Late Sh.Siriveri Venkateswarlu, father of the complainant obtained two insurance policies from the petitioner, one on 05.05.2009 and the other on 22.03.2010.  One policy was for a sum of Rs.4,50,000/- whereas the other policy was for a sum of Rs.4,80,000/-.  Under the said policies in the event of death by accident twice the sum assured was payable by the insurer.  Late Sh. Siriveri Venkateswarlu  having died in a train accident  on 28.02.2011, the claims in terms of insurance policies were submitted by the complainant/respondent to the petitioner company.  The claims however were repudiated vide letter dated 31.12.2011 which to the extent it is relevant reads as under :

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“With regard to the applications dated 22nd March, 2010 and 5th May, 2009, under above mentioned policies, on the life of Mr. Siriveri Venkateswarlu; we are reproducing below the aforesaid questions and the replies thereto in Application Forms, Q. No. 6.1, 6.2 for your reference:

    However, on the basis of the investigations carried out by us, we are satisfied that the aforesaid replies in the applications are false in as much as we hodl documentary proof to show that the life assured had substantial life insurance cover with another insurance company even prior to the date of his application.  After careful evaluation of all facts, documents submitted and circumstances in this case, we have come to the conclusion that the replies to the aforesaid questions in the application form, are incorrect, in as much as we hold documentary proof in support of the same.  Had such information been disclosed, our underwriting decision would have materially changed.

    The contract of insurance is based on the principle of utmost good faith and the company relies on the information provided

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by the life to be insured in the application for insurance.  Hence, despite making every attempt to consider the claim favourably, the facts regrettably demonstrate that this is not a valid claim on the above grounds.  We therefore, regret that we are unable to honour your claim and are repudiating our liability under the policy.”

(2)     Being aggrieved from the repudiation of the claim, the respondent/complainant approached the concerned District Forum by way of a consumer complaint.

(3)     The complaint was resisted by the petitioner primarily on the ground on which the claim had been repudiated.

(4)     The District Forum allowed the consumer complaint.  Being aggrieved from the order passed from the District Forum, the petitioner approached the concerned State Commission by way of an appeal.  The said appeal having been dismissed vide impugned order dated 11.12.2018, the petitioner is before this Commission.

(5)     A perusal of the proposal submitted by the deceased insured to the insurer would show that he denied having taken any other life insurance policy with other insurers.  The case of the petitioner in its reply file before the District Forum was that the deceased insured had taken as many as 15 insurance policies from the insurers other than the policies taken from the petitioner.  The details of the said policies are as under :-

(6)     The first proposal was signed by the deceased on 5.5.2009.  On that date, seven insurance policies taken from other insurers were already in force, having been issued between 17.12.2008 to 28.03.2009.

          None of these policies was disclosed by the deceased while submitting the proposal dated 05.05.2009.

The second proposal was submitted on 22.03.2010.  On that date at least 13 policies had already been issued to him, the said policies having been issued between 17.12.2008 and 17.03.2010.

(7)     Though, the claim had been repudiated on the ground that the deceased had concealed information in respect of the other insurance policies already taken by him, it was not even alleged in the complaint that no insurance policy had been taken by the deceased before he submitted proposals to the petitioner company.  Even in her affidavit filed

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by way of evidence, the complainant did not claim that the policies mentioned in the written version of the petitioner company had not been taken by the deceased.  On the other hand, the petitioner company duly supported its written version giving details of the aforesaid policies by way of an affidavit.  Therefore, it can hardly be disputed that the deceased insured had withheld the information in respect of several insurance policies which he had taken from other insurers.

(8)     The issue involved in this petition recently came up for consideration of the Hon’ble Supreme Court in Civil Appeal No.4261/2019 Reliance Life Insurance Co. Ltd.& Anr. –vs- Rekhaben Nareshbhai Rathod decided on 24.04.2019.  In the above referred case, the insured had concealed information with respect to a previous policy.  On his death, a claim was submitted by his spouse for payment in terms of the insurance policy taken by her husband.  The claim was repudiated by the insurer on account of non-disclosure of the previous policy, while submitting the proposal form.  Being aggrieved the complainant in the above referred case approached the concerned District Forum by way of a consumer complaint.  The complaint was dismissed by the District Forum but was allowed by the State Commission and the order passed by the State Commission was affirmed by this Commission.  Being aggrieved, the insurer approached the Hon’ble Supreme Court by way of a Special Leave Petition, later converted into a Civil Appeal.   Allowing the   appeal and dismissing the complaint to Hon’ble Supreme Court inter-alia held as under:

12 The repudiation in the present case was within a period of two years from the commencement of the insurance cover. This assumes significance because of the provisions of Section 45 of the Insurance Act 1932, as they stood at the material time:

