IN THE DISTRICT CONSUMERS’ DISPUTES REDRESSAL FORUM AT MYSORE<br /> <br /> PRESENT: 1. Shri.A.T.Munnoli<br /> B.A., L.L.B (Spl.) - President <br /> <br /> 2. Smt.Y.V.Uma Shenoi<br /> M.Sc., B.Ed., - Member<br /> 3. Shri. Shivakumar.J.<br /> B.A., L.L.B., - Member<br /> <br /> CC 174-2010 DATED 02.07.2010<br /> ORDER<br /> <br /> Complainant Smt.V.Shoba, <br /> W/o Ashwatha Narayana, No.1508, Soppinakeri, 1st Cross, Mandi Mohalla, Mysore-01.<br /> (INPERSON)<br /> <br /> Vs. <br /> Opposite Parties 1. Branch Manager, LIC of India, City Branch 5, Saraswathipuram, Mysore-09.<br /> 2. Senior Divisional Manager, <br /> Divisional Office, Jeevan Prakash, T.N.Narasimhamurthy Circle, Bannimantap, Mysore-570015.<br /> 3.<br /> The Zonal Manager, LIC of India, SCO Jeevan Bhagya, Saifabad, Hyderabad-500063.<br /> (By Sri.B.N.Shashidhara, Advocate)<br /> <br /> Nature of complaint : Deficiency in service<br /> Date of filing of complaint : 29.04.2010<br /> Date of appearance of O.P. : 14.05.2010<br /> Date of order : 02.07.2010<br /> Duration of Proceeding : 1 MONTH 15 DAYS<br /> <br /> <br /> PRESIDENT <br /> <br /> <br /> <br /> MEMBER<br /> <br /> <br /> MEMBER<br /> <br /> <br /> Sri. A.T.Munnoli,<br /> President<br /> <br /> 1. The complainant has filed the complaint under section 12 of the C.P.Act against the opposite party, alleging deficiency in service of payment of the life insurance policy amount, seeking direction to the opposite parties to pay the policy amount of Rs.3,05,000/- with interest as well as compensation and cost.<br /> <br /> 2. In the version opposite parties have contended that, the death of the insured arose within two years from the date of commencement of the policy and the investigation revealed that the deceased had suppressed material information regarding his life and hence, the complainant is not entitled to any amount and there is no deficiency in service.<br /> <br /> 3. In support of her claim, the complainant has filed her affidavit and produced certain documents. On the other hand, Administrative Officer of the opposite parties has filed his affidavit and produced certain documents. We have heard the arguments of husband of the complainant and learned advocate for the opposite parties and perused the records.<br /> <br /> 4. Now the points arises for consideration are as under:-<br /> 1. Whether the complainant has proved any deficiency in service on the part of the opposite parties and that she is entitled to the reliefs sought?<br /> 2. What order?<br /> <br /> 5. Our findings are as under:-<br /> Point no.1 : Partly in affirmative.<br /> Point no.2 : As per the final order.<br /> <br /> REASONS<br /> <br /> 6. Point no. 1:- The fact that, brother of the complainant by name Srinivas was working as machine operator in Falcon Tyres Ltd., Mysore and had life insurance policy No.721941349 dated 01.12.2007 for a sum of Rs.3,05,000/- is admitted. The complainant-sister of Srinivals was nominee. On 19.09.2008, the insured Srinivas died in the hospital due to Cardio Respiratory arrest. The complainant being nominee, submitted her claim form with policy bond. Second opposite party through a letter dated 14.05.2009, repudiated the claim on the ground that, correct information was withheld. In that letter, it was stated, if the complainant dis-agree with the decision, she can send her representation to the third opposite party. On 18.06.2009, the complainant sent representation to review the decision of the second opposite party. On 26.06.2009, the complainant received a letter from third opposite party that, he will call for the records from the second opposite party and place the representation before Review Committee. Several reminders were sent by the complainant and the last one is dated 23.02.2010. But, there is no response. Also, it is stated that, in the representation submitted by the complainant to the third opposite party, it is explained that, there was no relationship between the decease, which caused the death and ASOM, for which deceased had taken treatment long back.<br /> <br /> 7. According to the opposite parties, the deceased suppressed material information regarding his health, answering the questions 11(a), (b), (d), and (e) in negative in the proposal form. It is contended that, the deceased was admitted to Holds Worth Memorial Hospital, Mysore from 25.12.1997 to 27.12.1997 for right sided ASOM, but failed to reveal these facts in the proposal form. For repudiation of the claim, this is the ground put forth by the opposite parties.