ORDER

JUSTICE SUDIP AHLUWALIA, MEMBER

          The present Revision Petition under Section 21(b) of Consumer Protection Act, 1986 has been filed by Petitioners against the impugned Order dated 19.09.2019 passed by the State Consumer Disputes Redressal Commission, Telangana, Hyderabad in First Appeal Nos. 93 and 94 of 2016 vide which the Appeals filed by the Petitioners were dismissed.

2.      The facts and question of law involved in these Petitions are similar.  Therefore these Petitions are being disposed off by this common Order. However, for the sake of convenience, Revision Petition No. 93 of 2016 is treated as the lead case, and the facts enumerated hereinafter are taken from this Petition.

3.      Brief facts of the case are that the Respondent is the father and nominee of his deceased son Mr. Ila Vamshi Krishna who had obtained several policies from the Petitioner No. 1, in which one Policy bearing no. 684346260 dated 24.06.2006 was for a sum of Rs. 8,00,000/-. As per the norms of the policy, in case of death of the policy holder the nominee will get sum assured amount with bonus and other benefits. The deceased died on 09.10.2009 due to suicide. Nallakunta Police Station registered a crime vide Cr. No. 210/2009 u/s 174 of Cr.P.C. dated 09.10.2009. The Complainant informed the Insurance Company within a month of the incident and submitted the Claim Form along with all the requisite documents. On 31.03.2010, the Petitioner No. 2 sent a letter repudiating the claim stating that “the policy holder i.e. deceased had made incorrect statements and withheld correct information at the time of effecting the assurance and misled the Corporation into issuing the policies. Hence they have repudiated the claim” on 22.05.2010, the Complainant submitted a request before the Zonal Manager of the Petitioners requesting them to reconsider the repudiation. However, there was no response from their side. The Complainant stated in the letter that “usually at the time of obtaining the policy, the forms would be filled by agents and they will guide and write the contents, moreover at the time of obtaining the first policy in Sircilla Branch on 28.01.2006 with half year premium of Rs. 1445/-, the deceased was running a Kirana shop and subsequently joined job in a software company on 17.04.2006, and that after joining the job, the instant policy was obtained by the deceased on 24.06.2006 with an annual premium of Rs. 2067/- on the approach of another agent from Peddapally Branch and as such the income mentioned in the policies are different.” It is the case of the Complainant that there was no nexus between the objection and the reason of the death of the deceased. The deceased died 3 years after obtaining the policy and as such there cannot be any planning in advance. The deceased committed suicide due to depression, because of not getting Visa for going to the United States of America; That the incident was a sudden development and it was not done to obtain the insurance amount. Aggrieved by the wrongful repudiation, the Respondent filed his complaint before the District Forum, Karimnagar.

4.      The District Forum vide its Order dated 24.04.2015 allowed the Complaint. The relevant extracts of the Order of the District Forum are set out as below –

“13. In the result, the complaint is allowed and the opposite parties are jointly and severally directed to pay sum assured of Rs. 8 lakhs on the policy no. 684346260 including entitled benefits (if any) with interest @ 9% p.a. from the date of death of policy holder i.e., 09.10.2009 and further directed to pay Rs. 50,000/- as compensation towards mental agony and hardship and also awarded Rs. 5,000/- for the costs of the litigation.

Time for compliance is 30 days…”

5.      Aggrieved by the Order of the District Forum, the Petitioners filed Appeal before the State Commission. The State Commission dismissed the Appeal of the Petitioners vide impugned Order dated 19.09.2019. The relevant extracts of the Order of the State Commission are set out as below -

“23) In view of the foregoing discussions, I have no hesitation in holding that the insurance company is not justified in repudiating the claim. It is not as though that the claim is repudiated on the ground that there are any suspicious circumstance surrounding the death of the insured. Therefore there are no merits in the appeals and both are liable to be dismissed. Accordingly, both the appeals fail and are accordingly dismissed.

24) In the result, the appeals fail and are accordingly dismissed but in the circumstances, the parties to bear their own costs.” 

6.    

