JUSTICE V.K.JAIN, PRESIDING MEMBER (ORAL)

1.      Late Shri Balwinder Singh, husband of the complainant/respondent purchased three insurance policies, within a span of seven days, for a total sum assured of Rs. 10.75 lacs. Shri Balwinder Singh having died on 16.03.2008, a claim was lodged by the complainant for making payment in terms of the insurance policies taken by the deceased. The claim was repudiated by the insurer vide letter dated 18.07.2008 which, to the extent it is relevant, reads as under:

The company had covered the risk for the above said policy on the basis of the facts mentioned in the proposal form.  However, on receiving the death claim intimation for the above said policy, the various investigation done and medical records received confirm that Late Mr. Balwinder Singh had history of High Blood Pressure with Hypertensive Nephro Rectum with End Stage Renal Disease on Haemodialysis since September 2005.

These facts known to Late Mr. Balwinder Singh were not disclosed in proposal forms dated 09/01/2008, 31/01/2008 and 01/02/2008 respectively.

Had these facts been disclosed the Company would not have covered the risk for the above said policy.

Hence, the claim has been repudiated due to non-disclosure of material facts.

2.      Being aggrieved from the repudiation of the claim, the complainant/respondent approached the concerned District Forum by way of a complaint. The complaint was resisted by the insurer primarily on the same grounds on which the claim had been repudiated.

3.      The District Forum vide its order dated 20.01.2009, allowed the complaint and directed the petitioner company to pay a sum of Rs. 10,75,000/- to the complainant alongwith interest @ 9% per annum and cost of litigation quantified at Rs. 5,000/-.

4.      Being aggrieved from the order passed by the District Forum, the petitioner company approached the concerned State Commission by way of an appeal. The said appeal also having been dismissed vide impugned order dated 13.12.2013, the insurance company is before this Commission by way of this revision petition.

5.      The insurer appointed 3-D Investigation Agency to investigate the claim lodged by the complainant. The insurer after making investigation, inter-alia reported that the deceased insured was suffering from chronic renal failure and had been on dialysis since 2005. It was also detected that he had taken treatment at the hospital and at Dayanand Medical College and Hospital.

6.      The discharge card issued by Dayanand Medical College and Hospital, Ludhiana in respect of Sh. Balwinder Singh aged 45 years at the time of admission on 08.09.2005, shows that the aforesaid person was suffering from Hypertension and chronic renal failure and had remained admitted in the said hospital from 08.09.2005 to 10.09.2005. It further shows that his hemodialysis was done once, as a result of which the creatinine decreased. It was however, felt by the hospital that he required hemodialysis, and the patient was discharged on his request. The petitioner has also filed the prescription issued by one Dr. K.S. Chugh dated 25.10.2007 in respect of Sh. Balwinder Singh who was aged about 52 years at that time. It would be pertinent to note here that in the insurance policy also, deceased claimed to be of about 52 years old. The above referred prescription issued by K.S. Chugh, Padmashri, Emeritus Professor of Nephrology (PGIMER) would show that Sh. Balwinder Singh was suffering from chronic renal failure and was advised regular dialysis as well as renal transplant. The petitioner has also filed an ultra sound report dated 04.09.2005 issued by Patiala Diagnostic Centre and Eye Clinic in respect of Balwinder Singh aged about 50 years at that time. As per the diagnosis made by the said centre, the deceased was suffering from chronic renal failure. The medical record filed by the petitioner company also shows that the creatinine of the deceased had shot to more than 12, whereas his urea had increased to 173 on 12.10.2007. The report given by the Department of Biochemistry, Bio Diagnostics on 12.10.2007 is relevant in this regard. It is therefore, evident that the deceased was already suffering from chronic renal failure at the time the insurance policies were taken by him.

7.      The learned counsel for the complainant/respondent submits that since no doctor was examined by the insurance company to prove the alleged ailments, no reliance on the above referred reports can be placed. In support of her contention, she has relied upon the decision of this Commission in LIC of India Vs. Smt. Charanjit Kaur, RP No. 3653/2006 decided on 14.10.2011. However, on a perusal of the decision, I find that the said decision is clearly distinguishable on facts. In the above referred case, the insure was relying only upon a certificate purporting to be issued by the Registrar, BMC, Ludhiana whereas in the case before us, the entire medical record including the investigation report of the deceased has been filed by the insurer. The learned counsel for the petitioner company, on the other hand, has drawn my attention to the decision of this Commission in RP No. 1935/1999, LIC of India Vs. Krishan Chander Sharma. In the above referred case, neither the treating doctor was examined, nor was his affidavit filed by the insurer LIC of India. It was held by this Commission that non filing of the affidavit and/or non-examination of the treating doctor was not ruinous. The above referred decision of this Commission was challenged before the Hon’ble Supreme Court in SLP (C) No. 10421/2006 decided on 15.02.2007, which found no reason to interfere with the said order.

8.      In Mithoolal Nayak Vs. LIC of India, AIR 1962 SC 814, the Hon’ble Supreme Court inter-alia observed as under:

The terms of the policy make it clear, that the averments made as to the state of health of the insured in the proposal form and the personal statement were the basis of the contract between the parties and the circumstances that Mahajan Deolal had taken pains to falsify or conceal that he had been treated for a serious ailment by Dr. Lakshmanan only a few months before the policy was taken shows that the falsification or concealment had an important bearing in obtaining the other party’s consent.

