HON’BLE MR SUBHASH CHANDRA,         PRESIDING MEMBER

          HON’BLE DR SADHNA SHANKER, MEMBER

For Appellant                      Ms Suman Bagga, Advocate

For Respondent                   Mr Krishna Dev Jagarlamudi, and Mr

                                        Shresth Mukharya, Advocates

ORDER

PER SUBHASH CHANDRA

1.      The challenge in this appeal under Section 19 of the Consumer Protection Act, 1986 (in short, the “Act”) is to order dated 27.12.2016 in Complaint No. 43 of 2016 of the Andhra Pradesh State Consumer Disputes Redressal Commission, Vijayawada (in short, “State Commission”) allowing the complaint and directing the opposite party/respondent herein to pay Rs 46,87,548.92 with interest @ 9% p.a. from the date of repudiation of the claim (05.12.2015) to the appellant with compensation of Rs 2,00,000/- for mental agony and Rs 25,000/- as litigation costs within two months of the order.

2.      We have heard learned Counsel for the parties and perused the record carefully. 

3.      The relevant facts of the case, in brief, are that the respondent’s husband was a business entrepreneur who had taken a life insurance policy from the appellant in 2008 after necessary medical tests. He had also taken another policy in 2014 for Rs 56,00,000/- after undergoing medical tests. The life assured expired on 08.05.2015 due to cardiac arrest. The respondent submitted a claim form for settlement of the insurance claim as his nominee. An investigator was appointed by the appellant to investigate the claim followed by two more investigators named Mr S Kumar and Mr JN Kumar respectively who visited the respondent and collected necessary information. An indemnity bond, as directed by the opposite party, was executed by the respondent as the original policy had been lost by her. However, vide letter dated 23.11.2015, the appellant repudiated the claim on the ground that the deceased life assured (DLA) had not disclosed the existence of previous policies held by him while obtaining the policy. On 05.12.2019 a sum of Rs 9,12,451.08 was transferred electronically to the account of the respondent. The respondent then approached the State Commission. As the appellant failed to file its written version, its right to do so was closed. It also failed to file its evidence affidavit. The complaint came to be disposed through the impugned order. The State Commission held that while it was not in dispute that there was a policy approved by the appellant, the claim under the policy had been repudiated on the ground that the DLA did not disclose the existence of previous policies in the proposal form. It was held that the burden of proof lay on the appellant to establish this which it had failed to do. Hence, holding that the claim was repudiated on untenable grounds, the State Commission allowed the complaint. Appellant has prayed for setting the impugned order aside and for any other relief(s) as deemed fit.

4.      According to the appellant insurance company, the State Commission erred in not appreciating that the DLA had submitted the proposal form with false information in Part II of “Personal Details” and had indicated his reply against the column seeking “Existing Policy Details/Pending Policy Details” as “No”. However, during investigations it had been found that the DLA held various life insurance policies with different companies such as SBI Life, Bajaj Life, Max Life, TATA AIG Life, Kotak Life and Shriram Life. It was argued that a contract of insurance governed by the doctrine of ubberima fidei and the failure to make full disclosure of material facts by the DLA constituted non-disclosure of a ‘material fact’ which had not been appreciated by the State Commission. It was submitted that the pleadings of the appellant had not been considered by the State Commission since the complainant had clearly admitted that the column relating to previous policies had been left blank. Reliance was placed on the judgment of the Hon’ble Supreme Court in Reliance Life Insurance Co. Ltd. Vs. Rekhaben Nareshbhai Rathore in Civil Appeal No. 4261 of 2019 decided on 24.04.2019 wherein it was held that failure to disclose a policy of insurance obtained earlier at the stage of the proposal entitled the insurer to repudiate a claim under the policy. It was also argued that the State Commission erred in its finding by holding that the appellant had failed to establish its defence by not filing the written version and evidence.