<br /> <br /> 8. It is true, the deceased insured was admitted in Holds Worth Memorial Hospital, Mysore, for which documents at page 64 to 77 of the records are produced by the opposite parties and the final diagnosis, is right sided ASOM. It means, acute ottilis media, which is an infection of middle ear, which lost for a couple of days. In this regard, complainant has produced medical literature at page 106 to 110 of the records. This aspect is not denied or disputed by the opposite parties. Moreover, the deceased had admitted to Holds Word Memorial Hospital, Mysore in the year 1997, whereas he died in the year 2008, after more than 10 years.<br /> <br /> 9. The records make it clear that, for right sided ASOM, insured had taken treatment nearly 10 years prior to his death. The questions allegedly wrongly answered are available in record and question No.11 (a) pertains to whether deceased during the last 5 years consulted medical practitioner and the answer is no. Question 11(b) is, have you ever admitted to any hospital and the answer is no. Question 11 (d) is whether deceased suffering from ailments pertaining to lever, stomach, heart, kidney, brain and nerves and the answer is no. Question 11(e) is, as to whether deceased suffered from diabetes, TB, BP, cancer and the answer is no. These are the material questions according to the opposite parties, deceased had wrongly answered. Firstly, in question No.11(a), period specified is last 5 years and in the case on hand, the treatment that the deceased had taken was much more than 5 years earlier to the date of submitting the proposal. In addition to it, in these questions, ASOM is not forth coming. Hence, it cannot be said that, the deceased wrongly answered the said questions.<br /> <br /> 10. In addition to the above, for the complainant it is submitted that, deceased had admitted in the hospital 10 years back for right sided ASOM, whereas he died due to sudden cardio respiratory arrest. Hence, the reason for which deceased had admitted 10 years back is nothing to do for the cause of death.<br /> 11. Also, it is submitted that, even otherwise, the suppression of the fact must be material and relevant. In this regard, he relied on the ruling reported in I (2004) CLT 59. The Hon’ble Division Bench of the Madras High Court, considered, what are the material facts to attract provision of section 45 of the Life Insurance Corporation Act. In that case, the deceased had taken treatment for ulcer, but died due to heart-attack. It is held by the Hon’ble High Court that, there is no question of ulcer being considered as material factor, much less it is suppression. In that case, within a year from the date of the policy, the deceased had died. The husband of the complainant pointed out certain paragraphs of the said ruling and we would like to quote the same as follows:<br /> <br /> “11.12 Section 45 of the Insurance Act, 1938 reads as follows:<br /> 45: Policy not to be called in question on ground of mis-statement after two years – no policy of life insurance effected before the commencement of this Act shall after the expiry of two years from the date of commencement of this Act and no policy of life insurance effected after the coming into force of this Act shall after the expiry of two years from the date ion which it was effected, be called in question by an insurer on the ground that a statement made in the proposal for insurance or in any report of a medical officer, or referee, or friend of the insured, or in any other 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 and that the policy holder, knew at the time of making it that the statement was false or that it suppressed facts which it was material to disclose:<br /> Provided that nothing in this section shall prevent the insurer from calling for proof of age at any time if he is entitled to do so and no policy shall be deemed to be called in question merely because the terms of the policy are adjusted on subsequent proof that the age of the life insured was incorrectly stated in the proposal.”<br /> <br /> “It is true that special features are attached to a contract of insurance and these contracts are uberrima fideri resting upon a complete and truthful disclosure of all the facts by the insured. In such contracts, the principle of caveat emptor has absolutely no application. Non-disclosure of material facts would go to the roof of the matter, it being regarded as fatal to the validity of the contract. Under section 45 of the Act as amended in 1941, the Legislature has eliminated the nice distinctions of English Common Law with regard to the doctrine of warranty. The insurer, under the Indian law, as amended, has no right to avoid the contract by merely relying on some inaccuracy or falsity in respect of some of the recitals or items in the proposal for insurance, or even in reports of Medical Officers or any other documents connected with contract of insurance. It is imperative that to avoid the contract, the insurer must prove that material facts have been suppressed and that either suppression of material facts or fraudulent misrepresentation of material facts occurred with the full knowledge of the assured.”