2. Aggrieved by the Order of the State Commission, the Petitioners filed the present Revision Petitions raising the following key issues -
   1. That the Ld. Fora did not appreciate Clause 6 of the Policy condition before passing the impugned Orders. The Clause 6 of the Policy condition states that the policy shall be void if any incorrect statement is made in the proposal form. In the present case, the deceased life assured had suppressed material information in the proposal form dated 22.06.2006 as well as the revival form dated 31.03.2008 with respect to holding previous policy no. 684190925 issued in February 2006, and also gave incorrect and false information with respect to his educational qualification, occupation and annual income. Therefore, the claim was rightly repudiated;
   2. That the Ld. Fora did not appreciate that had the deceased life assured disclosed the details of the previous policy, the Petitioners would have subjected him to special reports such as ECG, Haemogram, Elisa for HIV test;
   3. That the State Commission overlooked the principle of law laid down by the Hon’ble Supreme Court in Reliance Life Insurance Co. Ltd. v. Rekhaben Nareshbhai Rathod (AIR 2019 SC 2039);

d.That the Ld. Fora failed to appreciate that it is not for the proposer to determine which information is to be given and which is not be given. Reliance is placed on judgements of the Hon’ble Supreme Court in “Satwant Kaur Sandhu v. New India Assurance”, 2009(4) CPJ 8 SC; “P.C. Chacko v. LIC”, 2008(1) SCC 321; and “LIC v. Asha Goel, AIR 2001 SC 549”.

7.   The Ld. Counsel for Petitioners has argued that it was the representations and assurance of the deceased life assured that the contents of the Proposal Form were true, correct and complete and so the subsequently Policy No. 684346260 was issued on 03.07.2006; That on 31.03.2008, the policy lapsed on account of default in payment of the premium. The deceased life assured applied for revival of the policy by filling up the Revival Form dated 31.03.2008, and after giving information and declaration sought thereunder. It was mentioned in the form that if any untrue averment is made, then the policy shall be absolutely null and void, and all the monies which have been paid for the policy shall be forfeited; That the State Commission failed to appreciate the ratio of “Rekhaben Nareshbhai Rathod” (supra); That the Ld. Fora did not appreciate Clause 6 of the Policy condition which states that there shall be forfeiture of the monies paid, and the Policy shall be void in case of incorrect information being furnished; That the Ld. Fora failed to appreciate that a contract of insurance is governed by ‘Uberrima Fides’, which means that every material fact and information sought must be disclosed; The Ld. Counsel for Petitioners cited the judgments of the Hon’ble Supreme Court in “Satwant Kaur Sandhu” (supra), “P.C. Chacko” (supra), and “LIC v. Asha Goel” (supra) in support of their contentions.

8.      The Ld. Counsel for Respondents has argued that the both the Fora have concurrently held against the LIC and in favour of the Respondents by holding that the alleged suppression of non-disclosure of the other Policy is not a ground for repudiation of claim; That it was also held that Insurance Company cannot escape on a technical ground of breach of conditions. Failure to fill all questions of the columns of the proposal form cannot be termed as suppression; That in a catena of decisions of this Hon’ble Commission as well as the Hon’ble Supreme Court, it has been held that the powers of this Commission are very limited unless there is any point of law involved for interference in the concurrent findings. In the present case, both the Fora have concurrently held against the LIC for wrongful repudiation of claim; That it is not the case of the LIC that the death of the assured was due to suicide which is not covered under the policy; That before issuing of the policy or at the time of revival, the LIC would  itself take a medical test of the assured from their panel Doctors; The Ld. Counsel for Respondents has cited the judgments of this Hon’ble Commission and Hon’ble Supreme Court in “Rubi Chandra Dutta v. United India Insurance Co., 2011 (11) SCC 269”; “Galada Power & Telecommunications v. United India Insurance Co., 2016 (14) SCC 161”; “Lourdes Society Snehanjali Girls Hostel v. H&R Johnson (India) Ltd., 2016 (8) SCC 286”; “B.M. Reliance LIC Co. Ltd. v. Usha Soni, (R.P. No. 1999 of 2019)” in support of their contentions.

9.      This Commission has heard the Ld. Counsel of both parties and has gone through the material available on record.

10.    It would be appropriate at this juncture to study the chronology of events pertaining to the two Insurance Policies.        

I.        The First Policy No. 684190925 was issued to the deceased life insured on 25.2.2006, which was operative w.e.f. 28.1.2006;

II.       The Second Policy No. 684346260 was issued on 3.7.2006, and its date of commencement was 24.6.2006.  For this Policy, the deceased life insured had submitted his Proposal Form on 22.6.2006 which was undoubtedly during the subsistence of the Ist Policy issued on 25.2.2006;

 III.     The First Policy lapsed on 28.1.2007 on account of default in payment of premium: the DLA had filled up the revival Form for the same on 15.12.2007 which was during subsistence of the 2^nd Policy, which was valid up to 23.6.2007;

IV.     The DLA filled up the revival Form for this 2^nd Policy on 31.3.2008, on the basis of which it was revived on 9.4.2008.  In both his Proposal Forms, and revival application Forms, the deceased has specifically mentioned “N.A.” to the query pertaining to all his Policies issued or revived under medical and non-medical categories of the Petitioner- LIC of India.

