KERALA STATE CONSUMER DISPUTES REDRESSAL COMMISSION VAZHUTHACADU THIRUVANANTHAPURAM APPEAL NO: 188/2008 JUDGMENT DATED:26..05..2010. PRESENT SMT. VALSALA SARANGADHARAN : MEMBER SRI. M.V. VISWANATHAN : JUDICIAL MEMBER Smt.C.M.Bindu, W/o Late Balagopalan, Kodungaloor Post, : APPELLANT Kodungaloor, Ernakulam. PIN – 680 664. (By Adv: Sri.George Cherian Karippapparambil) Vs. 1. The Branch Manager, LIC of India, Angamalli Branch (7001), PB No.55, Kallookkaran Shopping Complex, Angamalli, Pin-683 572. : RESPONDENTS 2. The Senior Divisional Manager, LIC of India, Divisional Office, Jeevan Prakash, M.G.Road, PB No.1133, Ernakulam-682 011. JUDGMENT SHRI.M.V. VISWANATHAN : JUDICIAL MEMBER The appellant was the complainant and respondents 1 and 2 were the opposite parties 1 and 2 respectively in CC.108/06 on the file of CDRF, Ernakulam. The complaint therein was filed alleging deficiency of service on the part of the opposite parties in causing delay of 5 months in reviving the policy and that there was also deficiency of service on the part of the opposite parties in repudiating the insurance claim put forward by the complainant, the widow of the policy holder, Late V.Balagopalan. The opposite parties entered appearance and filed written version denying the alleged deficiency of service. They contended that there was no delay on the part of the opposite parties in reviving the policy and that the policy holder caused delay in producing the necessary documents to support the revival application dated:25/11/2002. It was further contended that there was suppression of the material facts by the policy holder because of his failure to inform the opposite party/insurance company regarding the health condition of the life assured from the date of submission of the revival application and the date of revival. Thus, the opposite parties justified their action in repudiating the insurance claim. 2. Before the Forum below the complainant was examined as PW1 and the Assistant Administrative Officer of the LIC of India was examined as DW1. Exts.A1 to A6 and B1 to B14 documents were also marked on the side of the parties to the said complaint. On the basis of the evidence on record, the Forum below passed the impugned order dated:19/6/2006 dismissing the complaint in CC:108/06. Hence the present appeal by the complainant therein. 3. The points that arise for consideration are:- 1. Whether the respondents/opposite parties can be justified in repudiating the insurance claim made by the appellant/complainant with respect to the life insurance policy issued infavour of the life assured, V.Balagopalan? 2. Whether there was any deficiency of service on the part of the opposite parties in causing the alleged delay of 5 months in reviving the policy which had lapsed during December 2001? 3. Is there any legally sustainable ground to interfere with the impugned order dated:19/6/2006 passed by CDRF, Ernakulam in CC.108/2006? 4. Point No.1 The appellant/complainant is the widow of late V.Balagopalan who had taken a life insurance policy insuring his life. The said policy was for a sum of Rs.1.lakh and the premium had to be paid quarterly. Admittedly the said policy lapsed during December 2001 due to non payment of the quarterly premium. There is no dispute that the life assured Balagopalan submitted the application dated:25/11/2002 for getting the said policy revived. Along with the said application for revival the life assured Balagopalan had also submitted personal statement regarding his health. Ext.B3 is photocopy of the said personal statement regarding health submitted by the life assured Balagopalan. It is dated:25th November 2002 and the same was signed by the life assured. The signature of the agent of LIC is also seen affixed on the said personal statement. As per B3 personal statement the life assured declared his health condition as good. B3 personal statement is also having declaration which reads as follows:- “Balagopalan.V do hereby declare that the foregoing statements and answers are true and complete in every particular and agree and declare that these statements and this declaration along with my proposal for insurance under the lapsed policy shall be the basis of the contract or revival of the lapsed policy between me and the Life Insurance Corporation of India and that if any untrue averment be contained therein, the said contract shall stand forfeited to the Corporation. And I further declare that if between the date of this declaration and the date of revival of the Policy(i) any change in my occupation or any adverse circumstances connected with my financial position or the general health of myself or that of any member of my family occurs or (ii) a proposal for assurance or any application for revival of a policy on my life made to any Office of the Corporation is pending or has been withdrawn or dropped, deferred or declined or accepted at an increased premium or subject to a lien or on term other than as proposed, I shall forthwith intimate the same to the Corporation in writing, to reconsider the terms of Revival of the Policy. Any omission on my part to do so shall render the Revival absolutely null and void and all moneys which shall have been paid in respect thereof shall stand forfeited to the Corporation.” 