<br /> <br /> “A legal principle or theory, if pushed to extreme logical conclusions, may more often than not result in grave injustice as in the present case, if not absurdity. It is true that hard cases must not be allowed to make bad law. But, on the contrary, good law should not be permitted, by misapplication to be pushed to such literal and technical extremes, as in the defence of the present action, to degenerate into mechanical machinery which results in injustice without regard to the human background, facts and circumstances, judicial resource in the direction of achieving justice should be quite equal to the task of minimizing, if not eliminating, hard cases which at first blush appear to be necessitated by settled law called good under which if too many hard cases cannot be avoided; there should, then result a radical change in the law”<br /> <br /> “11.22. The test is as to whether the policy would have been issued, had it been disclosed that the insured was suffering from a particular kind of ailment. It is common knowledge that all ailments are not impediments in the issuance of a policy for life insurance. Only certain dreadful and killer diseases will make the insurer to hesitate for issuance of the policy and not of simple routine ailment or disorder to which the entire mankind is in one form or other susceptible and it is not also as if the insurer will have to be in search of only such persons, having a robust health without even the smallest disorder in their system. Therefore, it is for us to see what the fact suppressed was of a disorder, which is relevant or material, touching the longevity or the expectancy of life of the insured. As a matter of fact not all facts suppressed were dealt with under section 45 of the Act and only if material matter was suppressed or statement containing material matter was fraudulently given, the said provision will be applied against the insured. The meaning of material matter in the Oxford Dictionary was given as relevant and concerned with the matter of reasoning and not form, that here it is material with respect to the acceptance of risk which, in turn, touching the longevity or expectancy of life of the insured. Duodenal obstruction or ulcer, after treatment, has no risky factor and will not also be injurious to the longevity of the person concerned. In this case, we do not find any other disorder prior to the acceptance of the policy. The reason for the death of the insured was also only due to heart attack, regarding which no ailment was earlier found. So, even assuming that there was suppression of ulcer, it is not a material matter so as to attract the provision of section 45. Thus, even considering that the suppression was made by Muthu Gounder voluntarily and with full knowledge thereof since it has no relation with the cause of death, the insurance company cannot be allowed to repudiate the contract.”<br /> <br /> 12. For the complainant another judgement of the Hon’ble National Commission in Revision Petition No.2049/00 dated 19.06.2000 is relied upon. In this case also, Hon’ble National Commission has held that, ailment that the insured had if not connected with the cause of death, the insurance company cannot escape from liability. With reference to the decision of the Hon’ble Apex Court in (2001) 2 SCC 160 and (2008) 1 SCC 321, the Hon’ble National Commission in this ruling has observed that, <br /> <br /> “From the aforesaid enunciation of the law, it is clear that –<br /> (a) within a period of two years from the date of effecting of the policy the insurance policy can be repudiated on the ground of suppression of material fact and the statute itself provides for limitation of valid repudiation of the insurance policy.<br /> (b) Suppression must be on a material matter or must suppress such a fact which was material to be disclosed.