9.      I find from a perusal of the order passed by the State Commission that the said Commission relied upon the provisions contained in Section 45 of the Insurance Act, while dismissing the appeal filed by the petitioner company.

7.       Section 45 of the Insurance Act, to the extent it is relevant for our purpose provides that no policy of life insurance shall, after expiry of two years from the date on which it was effected, be called in question by an insurer on the ground that a statement made in the proposal for insurance in any document leading to the issue of the policy was inaccurate or false, unless the insurer shows that such statement was on a material matter or suppressed facts which it was material to disclose and that it was fraudulently made by the policy holder who knew, at the time of making it, that the said statement was false or that it suppressed facts which it was material to disclose.

          In the present case, even two years had not expired from the date of the policy when the insured died. Therefore, the policy could be questioned by the petitioner corporation, if it is shown that a statement made in the proposal was inaccurate or false. It was observed by the Hon’ble Supreme Court in Life Insurance Co. Ltd. Vs. Asha Goel & Anr. (2001) 2 SCC 160 that the contracts of insurance including the contract of life assurance are contracts uberrima fides and every material fact must be disclosed, otherwise, it would be a good ground for rescinding of the contract. It was observed that the duty to disclose material facts continues right upto the conclusion of the contract and also implies any material alteration in the character of the risk which may take place between the proposal and its acceptance. If there are any misstatements or suppression of material facts, the policy can be called in question. It was further observed that for determining whether there is a suppression of material facts, it may be necessary to also examine whether the suppression relates to a fact which is in the exclusive knowledge of the person intending to take the policy and it could not be ascertained by reasonable enquiry by a prudent person.

8.      In P.J. Chacko vs. Chairman, L.I.C. of India, AIR 2008 SC 425 the insured was required to disclose in the application form for obtaining the policy, as to whether he ever had any accident or injury and had remained absent from place of work on the ground of health during last five years.  The insured answered in negative to both the questions and also claimed that the state of his health was good.  Later, it was found that the insured had undergone adenoma thyroid operation four years prior to submitting the proposal, though cause of his death was polyneuritis, which had no connection with the operation he had undergone.  The suit filed by the legal heirs of the deceased for recovery of the amount of insurance was decreed by the Trial Court.  On an appeal preferred by LIC, the learned single Judge of the Hon’ble High Court held that since there was nothing to indicate that had the insured disclosed the factum of previous operation, the corporation might not have been inclined to insure him and would have insisted on a higher premium, non-disclosure was not a material fact justifying repudiation of the policy.  On an intra court appeal, the Division Bench of the High Court, however, opined that the parties were bound by the warranty clause contained in the agreement and the non-disclosure was to the material fact which were required to be answered correctly.  Being aggrieved from the rejection of their claim, the plaintiffs approached the Hon’ble Supreme Court, by way of an appeal and inter alia submitted that insurance being a requirement of social security, the suppression in question could not have led to repudiation of the policy.  The learned counsel for the LIC on the other hand submitted that undergoing operation had a direct nexus with the health of the insured and the suppression therefore was on a material fact.  It was also contended by him that on account of untrue averments made in the declaration, the contract of the Insurance itself was null and void.  It was also pointed out by him that the policy had been repudiated within two years.

9.      Rejecting the appeal, filed by the plaintiffs, the Hon’ble Apex Court, inter alia, noted the following three conditions for application of the second part of Section 45 of the Insurance Act, which postulates repudiation of the policy within a period of two years in case a statement made in the proposal for Insurance was found to be inaccurate or false:-

         “a.     the statement must be on a 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.”

The Hon’ble Supreme Court observed that if a person makes a wrong statement, with the knowledge of consequence therefrom, he would ordinarily be estopped from pleading that even if such a fact had been disclosed it would not have made any material change.  It was further observed that the proposer must show that his intention was bonafide and a proposal can be repudiated if a fraudulent act is discovered.  It was also observed that in such a case, it was not necessary for the insurer to establish that the suppression was fraudulently made by the policy holder or that he must have been aware at the time of making the statement that the same was false or that the fact was suppressed which was material to disclose.  The Hon’ble Apex Court quoted its earlier observation that the effect of mis-representation on the contract is precisely the same as that of non-disclosure; it affords the aggrieved party a ground for avoiding a contract.

          In Satwant Kaur Sandhu Vs. New India Insurance Co. (2009) 8 SCC 316, the Hon’ble Supreme Court emphasized that when an information on a specific aspect is asked for in the proposal form, an assured is under a 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.

Though the term “material fact” has not been defined in the Insurance Act, it is understood to mean 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".

10.    In the present case, the deceased died within two years from the date on which the policies were taken by him. He took as many as three insurance policies within a span of one week and he died less than one month after the last policy was taken by him on 22.02.2008. In clause 14 of the proposal form, the deceased insured was required to answer certain questions with respect to his health and the treatment if any taken by him in the past. The said questions and the answers thereto, to the extent they are relevant read as under:

 Since the deceased was suffering from chronic renal failure, it is evident that he gave false answers to the above referred questions and thereby committed a fraud with the insurer by making a willful misrepresentation as regards the state of his health and the treatment taken by him in the past. Therefore, Section-45 of the insurance company would certainly not be of any avail to the complainant.

11.    For the reasons stated hereinabove, the impugned orders cannot be sustained and the same are accordingly set aside. The complaint filed by the respondent is consequently dismissed with no order as to costs.