11.    Ld. Counsel for the Petitioners has relied on the decision of the Hon’ble Supreme Court in the case of “Reliance Life Insurance Co. Ltd. Vs. Rekhaben Naresh Bhai Rathod, AIR 2019 SC 2023 ”.  In this case also, the concerned life insured had held a previous Insurance Policy, the existence of which was not disclosed while obtaining a fresh Policy, and the Insurance claim subsequently raised by his spouse after his death was repudiated by the Insurance Company.  The Complaint was however allowed by the Ld. State Commission and its decision was even affirmed by this Commission. The Hon’ble Apex Court however set aside both the decisions and consequently also dismissed the consumer complaint filed by the Respondent/Complainant in the Hon’ble Supreme Court with the following observations-

“11. While considering the rival submissions, it is necessary to preface our analysis with reference to two basic facts. The first pertains to the nature of the disclosure made by the insured in the proposal form. The second relates to the ground for repudiation of the claim. The proposal form required a specific disclosure of the life insurance policies held by the proposer and all proposals submitted to life insurance companies, including the Appellant. The proposer was called upon to furnish a full disclosure of covers for life insurance, critical illness or accident benefit under which the proposer was currently insured or for which the proposer had applied. The answer to this was given in the negative. Furthermore, item 17 of the proposal form required a detailed disclosure of the other insurance policies held by the proposer including the sum assured. A disclosure was also required of the status of pending proposals. These were answered with a “not applicable” response, following the statement that the proposer did not hold any other insurance cover. The fact that two months prior to the policy which was obtained from the Appellant on 16 September 2009, the insured had obtained a policy from Max New York Life Insurance Co. Ltd. in the amount of Rs.11 lakhs has now been admitted. There was evidently a nondisclosure of the earlier cover for life insurance held by the insured……………….”

 “26. Contracts of insurance are governed by the principle of utmost good faith. The duty of mutual fair dealing requires all parties to a contract to be fair and open with each other to create and maintain trust between them. In a contract of insurance, the insured can be expected to have information of which she/he has knowledge. This justifies a duty of good faith, leading to a positive duty of disclosure. The duty of disclosure in insurance contracts was established in a King’s Bench decision in Carter v. Boehm (1766) 3 burr 1905, where Lord Mansfield held thus:

Insurance is a contract upon speculation. The special facts, upon which the contingent chance is to be computed, lie most commonly in the knowledge of the insured 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 under-writer into a belief that the circumstance does not exist, and to induce him to estimate the risqué, as if it did not exist.

It is standard practice for the insurer to set out in the application a series of specific questions regarding the applicant’s health history and other matters relevant to insurability. The object of the proposal form is to gather information about a potential client, allowing the insurer to get all information which is material to the insurer to know in order to assess the risk and fix the premium for each potential client. Proposal forms are a significant part of the disclosure procedure and warrant accuracy of statements. Utmost care must be exercised in filling the proposal form. In a proposal form the applicant declares that she/he warrants truth. The contractual duty so imposed is such that any suppression, untruth or inaccuracy in the statement in the proposal form will be considered as a breach of the duty of good faith and will render the policy voidable by the insurer. The system of adequate disclosure helps buyers and sellers of insurance policies to meet at a common point and narrow down the gap of information asymmetries. This allows the parties to serve their interests better and understand the true extent of the contractual agreement.

The finding of a material misrepresentation or concealment in insurance has a significant effect upon both the insured and the insurer in the event of a dispute. The fact if would influence the decision of a prudent insurer in deciding as to whether or not to accept a risk is a material fact. As this Court held in Satwant Kaur (supra) “there is a clear presumption that any information sought for in the proposal form is material for the purpose of entering into a contract of insurance”. Each representation or statement may be material to the risk. The insurance company may still offer insurance protection on altered terms.

27. In the present case, the insurer had sought information with respect to previous insurance policies obtained by the assured. The duty of full disclosure required that no information of substance or of interest to the insurer be omitted or concealed. Whether or not the insurer would have issued a life insurance cover despite the earlier cover of insurance is a decision which was required to be taken by the insurer after duly considering all relevant facts and circumstances. The disclosure of the earlier cover was material to an assessment of the risk which was being undertaken by the insurer. Prior to undertaking the risk, this information could potentially allow the insurer to question as to why the insured had in such a short span of time obtained two different life insurance policies. Such a fact is sufficient to put the insurer to enquiry.