<br /> (c) Suppression must be fraudulently made by the policy holder and<br /> (d) He must be knowing that the suppressed fact was material and it was required to be disclosed for taking the insurance policy. If this is not there, then on the ground of material suppression of fact, the policy cannot be repudiated. The Court pertinently observed that “misstatement by itself, however, was not material for repudiation of the policy unless the same is material in nature.”<br /> <br /> “Coming to the question of scope of repudiation of claim of the insured or nominee by the Corporation, the provisions of Section 45 of the Insurance Act is of relevance in the matter. The section provides, inter alia, that no policy of the insurance effected after the coming into force of this Act shall, after the 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 or in any report of a medical officer, or referee, or friend of the insured, or in any other document leading to the issue of the policy, was inaccurate or false, unless the insurer shows that such statement was on a material matter of suppressed facts which it was material to disclose and that it was fraudulently made by the policy holder and that the policy holder knew at the time of making it that the statement was false or that6 it suppressed facts which it was material to disclose. The proviso which deals with proof of age of the insured is not relevant for the purpose of the present proceeding. On a fair-reading of the section it is clear that it is restrictive in nature. It lays down three conditions for applicability of the second part of the section namely. : (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. Mere inaccuracy or falsity in respect of some recitals or items sin the proposal is not sufficient. The burden of proof is on the insurer to establish these circumstances and unless the insurer is able to do so there is no question of the policy being avoided on ground of misstatement of facts.”<br /> <br /> 13. It is submitted for the complainant that, opposite parties intend to rely on the records of the Holds Worth Memorial Hospital, Mysore, but to substantiate that fact, there is no evidence. Relying on the ruling reported in 2010 (2) CPR 17, it is submitted that, condition to be satisfy for application of the section 45 of the Insurance Act, certificate issued by the hospital, affidavit of the doctor is necessary and in the absence of the proof, the contention of the insurance company regarding suppression of material fact, cannot be accepted.<br /> <br /> 14. IRDA Regulations 2002 are referred to for the complainant and with reference to Regulations 6, it is submitted that, every insurer shall have in place of proper procedure and effective mechanism to address complaint and grievances of policy holders efficiently and with speed and the same along with the information in respect of insurance ombudsman shall be communicated to the policy holder along with the policy document and as may be found necessary. With reference to Regulation 8, it is submitted that, a life insurance company received a claim, shall process the claim without delay any queries or requirement of additional documents to be extent possibility shall be raised all at once and not in a piece meal manner within a period of 15 days from the receipt of the claim. A claim under a life insurance policy shall be paid or disputed giving all the relevant reasons within 30 days from the date of receipt of all relevant papers and the clarifications required. However, where the circumstances of a claim warrant and investigation in the opinion in the insurance company, it shall initiate and complete such investigation at the earliest. Where in the opinion of the insurance company, the circumstances of a claim warrant and an investigation it shall initiate and complete such investigation at the earliest in any case not later than 6 months from the date of lodging the claim. Pointing out Regulation 10, it is submitted that, an insurer carrying on life or general business as the case may be shall at all times respond within 10 days of the receipt of any communication from it’s policy holders in all matters, including guidelines for registering claim and early settlement thereof. Thus, with reference to the facts of the case, it is submitted that, after the complainant submitted claim to the first opposite party, she received letter from the second opposite party dated 14.05.2009 repudiating the claim stating that, the complainant may represent with the third opposite party if dis-agree with the decision. The complainant submitted representation to third opposite party on 18.06.2009 to review the repudiation and the third opposite party informed the complainant that, he is calling the records from the Divisional Office and the representation will be placed before the Review Committee. But, the third opposite party in spite of several reminders and the last one being 23.02.2010, there is no response. These facts are not denied or disputed by the opposite parties. Hence, considering regulations referred to above, in answering and responding the representation of the complainant also, there is deficiency in service.