NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
(from the order dated 19.6.2000 in Appeal No.1667/98
of the State
Commission, Jaipur, Rajasthan)
Smt. Santosh Kanwar
W/o Late Shri
Kailash Chandra Dashora
R/o Mahatama
Gandhi Colony,
Opp. Party.
Police Station, Jhalrapatan,
Distt. Jhalawar, Rajasthan …
Petitioner
Versus
Life Insurance Corporation of
Through the Sr. Divisional Manager
Divisional Office,
Jaipur,
Rajasthan … Respondent
BEFORE :
HON’BLE
MR.JUSTICE M.B. SHAH, PRESIDENT
HON’BLE
MRS. RAJYALAKSHMI RAO, MEMBER
HON’BLE MR. S.K.
NAIK, MEMBER
For the Petitioner : Ms. Shobha, Advocate
For the Respondents : Mr.
Ashok Kashyap, Advocate
09.09.2008
Being aggrieved and dissatisfied by the judgement and order dated 19.6.2000 passed by the State Consumer Disputes Redressal Commission, Rajasthan in Appeal No.1667/98, the insured (complainant) has preferred this Revision Petition.
It is the contention of the complainant that her husband, Shri Kailash Chandra Dashora, was working as a teacher with the State Nehru Secondary School, Jhalawar and had taken an insurance policy under the Salary Saving Scheme on 15.12.1993 for a sum of Rs.50,000/-. The insurance premium was being paid by the employer of the insured.
It
is pointed out that her husband fell sick on 16.6.1995 and was treated for
fever from 16.6.1995 to 10.7.1995 by Dr. Sushma Pandey at Jhalawar. He was thereafter referred to
Claim was submitted before the Life Insurance Corporation of India (hereinafter referred to as the LIC for short) but the same was repudiated by letter dated 13.11.1997 wherein reason for repudiation of the claim was as under :-
“In this
connection we have to inform you that in the proposal/personal statement for
assurance signed by the deceased assured on 11.12.1993, he had answered the
following questions as under noted:-
Questions
a.
Whether you have ever consulted
to any doctor in last five years in regard to some ailment which required
treatment for more than a week? No
b.
Whether you have been on
leave on ground of sickness in last five years? No
c.
Whether you have been
suffered from a decease related to stomach, heart,
lever, brain and nerves or whether you are suffering now?
No
d.
How is
you health normally?
We may, however,
state that all these answers were false as we hold in disputable proof to show,
before he proposed for above policy he had suffered from Myalgia,
URI APD, Br. Dysp. Lsc, Urticaria, Neuritis, Amaenia, Pyrexia, Amoebic Colitis for which he had
consulted a medical man and had taken treatment from him/in a Hospital and was
also on medical leave for 3 days and 12 days from 20.8.90 to 22.8.90 and
7.12.90 to 18.12.90, and had also drawn medical reimbursement for the above
diseases. He did not however, disclose
these facts in his Proposal/Personal Statement.
Instead he gave false answers therein as stated above”.
Hence, the complainant approached the District Forum, Jhalawar by filing Complaint No.35/1998. The District Forum, by its judgement and order dated 12.8.1998, allowed the complaint and directed the LIC to pay the sum assured with interest @ 18% per annum and Rs.5,000/- towards compensation and Rs.500/- as costs.
Against that judgement, LIC preferred an appeal before the State Commission, Rajasthan. The State Commission, by its judgement and order 19.6.2000, allowed the appeal on the ground that the assured knowingly suppressed the factum of the state of his health while making the proposal for obtaining the policy in question, jointly with his wife. No doubt, the State Commission recorded that, considering the facts, even the LIC had offered to pay Rs.25,000/- as ex gracia to the complainant.
That order is challenged by filing this Revision Petition.
Learned counsel
for the petitioner submitted that the impugned order passed by the State
Commission is, on the face of it, erroneous and without considering the
implication of Section 45 of the Insurance Act, 1938 as well as Regulations
framed by the Insurance Regulatory and Development Authority (hereinafter
referred to as the IRDA for short) in 2002.
