1.      The present First Appeal has been filed under Section 19 of the Consumer Protection Act, 1986 (“the Act”) against the Order dated 19.04.2018 passed by the learned State Consumer Disputes Redressal Commission, Bihar at Patna (“the State Commission”), in Consumer Complaint No. 12 of 2013 wherein the State Commission dismissed the Complaint with direction to  the Zonal Manager, LIC, Patna to decide the claim amount of Rs.25,00,000/-, representation dated 15.10.2012 of the Complainant within two months.

2.      For Convenience, the parties in the present matter being referred to as mentioned in the Complaint before the State Commission. “Sanrakshita Kumari” is identified as the Complainant (Appellant herein) who is a wife and nominee of the Life Assured Rakesh Kumar (Since Deceased). "Life Insurance Corporation of India" (LIC for Short) is referred to as the Opposite Parties (Respondents herein) / Insurer in this matter.

3.      Brief facts of the case, as per the Complainant, are that the Complainant's husband, Shri Rakesh Kumar (“the Deceased Life Assured” or “DLA”) obtained a Life Insurance Policy with accidental benefit (Double Benefit), vide Policy No. 516537470, from the OP on 09.09.2009, with a sum assured of Rs.12,50,000/- for a 15 yrs term commencing from 09.11.2009. The quarterly premium for the policy was Rs.15,312/-, which was regularly paid till 03.02.2011, totalling six quarterly premiums. Tragically, during the policy period, the DLA was murdered by anti-social elements on 10.03.2011. An FIR was lodged, and the police submitted a final report confirming the murder, which was accepted by the ACJM, Patna. Following his death, the Complainant filed a claim with the OP/Insurer along with the relevant documents. However, the claim was repudiated by the OP on 31.03.2012, citing the concealment of prior policies obtained by the DLA. On 15.10.2012, she filed a representation before the OP for reconsideration of the claim, which is still pending. As a result of claim repudiation and deficiency in service, the Complainant being a Nominee of the DLA filed CC No. 12 of 2013 before the State Commission and claimed the sum assured Rs.12,50,000/- and Rs.12,50,000/- towards Accidental Benefit (Double Benefit), Rs.91,872/- towards the total premium paid up to 03.02.2011, along with 15% interest and cost of litigation of Rs.1,50,000/-.

4.      In reply, the OPs/Insurer contested the claim alleging that the deceased life assured (DLA) deliberately suppressed material information regarding previous policies taken and the total sum assured at the time of obtaining the policy in question. The DLA did so with a fraudulent intention to avoid undergoing rigorous special Medical Examination, which was mandatory for taking a high-value policy. According to the OPs/Insurer, if the DLA had disclosed the details of the previous policies, he would not have been eligible for further insurance without Medical Examination. Therefore, based on the terms of the policy contract and the declaration contained in the relevant proposal form, the OPs repudiated the complainant's claim. They asserted that they had not committed any deficiency in service in repudiating the claim.

5.  The. State Commission vide order dated 19.04.2018 dismissed the complaint with the following order: -

“5. The Complainant has submitted that declaration of prior policies in the present L.IC. form was not mentioned by the agent of the L.I.C. Who filled up the entire form. The policy holder Rakesh Kumar simply signed in the form where it was required. Hon’ble Apex Court in the case of Satwant Kaur Sandhu Vs. New India Assurance Company report III (2008) CPJ 78 (SC) held that non mentioning of prior policies on the policy form cannot be said, the suppression of material facts. On the other hand, the opposite party LIC has submitted that the life assured had obtained altogether 16 LIC policy 15 policy amount has already been paid to the claimant. The details of prior policies has been annexed with the written arguments filed by the opposite party LIC. In several decisions, the Hon’ble Apex Court as well as Hon’ble National Commission held that concealment of prior polices is violation of the terms of the insurance policy and the Insurance Company is not liable for payment of assured amount. Hence, the repudiation is well justified. The Complaint be dismissed.