<br /> 15. Learned advocate for the opposite parties relied on the ruling reported in AIR 1962 SC 840. This ruling has been considered by the Hon’ble National Commission in the order cited supra, in Smt.Santhosh Kanwar and with reference to the decision of the Hon’ble Apex Court, it is noted that, considering the facts of that case, policy holder had taken pains to falsify or conceal that he had been treated for serious ailment only a few months before the policy was taken showed that the falsification or concealment at an important bearing. But, such are not the facts of the case on hand. Hence, the ruling will not help the opposite parties.<br /> <br /> 16. Lastly, for the complainant order of the Hon’ble National Commission in Revision petition No.3446/06 dated 10.07.2006 is relied upon. Regarding attitude of the insurance company, Hon’ble National Commission has observed in the said ruling to be effect that, <br /> <br /> “To void such litigation and its costs, officers of the LIC should keep in mind the observations of the Apex Court in the case of Life Insurance Corporation of India Vs. Asha Goel (Smt.) and Anr. (2001) 2 SCC 160 that the approach of the Corporation in the matter of repudiation of the policy, admittedly issued by it, should be one of extreme care and caution. It should not be dealt with in a mechanical and routine manner.”<br /> <br /> “Finally, we observe that it is necessary for the officers of the LIC to change their negative approach in dealing with such claim and the insurance coverage should not be nullified by backward looking interpretation of the Act and in some cases litigation could be avoided. The Apex Court, in this context, held in Skandia Insurance Co.Ltd., Vs. Kokilaben Chandravadan, (1987) 2 SCC 654 at 665, that, “it is the statutory provision defining the conditions of exemption which is being interpreted. These must, therefore, be interpreted in the spirit in which the same have been enacted accompanied by an anxiety to ensure that the protection is not nullified by the backward looking interpretation which serves to defeat the provision rather than to fulfill its life aim. To do otherwise would amount to nullifying the benevolent provision by reading it with a non-benevolent eye and with a mind not turned to the purpose and philosophy of the legislation without being informed of the true goals sought to be achieved. What the Legislature has given, the Court cannot deprive of by way of an exercise in interpretation when the view which renders the provision potent is equally plausible as the one which renders the provision impotent.”<br /> <br /> 17. Considering the facts, evidence and the law referred to above, we are of the considered opinion that, the complainant has successfully proved deficiency in service on the part of the opposite parties. Accordingly, our finding on the above point is partly in affirmative.<br /> <br /> 18. Point No. 2:- Considering the discussion made above and conclusion arrived at, we pass the following order:- <br /> <br /> ORDER<br /> <br /> 1. The Complaint is partly allowed.<br /> 2. The opposite parties jointly and severally are hereby directed to pay the policy amount of Rs.3,05,000/- to the complainant with interest at the rate of 10% p.a. from the date of the claim till realization. The amount shall be paid within a month from the date of this order.<br /> 3. Further, opposite parties jointly and severally are hereby directed to pay a sum of Rs.5,000/- towards mental agony and inconvenience caused to the complainant within a month from the date of this order, failing which the amount shall carry interest at the rte of 10% p.a.<br /> 4. So also, opposite parties to pay a sum of Rs.2,000/- to the complainant towards cost of the proceedings. <br /> 5. Give a copy of this order to each party according to Rules.<br /> <br /> (Dictated to the Stenographer, transcribed by her, transcript revised by us and then pronounced in the open Forum on this the day 2nd July 2010)<br /> <br /> <br /> <br /> <br /> <br /> (A.T.Munnoli) <br /> President <br /> <br /> <br /> <br /> (Y.V.Uma Shenoi)<br /> Member<br /> <br /> <br /> <br /> (Shivakumar.J.)<br /> Member<br /> <br /> <br /> <br /> <br /> <br /> <br /> <br />