She submits that those Regulations may not be applicable but, at the
same time, the principles laid down thereunder are
general principles applicable to all insurance policies since years. She further submitted that on this exact
point there is a decision of the Bombay High Court in the case of Smt. Dipashri
Vs. Life Insurance Corporation of
As against this, learned counsel for the LIC has referred to the leave taken by the insured for medical treatment and submitted that the order passed by the State Commission does not call for any interference. He further submitted that the insured knew about various ailments suffered by him but has not revealed it in the proposal form and, therefore, the claim was rightly repudiated.
FINDINGS :
For deciding the
matter, we would first refer to the law laid down by the
However, on law on the issue, after quoting Section 45 of the Insurance Act, 1938, the Court held as under :
“Section 45
postulates repudiation of such policy within a period of two years. By reason of the aforementioned provision, a period
of limitation of two years had, thus, been specified and on the expiry thereof
the policy was not capable of being called in question, inter alia, on the ground that certain facts have been suppressed
which were material to disclose or that it was fraudulently been made by
the policy-holder or that the policy-holder knew at the time of making it that
the statement was false. Statute,
therefore, itself provides for the limitation for
valid repudiation of an insurance policy.
It takes into account the social security aspect of the matter.
There are three
conditions for application of second part of Section 45 of the Insurance Act
which 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.
The insured’s
brother was an agent of Life Insurance Corporation of
The insured
furthermore was aware of the consequence of making a misstatement of fact. If a person makes a wrong statement with
knowledge of consequence thereof, he would ordinarily be estopped
from pleading that even if such a fact had been disclosed,
it would not have made any material change.”
From the aforesaid enunciation of the law, it is clear that –
(a) within a period of two years from the date of effecting of the policy, the insurance policy can be repudiated on the ground of suppression of material fact and the statute itself provides for limitation of valid repudiation of the insurance policy;
(b) suppression must be on a material matter or must suppress such a fact which was material to be disclosed;
(c) suppression must be fraudulently made by the policy-holder; and
(d) he must be knowing that the suppressed fact was material and it was required to be disclosed for taking the insurance policy. If this is not there, then on the ground of material suppression of fact, the policy cannot be repudiated. The Court pertinently observed that “misstatement by itself, however, was not material for repudiation of the policy unless the same is material in nature”.
Keeping the aforesaid law in mind, the controversy is required to be decided. In the present case, the insured deceased was not suffering from any serious disease at the time of filling up the proposal form for obtaining the insurance policy. There was no material suppression on his part.
Again, on the same point, we would refer to another decision of the Apex Court in the case of Life Insurance Corporation and others Vs. Smt. Asha Goel and another (supra), wherein after interpreting Section 45, the Court held as under:-
“Coming to the
question of scope of repudiation of claim of the insured or nominee by the
Corporation, the provisions of Section 45 of the Insurance Act is of relevance
in the matter. The section provides, inter alia, that
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 document
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. The proviso which deals
with proof of age of the insured is not relevant for the purpose of the present
proceeding. On a fair reading of the
section it is clear that it is restrictive in nature. It lays down three conditions for
applicability of the second part of the section namely :
(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. Mere inaccuracy or falsity in respect of some recitals
or items in the proposal is not sufficient. The burden of proof is on the
insurer to establish these circumstances and unless the insurer is able to do
so there is no question of the policy being avoided on ground of misstatement
of facts. The contracts of insurance including the contract of life
assurance are contracts uberrima fides and every fact
of material (sic material fact) must be disclosed, otherwise, there is good
ground for rescission of the contract. The duty to disclose material facts
continues fight up to the conclusion of the contract and also implies any
material alteration in the character of the risk which may take place between
the proposal and its acceptance. If there are any misstatements or suppression
of material facts, the policy can be called into question. For determination of
the question whether there has been suppression of any material facts it may be
necessary to also examine whether the suppression relates to a fact which is
in the exclusive knowledge of the person intending to take the policy and it
could not be ascertained by reasonable enquiry by a prudent person.