5. The aforesaid declaration would make it clear that the Life assured who gave the said declaration was also bound to intimate the LIC of India any change in the general health of the life assured. The complainant, the widow of the life assured or the life assured has no case that after submission of B3 declaration the life assured intimated about the change in the general health of the life assured. 6. Ext.B4 is copy of the discharge summary issued from Lisie Hospital, Kochi, with respect to the hospital treatment of the life assured in that hospital from 8/4/2003 to 12/4/2003. Ext.B4 discharge summary would make it clear that the life assured was admitted in that hospital on 8/4/2003 and he had undergone a surgery on 9/4/2003 and discharged from that hospital on 12/4/2003. It would also show that he was suffering from Carcinoma penis. Ext.B5 is the Histo-pathological report dated:12/4/2003 issued from Lisie Hospital. This would show that histo-pathological testing was conducted and it revealed squamous cell carcinoma. Ext.B6 certificate of hospital treatment issued by the treating doctor attached to Lisie Hospital, Ernakulam, Kochi would make it clear that the complainant was hospitalized from 8/4/2003 to 12/4/2003 for the treatment of squamous cell carcinoma penis and that the life assured continued treatment thereafter on20/5/2003, 16/6/2003 and 25/8/2003. Ext.B7 is a letter dated:28/3/2005 issued by the appellant/complainant to the 1st respondent/1st opposite party stating that the life assured Balagopalan was admitted in Lisie Hospital, Ernakulam on 8th April 2003 with left ingunal swelling and his disease was diagnosed as Malignancy and inspite of treatment the life assured expired on 13/12/2004. Ext.B8 is photocopy of the claimant’s statement submitted by the appellant/complainant before the 1st opposite party. In the said claim statement also it is submitted that the life assured expired on 13/12/2004 and he first developed the complaint about his illness in March 2003. Thus, the documentary evidence Ext.B4 to B8 would make it abundantly clear that after the submission of the revival application with declaration regarding health condition, the life assured had some health problems which developed in March 2003 and he was hospitalized on 8/4/2003 and the disease was detected as carcinoma penis on 12/4/2003. 7. As per Ext.B3 declaration given by the life assured he was bound to disclose the subsequent development regarding his health condition to the LIC of India, the insurer. But the life assured failed to inform the LIC of India regarding the change in his health condition subsequent to the submission of the application for revival of the insurance policy and before getting the policy revived. Thus, the aforesaid failure on the part of the life assured to inform the LIC of India, the insurer about the change in his health condition would amount to suppression of material facts. If that be so, the respondents/opposite parties, the Branch Manager and the Divisional Manager of LIC of India are justified in repudiating the insurance claim put forward by the appellant/complainant being the widow of the life assured, V.Balagopalan. 8. It has been held by the Honble High Court of Patna as early as in the year 1959 in Ratanlal and Another Vs. Metropolitan Insurance Company Ltd. (AIR 1959 Patna 413). That contracts of insurance including the contracts of life assurance are contracts Uberrimafides and every fact of materiality must be disclosed, otherwise there is good ground for rescission, And this duty to disclose continues up to the conclusion of the contract and covers any material alteration in the character of the risk which may take place between proposal and acceptance. The aforesaid principle followed by the Hon’ble Apex Court in Life Insurance Corporation of India and Others Vs.Asha Goel and another. That the duty to disclose material facts continues right up to 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. The aforesaid dictum laid down in the earlier decisions have been followed by the Honble Supreme Court in the recent decision in P.C.Chacko and Another Vs. Chairman, LIC of India and Others (2008) 1 SCC 321. 9. There can be no doubt about the fact that the subsequent treatment undergone by the life assured from 8/4/2002 to 12/4/2002 is an important fact which ought to have been disclosed by the life assured to the insurer. But unfortunately, the life assured failed to inform the subsequent change in his health condition which developed after the submission of the revival application and before the revival of the policy. 