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13 Section 45 stipulates restrictions upon the insurer calling into question a policy of life insurance after the expiry of two years from the date on which it was effected 11. After two years have elapsed the insurer cannot call it into question on the ground that: (i) a statement made in the proposal; or (ii) a statement made in any report of a medical officer, referee or friend of the insured; or (iii) a statement made in any other document leading to the issuance of the policy was inaccurate or false, unless certain conditions are fulfilled. Those conditions are that : (a) such a statement was on a material matter; or (b) the statement suppressed facts which were material to disclose and that (i) they were fraudulently made by the policy holder; and (ii) the policy holder knew at the time of making it that the statements were false or suppressed facts which  were material to disclose.  The cumulative effect of Section 45 is to restrict the right of the insurer to repudiate a policy of life insurance after a period of two years of the date on which the policy was effected. Beyond two years, the burden lies on the insurer to establish the inaccuracy or falsity of a statement on a material matter or the suppression of material facts. Moreover, in addition to this requirement, the insurer has to establish that this non-disclosure or, as the case may be, the submission of inaccurate or false information was fraudulently made and that the policy holder while making it knew of the falsity of the statement or of the suppression of facts which were material to disclose.  9

14.         Section 45 curtails the common law rights of the insurer after two years have elapsed since the cover for life insurance was effected. In the present case, the Court is called upon to determine the nature of the authority of the insurer where a policy of life insurance or a claim under it is sought to be repudiated within two years. The insurer submits that within a period of two years, its right to repudiate the respondent’s claim is untrammelled and is not subject to the conditions which apply beyond two years. On the other hand, the submission of the respondent is that even within a period of two years, a non-disclosure or suppression must be of a material fact to justify a repudiation. In other words, before a non-disclosure can be utilized as a ground to repudiate, it must pertain to a realm where it can be found that the non- disclosure was of a circumstance or fact which would have affected the decision of the insurer regarding whether or not to grant a cover.

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15 The fundamental principle is that insurance is governed by the doctrine of uberrima fidei. This postulates that there must be complete good faith on the part of 10 the insured. This principle has been formulated in MacGillivray on Insurance Law12 succinctly, thus:

―[Subject to certain qualifications considered below], the assured must disclose to the insurer all facts material to an insurer’s appraisal of the risk which are known or deemed to be known by the assured but neither known or deemed to be known by the insurer. Breach of this duty by the assured entitles the insurer to avoid the contract of insurance so long as he can show that the non-disclosure induced the making of the contract on the relevant terms…‖ The relationship between an insurer and the insured is recognized as one where mutual obligations of trust and good faith are paramount.

25 The expression ―material‖ in the context of an insurance policy can be defined as any contingency or event that may have an impact upon the risk appetite or willingness of the insurer to provide insurance cover. In MacGillivray on Insurance Law18 it is observed thus:

―The opinion of the particular assured as to the materiality of a fact will not as a rule be considered, because it follows from the accepted test of materiality that the question is whether a prudent insurer would have considered that any particular circumstance was a material fact and not whether the assured believed it so ...‖ 18 Twelfth Edition, Sweet and Maxwell (2012). See Pg. 493 for cases relied upon.

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Materiality from the insured’s perspective is a relevant factor in determining whether the insurance company should be able to cancel the policy arising out of the fault of the insured. Whether a question concealed is or is it not material is a question of fact. As this Court held in Satwant Kaur (supra):

―Any fact which goes to the root of the contract of insurance and has a bearing on the risk involved would be ―material‖.‖ Materiality of a fact also depends on the surrounding circumstances and the nature of information sought by the insurer. It covers a failure to disclose vital information which the insurer requires in order to determine firstly, whether or not to

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assume the risk of insurance, and secondly, if it does accept the risk, upon what terms it should do so. The insurer is better equipped to determine the limits of risk-taking as it deals with the exercise of assessments on a day-to-day basis. In a contract of insurance, any fact which would influence the mind of a prudent insurer in deciding whether to accept or not accept the risk is a material fact. If the proposer has knowledge of such fact, she or he is obliged to disclose it particularly while answering questions in the proposal form. An inaccurate answer will entitle the insurer to repudiate because there is a presumption that information sought in the proposal form is material for the purpose of entering into a contract of insurance.

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 19 disclosure in insurance contracts was established in a King’s Bench decision in Carter v Boehm19, 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 under-

writer 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 risque, 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.

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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 it 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) 19 (1766) 3 Burr 1905 20 - 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.

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

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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.

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.

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.

(9)     The learned counsel for the respondent relies upon the decision of this Commission in RP No.1117/2014 in Sahara India Life Insurance Company Ltd. & Anr. –vs- Rayani Ramanjaneyulu.  However, in view of

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the binding decision of the Hon’ble Supreme Court in Rekhaben (Supra), no reliance on the said decision can be placed.

(10)   For the reasons stated here in above and in view of the Order of the Hon’ble Supreme Court in Reliance Life (Supra) the impugned Order cannot be sustained and the same is accordingly set aside.  The consumer complaint is dismissed, with no order as to cost.