Internal Claims Review Committee against the repudiation order.   As there was no response from the appellate authority, the complainant approached the Ombudsman again, but the Ombudsman stated that the matter was beyond its jurisdiction.   Therefore, the complainant filed the consumer complaint before the State Consumer Disputes Redressal Commission, Hyderabad. 

3.      The OPs resisted the complaint by filing a written version in which they stated that the complaint was not maintainable, as it involved complicated questions of fact and law.  They further stated that the contract of insurance is based on ‘uberrima fides’.  The life assured was suffering from diabetes for more than 10 years and this fact was not brought to the knowledge of OPs or their agent, at the time of filling the proposal form.    Therefore, the claim was rightly repudiated.  However, as the premium amount of Rs. 20 lakh was paid by the life assured; the ex-gratia amount of Rs.15,70,470.46 was offered, but the same was not accepted by the complainant.

4.      The State Commission on the basis of pleadings and evidence, vide its order dated 23.09.2014, allowed the complaint and directed the OPs to pay Rs. 50 lakhs with interest @ 7% per annum. 

5.      Being aggrieved by the impugned order, both the parties have filed cross appeals before this Commission.  The complainant filed first appeal No. 271 of 2015 for enhancement of compensation to Rs.64,25,000/- along with 18% interest p.a. and Rs 3 lakhs towards the mental agony, whereas OP has filed first appeal No. 1258 of 2014 for setting aside the order of the State Commission and dismissal of the complaint.

6.      We have heard the learned counsel for both the parties.   Learned counsel for the complainant submitted that, appeal No 271/2015   had been filed after delay of 127 days and the reasons had been stated in the application for  the condonation of  delay.  We have perused the application, which is allowed and the delay is condoned for the reasons stated therein.

7.      On merits, the counsel for the complainant submitted that, the OPs had failed to establish that, the DLA was suffering from Diabetes Mellitus-Type II (for short “DM” type-II).  The counsel further submitted that, the DLA had correctly filled the proposal form and nothing was concealed.  During 17.8.2009 and 27.8.2009, Dr. R. Srinivasalu Reddy (R.S.Reddy)  the empanelled doctor of the OPs had  examined the DLA and  conducted certain specific laboratory tests listed under the Plan “Birla Sun Life -13 (‘BSL-13’)” and issued the Medical Examination Report (MER) of the DLA.  After the satisfaction of  the OPs, on 12.9.2009 the insurance policy was issued.  The insured had signed the proposal form in the presence of the medical examiner Dr.R.S.Reddy. The urine sugar was ‘Nil’ and the Fasting blood sugar(FBS)  was normal i.e. 80 mg/dl; therefore, the DLA was neither   diabetic nor had  any pre-existing disease.  The DLA  had paid two premiums of Rs. 10 lakhs each. The OPs have not examined any doctor to prove that the insured was suffering from DM, before or at the time of taking the policy. There was nothing on record to  prove that the DLA had preexisting Diabetes Mellitus for the past 10 years.  The counsel submitted that as per Section 45 of the Insurance Act ; after 2 years of issuance of  the policy, it should not to be called in question for  the ground of mis-statement.

8.      The learned counsel for the OPs/insurance Company submitted  that the DLA gave incorrect answers to certain medical questions in the proposal form.   The death of the DLA occurred on 31.3.2011  in the Help Hospital, Vijaywada due to  acute Respiratory Failure, Diabetic Ketoacidosis with acute Gastroenteritis (GE).  As, it was an early claim, arisen within two years from the date of issuance of the policy, the matter was investigated and the OPs had procured several medical documents, which revealed that the DLA was suffering from DM, type-II for the past 10 years i.e. much prior to the issuance of the policy.  The counsel further submitted that, the medical examination was advised on the basis of information supplied by the DLA.  The obscure disease could not be traced out until and unless the proposer reveals it to the Medical Examiner. It was quite possible that, prior to basic medical examination, the DLA might have taken medicine to control her blood sugar level.  It was the duty of the DLA to state each and every fact correctly while taking the policy, so that the underwriters could have assessed the risk accordingly, but the DLA deliberately concealed the fact to get policy for higher sum assured, which was a fraudulent act.   The counsel further submitted that, as cash surrender value  of the policy, a cheque for Rs. 15,70,470.45   as an ex gratia amount was issued to the complainant; but the same was returned by the complainant.           

9.      We have given thoughtful consideration to the arguments from both the parties, also perused the documents on the file viz. the proposal form, the medical record from the Help Hospital and the investigation report.  The OPs/insurance company had appointed an investigating agency, named ‘Stellar’ to investigate the death claim of Gudela Durgamma i.e. the DLA. During investigations, the investigator had approached several hospitals and doctors in Vijaywada, namely  Puma Heart Institute, Praveen Cardiac Centre, Dr. D. S. Prakasa Rao, Sri Satya Sai Clinic, Global Medical Centre and Dr. Bhanu Prabhakar of the Help hospital.

