Heard learned counsel for both sides.
2. Here is an appeal filed u/s 15 of the erstwhile Consumer Protection Act, 1986 (hereinafter called the ‘Act’). Parties to this appeal shall be referred to with reference to their respective status before the District Forum.
3. The factual matrix leading to the case of the complainant is that the deceased assured being husband of the complainant purchased life insurance policy bearing Nos. 592201158 and 592277606 for a sum of Rs.1,25,000/- and Rs.1,00,000/- commenced on 28.3.2009 and 14.3.2011 respectively. The complainant being nominee of James Barik alleged inter alia that the insured died on 12.10.2011. She submitted all the documents to the OP insurance company but they have repudiated the claim stating that the complainant has suppressed the material fact of the pre-existing disease while filling up of the proposal form. So showing deficiency of service on the part of the OP, complaint was filed.
4. OP filed written version stating that the insured while filling up of the proposal form has answered at Para 11 (i), (iii), (viii) and (ix) falsely because he has got pre-existing disease for which he has taken leave from the office from time to time and treated by the doctor. Since he has suppressed the material fact u/s 45 of the Insurance Act, they have repudiated the claim. There is no any deficiency of service on their part.
5. After hearing both parties, learned District Forum has passed the following impugned order:-
“ xxx xxx xxx
The OPs LIC are directed to settled the claim of the complainant within one month from the date of receipt of this order. The OPs LIC are also directed to pay a sum of Rs.5,000 (Rupees five thousand) only as compensation including the costs to the complainant on account of sufferance of her mental agony and harassment caused by the OPs LIC, failing which interest @6% per annum will be charged to the OPs on the settled amount till realization.
Accordingly the case is disposed of.”
6. Learned counsel for the appellant submitted that the learned District Forum has passed the impugned order without application of judicial mind to the facts involved in this case. He further submitted that u/s 45 of the Insurance Act the OP having onus to prove the pre-existing disease has proved the plea taken by adducing the official documents where James Barik was working and the medical opinion of the concerned insured. In support of his submission, he cited the decision of Hon’ble Supreme Court in Reliance Life Insurance Co.Ltd & another vrs. Rekhaben Nareshbhai Rathod AIR 2019 SC 2029 and also the decision of this Commission in Senior Branch Manager, Life Insurance Corporation of India and another vrs. Sukanti Panigrahy passed in FA No. 147 of 2005 disposed of on 12.10.2020. He submitted that the learned District Forum ought to have rejected the claim as the OP has discharged the onus. So he submitted to set aside the impugned order by allowing the appeal.
7. Learned counsel for the respondent submitted that the learned District Forum has passed the impugned order correctly and there is nothing wrong on it. So he supported the entire impugned order.
8. Considered the submission of learned counsel for the respective parties and perused the DFR including the impugned order.
9. It is well settled in law that the complainant has to prove the deficiency of service on the part of the OP. But it is the case where the OP has repudiated the claim on the ground that u/s 45 of the Insurance Act insured had suppressed material fact of pre-existing disease while filing present complaint. It is settled in law that onus lies on the insurer to prove the pre-existing disease while policy in question called by insurer.
10. Now issue is whether the insured has suppressed the pre-existing disease and making false statement while submitting proposal. In the decision of Mithoolal Nayak vrs. Life Insurance Corporation of India AIR 1962 Supreme Court 814, it has been held by the Hon’ble Apex Court which is as follows:-
“ xxx xxx xxx
The three conditions for the application of the second part of Section 45 are
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.”
11. With due regard to the decision, it can be safely observed that within two years of commencement of policy the insurer have right to revoke the policy as per unamended Section 45 of Insurance Act, 1938. But onus lies on the insurer to prove all the above pre-conditons before calling the policy in question within two years.