28. Learned Counsel appearing on behalf of the insurer submitted that where a warranty has been furnished by the proposer in terms of a declaration in the proposal form, the requirement of the information being material should not be insisted upon and the insurer would be at liberty to avoid its liability irrespective of whether the information which is sought is material or otherwise. For the purposes of the present case, it is sufficient for this Court to hold in the present facts that the information which was sought by the insurer was indeed material to its decision as to whether or not to undertake a risk. The proposer was aware of the fact, while making a declaration, that if any statements were untrue or inaccurate or if any matter material to the proposal was not disclosed, the insurer may cancel the contract and forfeit the premium. MacGillivray on Insurance Law8 formulates the principle thus:

... In more recent cases it has been held that all-important element in such a declaration is the phrase which makes the declaration the “basis of contract”. These words alone show that the proposer is warranting the truth of his statements, so that in the event of a breach this warranty, the insurer can repudiate the liability on the policy irrespective of issues of materiality.

29. We are not impressed with the submission that the proposer was unaware of the contents of the form that he was required to fill up or that in assigning such a response to a third party, he was absolved of the consequence of appending his signatures to the proposal. The proposer duly appended his signature to the proposal form and the grant of the insurance cover was on the basis of the statements contained in the proposal form. Barely two months before the contract of insurance was entered into with the Appellant, the insured had obtained another insurance cover for his life in the sum of Rs. 11 lakhs. We are of the view that the failure of the insured to disclose the policy of insurance obtained earlier in the proposal form entitled the insurer to repudiate the claim under the policy.

30. We may note at this stage, that the view which was taken by the NCDRC in the present case was contrary to its earlier decision in Vidya Devi (supra). In that case, the NCDRC upheld the repudiation of an insurance claim under a life insurance cover by the LIC on the ground of a non-disclosure of previous insurance policies. In taking this view, the NCDRC relied on its earlier decision in Chandarana (supra). Subsequently in Sahara India (supra), the NCDRC took a contrary view. Having noticed its earlier decisions, the NCDRC did not even attempt to distinguish them. Indeed, the earlier decisions were binding on the NCDRC. This line of approach on the part of the NCDRC must be disapproved.

31. Finally, the argument of the Respondent that the signatures of the assured on the form were taken without explaining the details cannot be accepted. A similar argument was correctly rejected in a decision of a Division Bench of the Mysore High Court in VK Srinivasa Setty v. Messers Premier Life and General Insurance Co. Ltd. MANU/KA/0032/1958 : AIR 1958 Mys 53 where it was held:

Now it is clear that a person who affixes his signature to a proposal which contains a statement which is not true, cannot ordinarily escape from the consequence arising therefrom by pleading that he chose to sign the proposal containing such statement without either reading or understating it. The is because, in filling up the proposal form, the agent normally, ceases to act as agent of the insurer but becomes the agent of the insured and no agent can be assumed to have authority from the insurer to write the answers in the proposal form.

If an agent nevertheless does that, he becomes merely the amanuensis of the insured, and his knowledge of the untruth or inaccuracy of any statement contained in the form of proposal does not become the knowledge of the insurer. Further, apart from any question of imputed knowledge, the insured by signing that proposal adopts those answers and makes them his own and that would clearly be so, whether the insured signed the proposal without reading or understanding it, it being irrelevant to consider how the inaccuracy arose if he has contracted, as the Plaintiff has done in this case that his written answers shall be accurate.”

(Emphasis added)

12.       The facts and controversy in the present case are squarely covered by ratio of the aforesaid decision of the Hon’ble Supreme Court since admittedly while submitting his proposal for the 2^nd Policy, the DLA had not disclosed about existence of his Ist Policy in his Proposal Form, thereafter while seeking revival of the Ist Policy which was lapsing on 28.1.2007, he did not disclose about the 2^nd Policy which he had acquired in the month of June, 2006, and even thereafter while seeking revival of the 2^nd Policy subsequently he again did not disclose about his Ist Policy which was issued in 2006 and thereafter revived in 2007, even though he was subsequently required to mention about the same in the relevant columns of the Proposal/Revival Application Forms.  His failure to do so, therefore, rightly attract the consequences which were held to be just and proper by the Hon’ble Supreme Court in the given facts and consideration.

13.    For the aforesaid reasons, this Commission finds merit in these Revision Petitions which are, therefore, allowed after setting aside the impugned Orders passed by both the Ld. Fora below.

14.    Consequently, the Complaints filed by the Complainant/Respondent also stands dismissed.  Parties to bear their own costs.

15.    Pending application(s), if any, also stand disposed off as having been rendered infructuous.