For the above discussion, we disposed of the complaint with observation that the Zonal Manager L.I.C. Patna who has still not decided the representation dated 15.10.2012 of the complainant is directed to decide the claimed amount Rs.15,00,000/- (including accidental benefit) with other benefits) with other benefits within two months from the receipt of this order failing which a cost of Rs.20,000/- will be payable to the Complainant by the opposite party LIC. Let a free copy of this order be sent to parties.”

6.      Being aggrieved by State Commission order, the Complainant (Appellant herein) filed this present Appeal seeking the following:

“It is therefore prayed that this Hon’ble Commission may graciously be pleased to admit this appeal, call for the records of the case, and after hearing both the parties, we further pleased to set aside the impugned order dated 19.04.2018 passed by the State Consumer Dispute Redressal Commission, Bihar at Patna in complaint No.-12 of 2013 and allow the complaint.

And/ or

May pass such other orders/ direction/ directions, as your Lordship deemed fit and proper in the fact and circumstances of the case.

7.      In the Appeal, the Complainant raised following key issues:

(a) The State Commission ought to have either allowed or rejected the claim under Section 14 of the Act after conducting proceedings under Section 13 of the Act. Further, it ought to have decided the complaint on its merits under Section 14(1) of the Act without referring the matter back to the Respondent.

b) The State Commission committed an error of law as well as in record by disposing of the complaint with an observation that the Zonal Manager LIC Patna, who has still not decided the representation dated 15.10.2012 of the Complainant, is directed to decide the Claim amount of Rs.25,00,000/- within two months from the receipt of this order. In fact, during the pendency of the complaint itself, the said representation dated 15.10.2012 was rejected by the Zonal Office Claim Review Committee, Patna (ZOCRC), and was intimated vide letter dated 22.02.2013. The same has already been brought on record before the State Commission by the Complainant and the OP-1 to 3.

c) The State Commission failed to appreciate the fact that OP Corporation has failed to prove that the DLA had deliberately concealed material information regarding previous policies, to avoid rigorous special medical examination.

8.      Upon notice on the memo of appeal, Respondent Nos. 1,2 and 3 filed their reply/ objection denied the contention of the appeal by reiterating the facts of the case and appreciating the Impugned Order passed by the State Commission. However, Respondent Nos. 4 and 5 failed to appear despite being granted the last opportunity, leading to them being placed ex-parte vide Order dated 21.12.2023.

9.      In his arguments, the learned counsel for the Appellant/ Complainant reiterated the grounds of appeal and the facts of the complaint, emphasizing the legitimacy of the insurance claim of the Complainant under the policy in question. He asserted that the manner of death of the DLA falls well within the definition of accidental death under the insurance policy. The counsel highlighted that from the perusal of the Repudiation letter dated 31.03.2012, there was negligence and deficiency in service on the part of the OPs. The Senior Divisional Manager, LIC sent the said Repudiation Letter to various officials for information and necessary action, indicating negligence on their part. It was argued that the claim of the appellant was arbitrarily and illegally repudiated on vague and illegal grounds that the DLA deliberately withheld information/details of previous insurance policies, purportedly to avoid a detailed medical examination. However, it was emphasized that the DLA died due to murder, not on account of any disease, undermining the relevance of medical examination in this context. He further argued that the document submitted by the Insurer regarding total insurance eligibility of a proposer dated 18.03.2010 was not applicable to the present case, as the proposal in question was accepted earlier, on 09.11.2009. Moreover, the non-disclosure of earlier policies by the DLA did not amount to suppression of material facts in the case. Therefore, there was no nexus between the cause of death and the alleged suppression of fact. Moreover, the reply so filed by the Respondent No. 1 to 3 in the present appeal is not tenable under the law as the same in not properly verified and affidavit. In support of the complaint, the Complainant and her witnesses filed their respective evidence on affidavit. The counsel argued that the State Commission failed to appreciate the issues involved in this case and urged for the impugned order to be set aside, allowing the complaint of the Complainant/Appellant.