10.    The investigator met Dr. D. S. Prakasa Rao, who stated that,  the life assured used to consult him for Diabetes since 10 months and  she did not have any health problems prior to this.  The DM was diagnosed by him only, but according to the medical record of the Help Hospital, she  was  a patient of  DM for 10 years.  The investigator enquired from Dr. Bhanu Prabhakar at the Help Hospital; according to his statement, the past history was reported by the DLA’s family members, that she had DM for 10 years;  hence, therefore it was mentioned in the case sheet.  The statement from Dr. D. S. Prakasa Rao is reproduced as below:

“I. D. Suryaprakasa Rao, Occupation:RMP Doctor, M/s Styasai Clinic, R/o Chitti Nagar, Tunnel Road, am practicing as RMP. 

Mrs. Goodela Durgamba, Age:65 years, was undergoing for general treatment by me.  She was suffering from diabetics since 10 months and undergoing treatment by me.  On 29.03.2011, she suffered with vomiting, motions and Gastric trouble.  On that day due to heavy out patient (OP) with the help of my son refer her to “Help Hospital”.  On 31.03.2011 she died at Help Hospital.  Hence, I declare that it is true and correct.”

Based on the investigator’s findings, it is clear that, Dr.D.S. Prakasa Rao who used to  treat the DLA for general aliments was like a family doctor of the DLA and according to him, the DM was detected by   him for the last 10 months only.  

11.    The investigator also recorded the statements of the neighbor, Mr. Jammu Venkateshwar Rao and DLA’s son Jammu Shiva. The findings of investigator are reproduced as below:-Findings and conclusion:

“During our enquiry, her two sons informed us that she was hale and healthy; but ten months back only she was diagnosed with DM as she was not well.  When we asked them about past history mentioned in Help Hospital, they informed us that they have reported to the doctor as 10 months, but not 10 years and they do not know how 10 years was mentioned in the record.

The concerned doctor of Help Hospital asked us to take clarification from LA’s family member as they themselves have reported to him about LA’s medical history.

We did not get any information regarding LA’s pas treatment details from the neighbors and also from our hospital checks.

During our enquiry, we came to know that LA’s sons have deposited their income in her name and taken this policy.  LA’s sons informed us that the LA had not filed any ITR, but she had PAN card only.  We have obtained deposit account ledger of LA from REPCO Bank.”

Though, the investigator did not give conclusive opinion, but the findings clealry indicate that the DLA was not suffering from DM for 10 years.

12.    Let us see the MER and BSL-13 conducted by OP before issuance of policy. It was an admitted fact that, the DLA underwent Medical Examination Report and Birla Sun Life  (BSL-13) tests  before the acceptance of proposal.  As per the record, Dr. R.S.Reddy of R.S.R.Hospital  had examined the DLA and also conducted BSL-13 tests. For much details, the BSL-13 tests consists as below:-

          1. Serum Cholesterol                                      2. Serum Triglycerides

            3. SGOT/AST                                                 4. SGPT/ALT

            5. Total Bilirubin (Direct/Indirect)                    6.Total Protein (Albumin/Globulin)

            7. GGTP                                                         8. Alkaline Phosphatases

            9. Fasting Blood Sugar If                              10. HbsAg, if positive then,

             s then conduct HbA1c( reflexive )  test            conduct HbsAg (reflective) test

            11. Urea/ BUN                                                          12. Serum Creatinine

            13. HIV (1&2) 

It is pertinent to note that, based on the test results, after satisfaction only, the OP had issued the insurance policy. We have perused the entire test reports. On careful perusal of the reports we found that, the Fasting Blood sugar: 80.5 mg%, the urine sugar was Absent and the Urine micro albumin was within normal limit . These three tests are more specific  to  rule out  evidence of DM-type II.   Moreover, those tests were conducted in OP’s authorized empanelled RSR laboratory at Nellore .   Therefore, in our considered view  , the DLA was not suffering from  DM  at the time of filling the proposal form.

13.    We have perused medical record from the Help Hospital, where the DLA was expired. She was admitted there on 30.3.2011 for  the history of loose motions and breathing problem and despite treatment, she expired due to Cardio respiratory arrest at 3.05 PM on the next day,31.3.2011. She was diagnosed as a case of Acute respiratory failure, with Diabetic Ketoacidosis and Acute Gastroenteritis (GE).   On careful perusal, it was noted that the DLA was examined by Dr. Prabhakar Rao. It was also mentioned in the case sheet that, patient had DM+ since 10 years. The patient was treated in the Help Hospital for one day with antibiotics and other medicines; however nothing was clear that, the treatment for DM was advised. It is quite surprising that, how  the Help Hospital has arrived to the diagnosis of Diabetic Ketoacidosis  without conducting basic tests like Blood Sugar, urine Sugar and urinary Ketone bodies. Also, the medical record is completely devoid of laboratory investigations. On 31.3.2011, the DLA suffered Cardio- respiratory arrest which caused the death.  Therefore, it is clear that, the Help Hospital has just relied upon the alleged history of DM for 10 years and without laboratory investigations arrived at the diagnosis of Diabetic Ketoacidosis. Thus, we do not accept that, the DLA was suffering from DM-type II.