12. The said decision has also been followed in the case of Reliance Life Insurance Co.Ltd & another (Supra). The onus lies on the insurer to prove the aforesaid three conditions precedent while applying section 45 of said Insurance Act. Again question was raised with regard to the meaning of “material fact.” In this regard also in the decision Reliance Life Insurance Co.Ltd and another (Supra) Their Lordships observed as follows:-
“xxx xxx xxx
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 justified a duty of good faith, leading to a positive duty of disclosure. The duty of disclosure in insurance contracts was established in a King’s Bench decision in Carter v. Boehm, 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 underwriter trusts to his representation, and proceeds upon confidence that he does “not keep back any circumstance in his knowledge, to mislead the underwriter into a belief that the circumstance does not exist, and to induce him to estimate the risqué, 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. Proposal forms are a significant part of the disclosure procedure and warrant accuracy of statements. Utmost fare 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 breach of the duty of good faith and will render the policy voidable by the insurer. The system for 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.”
13. The aforesaid decision has also been followed repeatedly by this Commission in Senior Branch Manager, Life Insurance Corporation of India and another (Supra). By keeping in mind of the aforesaid principles, it is necessary to go through Section – 45 of the Insurance Act which is as follows:-
“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 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 documents 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.”
14. The aforesaid decision of the Hon’ble Apex Court and this Commission read with Section – 45 of the Insurance Act are clear that the policy in question can be called within two years from the date of commencement of the policy. In the instant case, Policy No. 592201158 has been called in question after two years of its commencement. In that regard Section – 45 of the Insurance Act will not apply. But so far Policy No. 592277606 is concerned, Section – 45 of the Insurance Act would apply. No doubt it is reiterated that the OP has onus to prove the ingredient of Section – 45 of the Insurance Act.
15. The proposal form is as such:-
“xxx xxx xxx
11. (i) During the last five years did you consult a Medical Practitioner for any ailment requiring treatment for more than a week? No
(ii) Have you ever been admitted to any hospital or nursing home for general check up observation, treatment or operation? No.
(iii) Have you remained absent from place of work on grounds of health during the last 5 years? No
(iv) Are you suffering from or have you ever suffered from ailments pertaining to liver, stomach, Heart, Lungs, Kidney, Brain or nervous system? No
(v) Are you suffering from or have you ever suffered from Diabetics, Tuberculosis, High Blood Pressure, Low Blood Pressure, cancer, Epilepsy, Hernia, Hydrolysis, Leprosy or any other disease? No
(vi) Do you have any bodily defect or deformity? No
(vii) Did you have ever any accident or injury? No
(viii) Do you use or have you ever used Alcoholic drink, Narcotics, any otiehr duugs, Tobacco in any form? No
(ix) What has been your usual state of health? Good”
16. On going through the DFR, it appears that the OP has filed the official records vide Annexure – B showing the leaves taken by James Barik in several occasions between 2006 to 2011 on health ground. Similarly, the copy of reports of the doctors sent by complainant to OP clearly show that in 2010 and 2011, he was not well and has been also referred to hospital.
17. When the insured was ill and has been hospitalised within last three years and has taken leaves further on health reason, the answers given by him in the proposal form for second policy amounts to suppression of material fact. So there is reason to believe that OP has proved the suppression of material fact of pre-existing disease by James Barik while filling up of the proposal form for the second insurance policy. On the other hand, the insured is not only guilty of suppression of material fact but also given the false statement knowing well same to be false. Therefore, this Commission is of the view that the learned District Forum has not properly analysed the case on the facts and law involved in the case so far as disposal of second insurance policy is concerned. Although the learned District Forum has not dealt with first insurance policy as dealt by this Commission, the conclusion arrived by the learned District Forum is concurred herewith.
18. In view of aforesaid discussion, this Commission while agreeing with the view taken by the learned District Forum so far first insurance policy is concerned but do not agree with the view taken for the second insurance policy. Hence, the impugned order is set aside in part. Therefore, the impugned order is modified by directing the OP to settle the claim of complainant so far Policy No. 592201158 is concerned and rest part of the impugned order would remain unaltered so far payment of compensation for mental agony and cost concerned.
DFR be sent back forthwith.
Supply free copy of this order to the respective parties or the copy of this order be downloaded from Confonet or Website of this Commission to treat same as copy supplied from this Commission.