10. Regulation 2(d) of the Insurance Regulatory and Development Authority (Protection of policy holder’s interest) Regulations, 2002 defines the term material. The explanation to regulation 2 (d) would show that material fact shall mean and include all important, essential and relevant information in the context of under-writing the risk to be covered by the insurer. It is to be noted that the subsequent change in the health condition of the life assured can be considered as an important and essential information as far as the insurer is concerned, with respect to the process of taking decision as to whether the risk is to be undertaken or not. 11. The Hon’ble Supreme Court in Satwant Kaur Sandhu Vs. New India assurance Company Ltd in Civil Appeal No.776/02 has held that the term material fact 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. Thus, it can very safely be concluded that the life assured failed to disclose material fact regarding his change in the health condition subsequent to the filing of the revival application and before the revival of the policy. 12. The declaration given by the life assured in Ext.B3 personal statement would also make it clear that any omission on the part of the life assured to follow the conditions stipulated in the declaration would make the revival absolutely null and void and all moneys which shall have been paid in respect there of shall stand forfeited to the LIC. Thus, the respondents/opposite parties are perfectly justified in repudiating the insurance claim on the ground of suppression of material fact. Therefore, Ext.B9 repudiation letter dated:31/3/2005 issued by the 2nd opposite party/Senior Divisional Manager, LIC of India is to be treated as just and valid repudiation. The Forum below has rightly upheld the repudiation made by the opposite parties. This point is answered accordingly. 13. Point No:2:- The appellant complainant has got a definite case that the respondents/opposite parties unnecessarily caused undue delay in reviving the policy. Admittedly, the life assured submitted the application for revival of the policy on 25.11.2002. He furnished the original of B3 personal statement regarding health etc with necessary declaration on 25/11/2002 itself. Then, it was incumbent upon the respondents/opposite parties to take necessary steps to take a decision as to whether the lapsed policy can be revived or not. Admittedly, the policy was revived on 22/4/2003. Thus, the respondents/opposite parties took 5 months time to get the policy revived. Regulation 4(6) of the Insurance Regulatory and Development Authority (Protection of policy Holder’s interests) Regulations 2002 is as follows:- “Proposals shall be processed by the insurer with speed and efficiency and all decisions thereof shall be communicated by it in writing within a reasonable period not exceeding 15 days from receipt of proposals by the insurer.” 14. The aforesaid regulation 4(6) would make it abundantly clear that the respondents/opposite parties were bound to process the revival application (proposal) for the revival of the policy with speed and efficiency and at any rate within 15 days. The aforesaid regulation 4(6) would also make it clear that the decision on the said proposal should be communicated by writing within a reasonable period not exceeding 15 days. But there is nothing on record to show that any such communication was issued by the respondents/opposite parties after 25/11/2002 and before 22/4/2003, the date on which the policy was revived. Thus, it can be seen that the respondents/opposite parties caused unreasonable delay of 5 months in taking the decision on the proposal for revival of the lapsed policy. 15. The opposite parties in their written version has admitted that the 1st opposite party (Branch Manager of LIC) received revival application on 25/11/2002 for revival of the policy along with personal statement of health containing declaration and medical report dated:25/11/2002. It is further contended in the version that the BST report and serum cholesterol report were submitted on 14/1/2003 and ECG report was obtained only on 4/2/2003. But, there is no evidence forthcoming from the side of the opposite parties to substantiate their case that the medical reports were submitted by the life assured on 14/1/2003 and 4/2/2003. If any such reports were submitted subsequent to 25/11/2002 that fact would have been disclosed by the inward register or other documents maintained by the 1st opposite party in the branch office. But no such document is forthcoming from the side of the opposite parties to substantiate their case that the medical reports were submitted by the life assured subsequent to the submission of the revival application. There is also no case for the opposite parties that the medical reports were called for by the opposite parties and it is on the subsequent request