14.    The next question for consideration is the payment of ex-gratia amount made by the OP, but the same was not accepted by the complainant.   We vide order 15.9.2017, have sought clarification from the OPs  regarding  the basis of the Cash Surrender Value as an ex-gratia payment.  The OPs had filed the clarification 27.11.2017; but reasons stated therein did not satisfy us. It was also stated that, the approach was adopted by the insurance company on humanitarian ground, as good gesture to pay the cash surrender value as an ex-gratia. It should be borne in  mind that, the cash surrender value is, the amount the insured is entitled to receive in case of cancellation before the death of the insured or before the policy matures.   It is surprising that, in the instant case the insured had neither  cancelled nor  surrendered the policy.  It was the claim that arose after  the death of the insured. Therefore, there shall not be any question of paying the cash surrender value. Surprisingly, the OPs had issued the cheque to the complainant for Rs.15,70,470/-  for ex-gratia.  However,  still the OPs had intelligently gained  Rs.4,29,530/- without any justification. It was done intentionally to avoid payment of Rs.50,00,000/- i.e. the sum assured.  Therefore, it amounts to unethical and unfair trade practice on behalf of the OPs.

15.    In the case, LIC Vs Asha Goel and another (AIR 2001 SC 549), the Hon'ble Supreme Court held that, the claim cannot be repudiated merely on the ground that the deceased had withheld the correct information regarding his health at the time of effecting insurance with the Corporation. It was held that the matter of repudiation of policy should not be dealt with in a mechanical and routine manner, but should be one of extreme care and caution. In the present case, the claim was repudiated without any proof of previous ailment. Even if the ailment had been proved, the same had no nexus with cancer, with which the insured died. The repudiation was, therefore, not justified.

16.    Now, turning to the another appeal, F.A. No.271/2015, filed by the complainant for enhancement of compensation to the tune of Rs.64,25,000/-  and also seeking further interest of 18% on the award.  In our considered view, we do not find any justification for enhancement. The State Commission has passed well-reasoned order and awarded Rs.50,00,000/- along with interest at 7% p.a. from the date of filing, which is just and proper.  Therefore, the complainant is not entitled for enhancement of compensation.

17.     To sum up, it can be concluded that the mother of the complainant did not suffer from any major ailment at the time of filling the proposal form for obtaining the insurance policy.  Even the panel of doctors duly appointed by the OPs did not find anything adverse based, upon which, the issuance of policy could be denied.  The agent of the OPs submitted the Moral Hazard Report after witnessing the insuree at the time of the submission of the proposal form to this effect that she was perfectly in good health. The report was considered and the Senior Branch Manager accepted the proposal, and a policy was issued to the Complainant's mother. Therefore, both the parties are bound by  the  terms and conditions of the insurance contract. The mother of the Complainant suddenly became ill and for better check-up, she was taken to Help Hospital, at Vijaywada but, unfortunately, she died on 31.3.2011 due to Cardio-respiratory arrest.  After submission of claim, the OPs had conducted investigation through private agency. The investigator after complete investigations   did not give any conclusive opinion and failed   to establish that the DLA was suffering from DM type II for the past 10 yrs. The statements recorded by the investigator from DLA’s neighbors, and Dr.D.S.Prakasa Rao, prove that DLA was suffering from DM since 10 months only. Moreover, as discussed   BSL-13, ruled out that, the DLA was having DM at the time of filling the proposal form.  Prior to her death, on 30.3.2011 she was admitted at the Help Hospital and diagnosed to be DM / Diabetic Ketoacidosis   We do not agree with the diagnosis, because the hospital record  is completely silent  about  the tests reports which would confirm the diagnosis of DM/ Diabetic Ketoacidosis.   Moreover,  the OPs had not chosen to examine the doctor from the Help Hospital to prove that the patient was suffering from DM for 10 years. 

18.  We would like to put reliance upon the judgment of Hon’ble Supreme Court in the case  P. Venkat Naidu Branch Manager, LIC Kurnool and Anr. Civil Appeal No.7437 of 2011, decided on 26.8.2011 in which, it has held that 

“Since the respondents had come out with the case that the deceased did not disclose correct facts relating to his illness, it was for them to produce cogent evidence to prove the allegation.”  

In the instant case, the OPs have failed to produce any tangible evidence to prove that the deceased had withheld information about her long-standing diabetic status and treatment. Therefore, the repudiation of claim was not justified. However, the OPs attempted to pay ex-gratia amount, meaning thereby it was to avoid their total claim liability. This should not be the intention of the insurance company, which has been established for the purpose of benefit of the public.

19.    Based on the discussion above, both the appeals are dismissed as devoid of merit.  The parties shall bear their own costs.