To the same effect, there is the judgement of
the
"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.
Where the policy-holder, who had been treated, a few months before he
submitted a proposal for the insurance of his life with the insurance company
by a physician of repute for certain serious ailments as anaemia,
shortness of breath and asthma, not only failed to disclose in his answers to
the questions put to him by the insurance company that he suffered from those
ailments but he made a false statement to the effect that he had not been
treated by any doctor for any such serious ailment :
Held (i) that, judged by the standard laid
down in Section 17, Contract Act, the policy-holder was clearly guilty of a
fraudulent suppression of material facts when he made his statements, which he
must have known were deliberately false and hence, the policy issued to him
relying on those statements was vitiated.
(ii) The principle
underlying the Explanation to Section 19 of the Contract Act is that a false
representation, whether fraudulent or innocent, is irrelevant if it has not
induced the party to whom it is made to act upon it by entering into a contract.
That principle did not apply in the instant case. The terms of the policy made
it clear that the averments made as to the state of health of the insured in
the proposal form and the personal statement were the basis of the contract
between the parties and the circumstance that the policy-holder had taken pains
to falsify or conceal that he had been treated for a serious ailment by a
physician only a few months before the policy was taken showed that the
falsification or concealment had an important bearing in obtaining the other
party's consent. A man who has so acted cannot afterwards turn round and say,
'it could have made no difference if you had known the truth'. In the
circumstances no advantage could be taken of the Explanation to Section 19 of
the Contract Act."
To avoid such repeated contentions and to protect the consumer, this Commission, in the case of Asha Garg V/s. United Insurance Company Ltd. (Original Petition No.164/2001 decided on 24.11.2005) also held as under:-
“Learned Counsel
for the Complainants submitted that the law in
Repudiation of
the claim by the insurance company on the alleged ground of suppression of
material facts, even in the Courts in
Suggested Reforms in Insurance Contracts in
the
“Practice
in And Reform Of Non-Disclosure And Misrepresentation
The point that law
is capable of operating harshly regarding the disclosure of material facts in
particular has already been made earlier in this chapter. Indeed it has been
often been said that a proposer for insurance may act
with perfect good faith and yet not satisfy the duty of disclosure which the
law requires because he did not realise that
particular facts were in law material, or did not realise
that he had to do any more than truthfully complete the answers to questions on
a proposal form. It could be argued
that there is no real need for a duty of disclosure in modern conditions other
than one requiring the insured to answer honestly questions expressly put to
him.
Until fairly
recently it seemed as though the law would be reformed in this
respect. This was because
recommendations for reform have been made by both the Law Reform Committee on
1957 and by the Law Commission in 1980. The important and carefully considered
recommendations of the Law Commission, which in practice would probably have
meant the withering away of a pure duty of disclosure, were accepted by the
government, but were strongly opposed by the insurance industry
particularly in respect of their application to business insurance. The unfortunate result of this has been
that actual legal reform seems unlikely at present. Instead, the government has
accepted “reform” by way of self-regulation by the insurers themselves. For
this reason, it is felt that detailed description of the Law Commission’s
proposals would be inappropriate in a ‘book of this size’.
Statements
of insurance practice
As has been noted
earlier, this self-regulation take the form of
declaratory Statements of Insurance Practice. In so far as they do, in
practice, provide a measure of protection for the individual insured, they are
obviously to be welcomed. In addition, we must note the influence of the
Insurance Ombudsman in this area, as discussed below. Unfortunately, one cannot be certain
that the statements are universally complied with because those insurers who
are not members of the Association of British Insurers of Lloyd’s are not party
to them, although they are “expected” to comply. A brief review of their terms is necessary.