5.      Per contra, the complainant/respondent herein submitted that while the appellant repudiated her claim on the ground that previous policies were not disclosed, it had consistently been her stand that the Insurance Policy was lost by her (for which reason she submitted an Indemnity Bond) and she did not have the Proposal Form. It was averred that the burden of proof to prove the existence of previous policies lay on the appellant which had not been discharged. It was contended that under Section 45 (1) of the Insurance Act, no Life Insurance Policy could be called into question on any ground after expiry of 3 years; hence Section 45 (2) relating to repudiation was not applicable. In view of the column remaining blank, it was stated that there had been no declaration made and, therefore, there was no attempt at fraud. The refund of the premium of Rs 9,12,451.08/- to the respondent also does not arise as per Proviso II to Section 45 (4) if the claim was rejected on ground of fraud. The claim had also not been repudiated on grounds of life expectancy under Section 45 (4) since a medical examination had been conducted prior to the policy and an additional premium was charged. It was argued that the ratio of Rekhaben (supra) did not apply to the case since this judgment was rendered in the context of the un-amended Section 45 of the Insurance Act which was amended only w.e.f. 26.12.2014. It was contended that as on the date of the demise of the DLA, i.e., 08.05.2015, Section 45 stood amended. Therefore, the amended Section providing that a policy may be called in question at any time within 3 years from the date of issuance or date of commencement of risk whichever was later was in force and that as per proviso (ii) in case of repudiation on grounds of misstatement or suppression of material fact but not on the ground of fraud, premium collected till repudiation was to be paid to the nominees/ legal representatives within 90 days was applicable to the case on hand.

6.      The letter of repudiation dated 30.11.2016 reads as under:

“Our investigations have established that Life Assured had previous insurance from other insurance companies which was not disclosed in the Application dated July 09, 2014. Had this information been provided to the company at the time of applying for the insurance policy, we would not have provided the policy on same terms and conditions.”

[ Emphasis supplied ]

7.      From the foregoing, it is evident that the claim of life insurance has been repudiated on the ground of suppression of material facts that the DLA had other life insurance policies, the details of which had not been disclosed. It is also evident that the appellant appointed three investigators to enquire into the admissibility of the claim preferred. However, neither the investigators’ report indicating details of the previous policies nor any affidavits to establish the same have been brought on record. Secondly, while the policy in question was sanctioned by it on 09.07.2014, the repudiation has raised the issue of the policy having been obtained through misstatement/suppression of facts as per Section 45 of the Insurance Act. Reliance has been placed on the judgment of the Hon’ble Supreme Court in Rekhaben (supra) which is based on an interpretation of the un-amended Section 45 which was amended w.e.f. 26.12.2014 to substitute the period in which a life insurance policy could be called into question which was changed from 2 years from the date of the commencement of risk to 3 years. The contention of the respondent is that as the risk under the policy commenced on 31.07.2014 (date of approval of policy) and the DLA expired on 08.05.2015, it was beyond the period of 2 years prescribed under the un-amended Section 45 of the Insurance Act stipulating a period of 2 years and hence the basis of repudiation on any ground was not valid. Appellant’s contention on the contrary is that there was non-disclosure of previous insurance from other insurance companies and the amended Section 45 (4) of the Insurance Act permitted review of policy within three years and refund of premium. The ground of repudiation of the insurance claim is based on non-disclosure of ‘material’ information. The respondent’s contention is that the information in the relevant column with regard to the existence of the previous policy had been left blank and therefore, did not imply either misrepresentation or obtaining of the policy on the grounds of any fraud on the part of the DLA, her husband.

8.     The State Commission has upheld the contention of the respondent (complainant) with the following finding:

A perusal of Ex.A-7, at a glance, clearly reveals that the opposite party repudiated the claim on the sole ground that the life assured did not disclose the existence of previous policies, in the proposal form. The opposite party is not disputing the issuance of the policy in favour of the life assured. The opposite party, in unequivocal terms, admitted that it issued the policy, bearing No. 16958816 on 31.07.2014, for a sum assured of Rs. 56,00,000/- in the name of the life assured. At the time of the arguments, the opposite party filed a memo. The relevant portion of the memo reads as under:-

2.       The right to lead evidence by the opposite party herein was forfeited and was confirmed by the National Commission.

