PER SURESH CHANDRA, MEMBER

Complainant’s husband Shri Pritpal Singh Sandhu took a LIC Policy bearing No. 111191636 for Rs.2,00,000/- on 28.04.1990 after due medical examination by the petitioner / OP’s doctor.  The complainant was the nominee of the policy taken.  The life insured expired on 26.12.1990 due to heart / kidney failure at Madras Institute of Nephrology also known as Vijaya Health Centre, Chennai after a brief illness.  According to the complainant, the life insured was enjoying sound health earlier.  After completing with the formalities, the complainant made a claim under the LIC policy but the same was repudiated on 31.3.1993 on the ground that the deceased had withheld material information regarding his health at the time of furnishing information for issuance of the policy.  Thereafter, the complainant filed a consumer complaint with the District Forum with a prayer for direction to the OP insurance company to pay Rs.2,00,000/- (being the claim amount) alongwith interest @24% p.a. and cost.  The complaint was resisted by the OP insurance company and it was stated on its behalf that while submitting the proposal form on the basis of which the LIC policy in question, came to be issued, the deceased had declared in clause 19 as under:-

2.      The aforesaid information was also duly verified by the life insured who declared that the information furnished by him in response to various questions including the aforesaid question was true and complete in every respect and that he has not withheld any information in this regard.  However, since the life insured expired within a short span of 8 months after taking the policy in question, an investigation was carried out by the OP insurance company when it came to its notice that the information furnished by the life insured was absolutely incorrect because neither he was enjoying sound health nor he had furnished full information in respect of his previous ailments.  It further came to notice that even though the deceased was a permanent resident of Chandigarh, he had chosen to take the policy in question at Delhi at the address of his brother in Delhi, where he used to come for interaction with Advocates of the Supreme Court and other clients.  Beside this abnormal act raising suspicion, it also came to notice during investigation that the deceased was, in fact, suffering from a chronic disease of diabetes for the last about 16 years till the time of his death.  Medical certificates issued by the Doctors who had treated him earlier showed that the deceased had been treated for mild B.P. and diabetes during the period of July to September 1990 and for diabetic nephropathy in the month of October to November 1990.  The certificate issued by the Madras Institute of Nephrology where he was admitted on 07.12.1990 for treatment till the time of his death indicated that according to the information furnished by deceased himself, he had been suffering from diabetes for the last 16 years and he was diagnosed for chronic renal failure and diabetic nephropathy at the Institute.  In view of this previous history regarding his health status which came to the notice of OP Insurance Company during investigation carried out by it, it was clear that the deceased had intentionally and deliberately concealed the very material fact of his suffering from diabetes in the proposal form, which lead to his early death.  This concealment on the part of the deceased rendered the contract of insurance as null and void and hence the OP insurance company repudiated the claim.  It was pleaded that in the given situation, there was no right in favour of his claimant wife to claim any amount under the aforesaid LIC policy.  After appraisal of the issues and the evidence adduced, the District Forum dismissed the complaint of the complainant who carried the same in appeal to the State Commission challenging this order of the District Forum.  The State Commission having reversed the finding of the District Forum, the OP insurance company, petitioner herein, has challenged this impugned order of the State Commission through the present revision petition.

3.      We have heard learned counsel for the petitioner and have also perused the record of this case placed before us.  None has appeared on behalf of the respondent. 

4.      It has been submitted on behalf of the petitioner that the District Forum dismissed the complaint of the respondent by a well-reasoned order.  The State Commission has, however, while passing the impugned order failed to see that the Doctor who recorded the history and the nature of disease of the deceased at the time of admission in the hospital could not have thought of all these diseases with which the deceased suffered unless he himself told the same to the Doctor while taking admission in the hospital.  Admittedly, the life assured did not disclose these ailments when he took the policy and hence the contract of insurance is vitiated by concealment of material information in a fraudulent manner.  Learned counsel for the petitioner pointed out that in another matter pertaining to the same person where he had taken a medi-claim policy at Chandigarh, the claim of the respondent / complainant was rejected by the State Commission which order was also upheld by the National Commission and the revision petition filed by the respondent was dismissed.  He further submitted that the appeal filed by the respondent before the Apex Court has also since been dismissed by the Apex Court.  He argued that the facts of both the cases being the same in respect of the same life insured, the impugned order of the State Commission in favour of the respondent is liable to be set aside.

5.      We have considered the submissions made before us carefully.  Hon’ble Supreme Court while dismissing the appeal of the wife of the deceased assured vide judgement given in Satwant Kaur Sandhu Vs. New India Assurance Company Limited [(2009) 8 SCC 316] has held as under:-

“A mediclaim policy is a non-life insurance policy meant to assure the policy-holder in respect of certain expenses pertaining to injury, accidents or hospitalizations. Nonetheless, it is a contract of insurance falling in the category of contract uberrimae fidei, meaning a contract of utmost good faith on the part of the assured. Thus, when an information on a specific aspect is asked for in the proposal form, an assured is under a solemn obligation to make a true and full disclosure of the information on the subject which is within his knowledge. It is not for the proposer to determine whether the information sought for is material for the purpose of the policy or not. Of course, obligation to disclose extends only to facts which are known to the applicant and not to what he ought to have known. The obligation to disclose necessarily depends upon the knowledge one possesses. His opinion of the materiality of that knowledge is of no moment” (Para 18)

The term ‘material fact’ is not defined in the Insurance Act, 1938 and, therefore, it has been understood and explained by the courts in general terms to mean as any fact which would influence the judgement of a prudent insurer in fixing the premium or determining whether he would like to accept the risk.  Any fact which goes to the roof of the contract of insurance and has a bearing on the risk involved would be “material”.  The Insurance Regulatory and Development Authority(Protection of Policy holders’ Interest) Regulations, 2002 defines the word “material” to mean and include all “important”, essential and “relevant” information in the context of guiding the insurer to decide whether to undertake the risk or not. (Para 22 and 24)

Thus, in a contract of insurance, any fact which would influence the mind of a prudent insurer in deciding whether to accept or not to accept the risk is a “material fact”.  If the proposer has knowledge of such fact, he is obliged to disclose it particularly while answering questions in the proposal form.  Any inaccurate answer will entitle the insurer to repudiate his liability because there is clear presumption that any information sought for in the proposal form is material for the purpose of entering into a contract of insurance.”(Para 25)

6.      We find that the ratio laid down by the Apex Court in the other case of the claimant wife of the deceased assured is fully applicable to the present case and hence it is clear that the impugned order passed by the State Commission cannot be sustained in the eye of law.  The same is accordingly set aside and the revision petition filed by the OP insurance company stands allowed but with no order as to costs.