10.    The learned Counsel for Respondent No. 1-3 strongly argued that the DLA, at the time of filing the insurance proposal, deliberately concealed information regarding previous insurance policies, which is a material fact for assessing the risk and determining the sum assured. He emphasized that the DLA had taken a total of 16 insurance policies from LIC, out of which only one was repudiated. The learned Counsel cited the precedent of LIC of India & Anr. vs. Vidya Devi & Anr (R.P. No. 382 of 2011), where this Commission had held that the insured is obligated to disclose previous policies, and failure to do so constitutes suppression of material facts. The DLA's deliberate omission of this information justified the repudiation of the claim. He elaborated on the significance of disclosing previous insurance policies by the DLA at the time of proposing for a new policy. He argued that such disclosure is crucial for assessing the risk involved and determining the sum assured. He emphasized that the underwriter relies on this information to calculate the total sum assured under all policies held by the proposer, as well as to determine the Sum Under Consideration (SUC) within the previous two years. The SUC plays a vital role in the underwriting decision-making process and influences the requirement of medical reports. He further highlighted the provisions of the General Underwriting Instructions of the Underwriting Manual of LIC, which mandates referencing previous policies before making an underwriting decision. The Counsel contended that if the DLA had disclosed all 15 previous policies, the maximum sum assured that could have been offered to him was Rs. 34 lakhs, based on his annual income. However, considering the total sum assured of Rs. 52,30,000/- including the policy in question, it exceeded the maximum permissible limit. Therefore, he asserted that there was no flaw in the decision of LIC to repudiate the claim based on the non-disclosure of previous policies by the DLA. The learned Counsel further asserted that the impugned order passed by the State Consumer Dispute Redressal Forum at Patna was justified and should not be overturned.

11.    The counsel for Respondent No. 1 to 3 further argued that the insurance contracts are founded on the principle of utmost good faith ('Uberrima-fides'). He emphasized that insurers rely on the information provided by proposers or the insured party to assess and underwrite the risk. Referring to several judgments of the Supreme Court, including United India Insurance Company Ltd Vs MKJ Corporation (1996) 6 SCC 428, Life Insurance Corporation of India and Ors. v. Asha Goel (Smt.) and Anr (2001) 2 SCC 160, and P.C. Chacko and Anr. vs. Chairman, Life Insurance Corporation of India and Ors. (2008) 1 SCC 321, he highlighted that deliberate misrepresentation or concealment of material facts by the insured can vitiate the insurance contract. Further, he cited the decision of this Hon'ble Commission in the case of Dineshbhai Chandarana & Anr. vs. Life Insurance Corporation 'Yogakshema' & Anr. MANU/CF/0104/2010, where it was held that failure to disclose past policies constituted material suppression, justifying the repudiation of the insurance claim by the insurance company. Based on the settled legal principles regarding the obligation to provide accurate and complete information at the time of submitting a proposal form for insurance, the counsel urged the Hon'ble Commission to dismiss the appeal.

12.    I have examined the pleadings and associated documents placed on record and rendered thoughtful consideration to the arguments advanced by learned Counsels for both the parties.

13.    It is the specific contention of Respondents that claim of the Complainant with respect to the policy in question was repudiated solely on the grounds that the Decease Life Assure (DLA) had not disclosed the previous 15 policies held by him at the time of filing proposal form for obtaining insurance cover for the said policy for Rs.12,50,000/-. The Respondents have brought on record a detailed Table containing the policy number, the sum assured, premium payable, periodicity of payment, date of commencement, nominee, agents/DO and the claim position. Scrutiny of the same reveals that the individual had taken 16 policies consistently over the period of 11 years from 1998 to 2009. It is the Respondents contention that it was imperative for the DLA to inform the existing insurance policies at the time of submitting proposal for a new policy. Such information is crucial for assessing the risk involved and determining the sum assured. This information is essential to calculate the total sum assured under the policies held by the proposer and to determine the sum under consideration within the previous two years. In the given circumstances, it entailed his detailed medical examination before the fresh policy is issued, which the DLA avoided.