3.       In view of the above position the opposite party herein is obligated to place on record the facts as detailed below: which are brought to the Hon'ble Commission for consideration at the time of disposal of the main complaint.

a)      The issuance of policy an 31-07-2014 for a sum assured of Rs.56,00,000/-is true.

b)      This opposite party repudiated the death claim on the ground of false information pertaining to personal details in part 2 of the proposal form dated 09-07-2014 by exercising Jurisdiction conferred by venture of section 45 of Insurance Act.

c)       Therefore, the premium amount of Rs.9,12,000/ was returned back to the complainant.

          …………

Suffice it to say, the burden lies on the opposite party to establish that the life assured induced the opposite party to issue policy, bearing No.16958816 for sum assured of Rs.56,00,000/-, without disclosing the existence of previous policies in the proposal form. As observed earlier, the opposite party did not choose to file the written version to substantiate its stand. For the reasons best known, the opposite party did not file evidence affidavit or produce the documents. The original proposal form is in the custody of the opposite party. For one reason or other, the opposite party did not produce the original proposal form submitted by the life assured. The opposite party did not evince any interest to produce the policies alleged to have been taken by the assured from other Insurance Companies. A duty is cast on the opposite party to substantiate its stand taken by it in the repudiation letter. Absolutely there is no material on record to establish that the life assured had taken the policies from other companies prior to 09.07.2014, date of the proposal. The opposite party miserably failed to establish the stand taken by it in the repudiation letter. The complainant has taken a specific stand in the complaint that the opposite party appointed three investigators to investigate into the claim. The reports of the investigators have not seen the light of the day till date. The right of the opposite party to file written version was forfeited by this Commission and the same was confirmed by the Hon'ble National Commission In the light of the foregoing discussion, we have no hesitation to hold that the opposite party repudiated the claim of the complainant without justifiable cause. Repudiation of the claim of the complainant without any basis would amount to deficiency in service as contemplated under Section 2(1) (g) of the Act. Hence, the point No.1 is answered in favour of the complainant and against the opposite party.

[ Emphasis added ]

It was therefore, held as under:

In the result, the complaint is allowed, directing the opposite party to pay an amount of Rs.46,87,548.92 with interest at the rate of 9% per annum from the date of repudiation of the claim, i.e., 05.12.2015 till the date of realisation; Rs.2,00,000/- towards compensation for mental agony and Rs.25,000/- towards cost to the complainant. The opposite party is further directed to comply the orders of this Commission within two months from the date of this order.

9.     From the foregoing discussion, it is apparent that the life insurance policy in question had been obtained on the basis of a proposal form which did not disclose whether any policy had been obtained earlier by the DLA or otherwise, the appellant approved the policy without insisting that this information be provided to it. However, in view of the claim raised before it, it has now taken the position that there was non-disclosure of material information which rendered the policy liable to be void ab initio on the principle of ubberima fidei.  On the contrary, the respondent would have us believe that this column had been left blank and therefore, there was no misrepresentation or false declaration in the proposal form.

10.   It is also evident that the appellant sanctioned the policy without checking the pre-existence of other policies since it has not brought the original documents on record. However, the fact remains that the policy in question was issued by the appellant. The appellant was also required to exercise due diligence while approving a policy and cannot be absolved of the responsibility of having approved the policy without ensuring proper verification and exercising due diligence with respect to the information sought by it through the proposal form.  It is not open for the appellant at this stage, after having approved the policy to reject the claim on the ground of ubberima fidei when it did not itself exercise the due diligence required. It is also not denied that the premium was paid by the respondent’s late husband in respect of the policies. Appellant also failed to lead evidence despite opportunity before the State Commission to bring documents on record.

11.   The proposal form is a standard form designed by the appellant to disclose all information thereunder and it should have been ensured that all information was provided by the appellant for the policy by it. At this stage it is not open for the appellant to take the view that information was not disclosed and therefore, the claim preferred was not payable. 

12.   It is therefore, manifest that the policy approved by the appellant was sanctioned even after all the columns of the proposal form duly filled in had declared in the negative. While it was necessary that the DLA should have disclosed the information, it was equally incumbent on the appellant to have ensured that all the details were provided to it prior to its approval of the insurance cover.

13.    In view of the discussion above, the appeal is liable to fail. It is accordingly disallowed. The order of the State Commission is upheld.

14.   All pending IAs, if any, stand disposed of with this order.