made by the opposite parties those medical reports were filed by the life assured. In the absence of any such material it can only be inferred that the life assured submitted the revival application with all necessary or supporting documents. It is also to be noted that the revival application and the personal statement were submitted with knowledge and consent of the agent of the LIC. There can be no doubt about the fact that the LIC agent would be in a position to know about the documents to be furnished along with the revival application. So, it can only be inferred that the life assured submitted the revival application with the necessary documents including the medical reports. It is pertinent to note that the opposite parties have not produced the aforesaid medical reports such as BST report, serum cholesterol report and ECG report submitted by the life assured for getting the lapsed policy revived. The production of those medical reports would necessarily show the date on which those reports were issued by the concerned authorities. The non production of those reports by the opposite parties would make it clear that the said case of the opposite parties is developed to negative the case of the complainant that there was unreasonable delay on the part of the opposite parties in reviving the policy. 16. From the side of the opposite parties, DW1, the Assistant Administrative Officer attached to the office of the 2nd opposite party has been examined. But DW1 is not in a position to say about the date on which the medical reports were submitted by the life assured. DW1 has also deposed that he was not working in the proposal processing section at the relevant time and he is aware of the guideline issued for processing the proposal for revival of the lapsed policy. But, at the same time DW1 has categorically deposed that in the ordinary course, the revival application will be processed within one month; but in the present case the revival application was processed by taking 5 months time. DW1 was not in a position to say as to why such a delay occurred. It is pertinent to note that DW1 has categorically admitted that the revival application was allowed by the zonal office on 12/3/2002 and thereafter 42 days had been taken to inform the party about the revival of the policy and thereby the opposite parties permitted the life assured to remit the revival fee after a lapse of 42 days from 12/3/2003. Thus, the testimony of DW1 and the documentary evidence on record would make it crystal clear that there was unreasonable delay on the part of the opposite parties in reviving the policy. The aforesaid unreasonable delay in reviving the policy would amount to deficiency of service. 17. The complainant as PW1 has categorically deposed that all the necessary documents were submitted along with the revival application and there was no delay on the part of the life assured in producing the medical reports for getting the lapsed policy revived. Thus, the appellant/complainant has succeeded in establishing her case that there occurred unreasonable and undue delay on the part of the opposite parties in reviving the lapsed policy. 18. Admittedly the life assured submitted the application for revival on 25/11/2002 and that the policy was revived only on 22/4/2003 and thereby the opposite parties took 5 months time in reviving the lapsed policy of the life assured, V.Balagopalan. The evidence on record would establish the fact that on 25/11/2002 the life assured had no sort of illness and he was healthy. Ext.B3 personal statement regarding the health condition of the life assured was submitted truly and correctly. There is no material available on record to show that B3 personal statement contained any misleading or false statement or that the life assured submitted B3 personal statement by suppressing any material fact regarding his health condition or about any other facts. Thus, there was no suppression of material fact while submitting B3 personal statement with the declaration. The documentary evidence available on record would show that the life assured approached the doctor at Lisie Hospital on 8/4/2003 and he had surgery on 9/4/2003 and the histopathological report obtained on 12/4/2003 and the said report disclosed carcinoma penis. It is true that during March 2003, the life assured had left ingunal swelling. But he get that ailment treated only on 8/4/2003 by approaching the doctor attached to Lisie Hospital, Ernakulam, Kochi. 