14.    The Respondents specifically contested that the maximum sum assured that could have been offered to the DLA was Rs.34,00,000, based on his income and they provided detailed information with respect to 15 policies previously held by him. Close examination of the same reveals that each of these policies have specific amount of sum assured, expect for two columns No. 8 and 9. The reason for not stating the sums assured is unclear. At the same time, it is admitted that the single premium of Rs.10,000/- each was in fact paid by the DLA on 31.08.2006 and 04.09.2006 respectively as well as this sum assured had also been paid to the Complainant, post death of the DLA. Intriguingly, this amount has not been reflected in the total. Further, the total of the remaining 13 entries of the sum assured reveals that the total sum assured in the policies issued to the DLA  was Rs.47,70,000/-. Further, this amount is excluding the amount paid under entries No. 8 and 9 with respect to two policies vide No. 514480580 and No.514481441 for which the DLA had paid single premium of Rs. 10,000/- each on 31.08.2006 and 04.06.2006.

15.    It is the admitted position of the Insurer that, if the DLA had disclosed all 15 previous policies, based on his annual income, the maximum sum assured that could have been offered to him was Rs.34 Lakhs. However, Insurer had in fact paid Rs.47,70,000 as well as the additional amount paid under entries No. 8 and 9 with respect to two policies vide No. 514480580 and No.514481441 to the Complainant. Therefore, the contention of the Respondents that the maximum permissible insurance cover to the DLA is only 34 Lakhs as his income was only Rs. 2 Lakh per annum is untenable.

16.    In the case in question the only issue is disclosure of the previous policies issued by the same insurer. Other than this, the DLA suffered no disqualification and had paid the premium as necessary. It also deserves to be mentioned that, the individually was regularly taking insurance policies from the year 1998 till 2009. These details have been brought out clearly in a tabular form by the Respondents. If these existing policy details were not brought out by the DLA at the proposal stage for any reason, the Insurer could have observed the same from their own database at the initial stage itself or anytime thereafter and taken action either to cancel the policy or to revise the insurance cover to the extent of eligibility, and reviewed the premium payable as necessary. The same was not done till the time the insured died. After he died and when the claim was preferred, the same was repudiated solely on this ground.

17.    Now analysing the issue of the case. There is no doubt about the fact that the life assured has failed to disclose his previous policies in the proposal form. In this regard attention is drawn in the recent judgement by Hon’ble Supreme Court in Bajaj Allianz Life Insurance Company Ltd. v. Dalbir Kaur, 2020 SCC OnLine SC 848 decided on 09.10.2020 wherein it was observed as under:

“A contract of insurance is one of utmost good faith. A proposer who seeks to obtain a policy of life insurance is duty bound to disclose all material facts bearing upon the issue as to whether the insurer would consider it appropriate to assume the risk which is proposed. It is with this principle in view that the proposal form requires a specific disclosure of pre-existing ailments, so as to enable the insurer to arrive at a considered decision based on the actuarial risk.”

18.    Similar view was taken by the Hon’ble Supreme Court in Reliance Life Insurance Co. Ltd. v. Rekhaben Nareshbhai Rathod, (2019) 6 SCC 175 decided on 24.11.2019 wherein it was held that suppression of the facts made in proposal form will render Insurance Policy voidable by the Insurer. A Division Bench of the Mysore High Court in VK Srinivasa Setty Vs M/s Premier Life and General Insurance Co Ltd which is cited with approval by the Hon’ble Supreme Court in this case:

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 Ltd21 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 understanding it. That 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.

19.    Based on the discussion above, it is evident that the Deceased Life Assured (DLA) failed to bring out the details of previous policies in the proposal form. However, the contention of the Appellant is that the said proposal form was filled by the Agent of the Insurance Company. Additionally, neither the Insurance Company raised any objection nor did the Agent verify the details. Moreover, the Insurance Company received a substantial premium of Rs.91,872. Considering that all the previous policies were issued by the same insurance company, it would be just and equitable to refund the premium amount paid by the DLA along with interest.

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20.    Consequently, the present First Appeal No.865 of 2018 is partly allowed with a direction to the Respondent Insurance Company to refund the premium amount of Rs.91,872/- along with 9% per annum from the date of filing of the complaint before the State Commission i.e. January 2013 till its realization, within four weeks from the receipt of the order. In the event of delay beyond one month, the rate of interest applicable shall be @ 12% for such extended period.

21.    Rest of the order passed by the State Commission dated 19.04.2018 is upheld.

22.    All pending application, if any, stand disposed of.