19. The failure on the part of the life assured is to inform the LIC of India about his medical treatment on 8/4/2003. It is to be noted that the revival application was submitted along with the necessary documents on 25/11/2002. In the ordinary course that revival application would have been processed and a decision taken within one month. If that be so, the revival of the lapsed policy ought to have been done on or before 25/12/2002. Regulation 4(6) of the Insurance Regulatory and Development Authority (protection of policy holder’s interest) Regulations, 2002 stipulates processing of the proposals including the proposals for reviving of the lapsed policies should be done within 15 days. It is to be noted that the aforesaid regulations were framed in exercise of the powers conferred under subsection 2 of section 114-A of the Insurance Act, 1938 read with sections 14 and 26 of the Insurance Regulatory and Development Authority Act, 1999. The aforesaid regulations were framed for the protection of the interest of the policy holders. The aforesaid regulations were binding on the insurers, insurance agents, insurance intermediaries and policy holders. Thus, the opposite parties were bound to follow the provisions of the said regulations. If that be so, the failure to follow the provisions of regulation 4(6) would amount to deficiency of service. The life assured was entitled to get the protection under the said regulations. Thus, in all respects the aforesaid undue and unreasonable delay in reviving the policy resulted in causing financial loss to the appellant/complainant being the legal heir and widow of the life assured, V.Balagopalan. Had the opposite parties vigilant and diligent in processing the revival application within the stipulated time, there would not have any suppression of material facts. The revived policy would have the effective force and that the appellant/complainant would have been benefited by the policy. Thus, the omission and inaction on the part of the opposite parties resulted in causing financial loss and inconvenience to the appellant/complainant. The aforesaid omission or lapse on the part of the opposite parties would amount to deficiency of service. 20. The appellant/complainant suffered financial loss of Rs.1.lakh and other incidental benefits such as bonus etc. The appellant/complainant must be compensated for the loss suffered by her on account of the deficiency in service on the part of the opposite parties. It may be correct to say that there was also omission or lapse on the part of the life assured in keeping the policy alive. The life assured took the policy during 2001 and the said policy was lapsed by December 2001 itself. The life assured initiated steps to get the policy revived only after the lapse of 11 months. He submitted the revival application only on 25/11/2002. It is only because of the negligence and laches on the part of the life assured created all the subsequent problems. The appellant/complainant being the legal heir of the life assured is also to be asked to suffer the consequence of the negligence or lapse on the part of the life assured. Thus, it can be held that there was composite negligence on the part of the Life assured and respondents/opposite parties. Considering all these aspects, this commission is of the view that the appellant/complainant is to be paid a compensation of Rs.50,000/- for the deficiency of service on the part of the respondents/opposite parties. The said compensation can be considered as just and reasonable compensation. Thus, the impugned order dated:19/6/2006 passed by CDRF, Ernakulam in CC.108/06 is set aside. It is made clear that the finding of the Forum below justifying the action of repudiation is upheld. But the Forum below failed to consider the case of the complainant regarding the unreasonable delay on the part of the opposite parties in reviving the policy and the resultant financial loss suffered by the complainant being the widow and beneficiary of the life assured. Thus, the respondents/opposite parties are directed to pay compensation of Rs.50,000/- to the appellant/complainant for the deficiency of service on the part of the opposite parties 1 and 2. Considering the nature of the case, the parties are directed to suffer their respective costs throughout. The compensation is to be paid within one month from the date of receipt of copy of this judgment, failing which the compensation amount of Rs,50,000/- will carry interest at the rate of 9% per annum from the date of this judgment. These points are answered accordingly. In the result the appeal is allowed partly. The impugned order passed by the Forum below is set aside. The respondents/opposite parties are directed to pay compensation of Rs.50,000/- to the appellant/complainant for the deficiency of service on the part of the opposite parties in causing unreasonable delay in reviving the lapsed policy. The respondents/opposite parties are further directed to pay the aforesaid compensation of Rs.50,000/- within one month from the date of receipt of copy of this judgment, failing which the said amount will carry interest at the rate of 9% per annum from the date of this judgment till realization. The parties are directed to suffer their respective costs throughout. M.V. VISWANATHAN : JUDICIAL MEMBER VALSALA SARANGADHARAN : MEMBER VL. | 