The revised
Statements issued in 1986 reflect the Law Commission’s recommendations. As far
as non-disclosure and misrepresentation are concerned, their effect is that
insurers undertake not to rely on an innocent breach by the insured. By
paragraph 2(b) of the Statement of General Insurance Practice,
“An insurer will
not repudiate liability to indemnify a policy-holder:
(i)
on grounds of
non-disclosure of a material fact which a policy-holder could not reasonably be
expected to have disclosed;
(ii)
on
grounds of misrepresentation unless it is a deliberate or negligent
misrepresentation of material fact”…….
Under the heading of consumer protection, the learned Author has observed thus:
“Consumer Protection:
Judges have on
occasion railed against insurers for not producing their policies in a form
intelligible to the ordinary consumer, and consumer representatives
and bodies, including the Director General of Fair Trading and the Insurance
Ombudsman, have frequently made the same
point. The Law Commission clearly intended that conditions and
exceptions in insurance contracts should be brought within the ambit of
what became the Unfair Contract Terms Act, 1977, but pressure from the
insurance industry secured their exclusion from that Act in return for
their agreeing to promulgate the Statements of Insurance Practice.
However, many insurers did respond to criticism in particular by rewording
their policies in “plain English”.
This is clearly to be welcomed, although this does not necessarily mean
that the average consumer will still read and
understand their insurance policies nor, as we have seen, does it necessarily
mean that problems of interpretation will not arise”.
…..
More recently
there has been an even more important development, more important because it is
not dependent on a self-regulatory structure. This is the introduction of the
Unfair Terms in Consumer Contracts Regulations to which reference has already
been made. It needed E.C. legislation to produce this measure of consumer
protection. Some consideration has
already been given to these Regulations. In the context of this chapter, there
are three points which need
to be made. The first is the general requirement to use plain,
intelligible language. This reinforces the trend toward “plain English”
already noted. The second is that the Director General of Fair Trading is
under a statutory duty to monitor the use of unfair term and can seek
undertakings or court injunctions to prevent their use. The third point is the
most important one for present purposes and concerns the question of the
application of the core part of the Regulations to the question of the cover
provided by an insurance contract.
The core part
strikes down any “unfair term” which contrary to the requirement of good faith
causes a significant imbalance in the parties’ rights and obligations under the
contact to the detriment of the consumer.
However, it does not apply to any terms which “defines
the main subject matter of the contract”. It is thought that the provisions
concerning the risks covered and excepted under an
insurance contract must be within this exception, as these do define the main
subject matter of the contract. This, it is suggested, is also a sensible
interpretation. In the result, it is thought that the impact of the Regulations
on the matters under consideration here is limited to the requirement of plain
and intelligible language, supported by a statutory reinforcement of the
contract proferentem rule.”
Insurance Regulatory and
Development Authority (Protection of Policy-Holders’ Interests) Regulations
2002
Fortunately,
in
Hence, the question is – whether in this case there is suppression of material fact on the part of the insured at the time of taking policy?
For finding out whether the alleged suppression in the proposal form by the insured is on material fact, we would refer to the analysis made by the District Forum for the alleged medical treatment taken by the insured. The relevant portion thereof is as under:-
Month
of Treatment Name of disease
December 1990
(7.12.90 to 15.12.90) U.R.I.
[U.R.I.- Upper
Respiratory Infection - An imprecise
term for any kind of infectious disease involving nasal passage, pharynx and
bronchi.]
January 1992 (11.1.92 to illegible) Myalgia
[Myalgia -
Tenderness or pain in muscles or muscular rheumatism.]
November 1992 (6.11.92 to 11.11.92) U.R.I.
February 1993 (2.2.93 to illegible) U.R.I.
June 1993, November
1993 (4.11.93 to 11.11.93) L.S.C.
December 1993 (29.11.93 to 2.12.93) Urticaria
[Urticaria - A
vascular reaction of the skin characterized by the eruption of pale evanescent
wheals, which are associated with severe itching.]
Subsequent to the policy
cover:
March
1994 (15.12.94 to 12.3.94) Neuritis
[Neurtis - Inflammatioin of a nerve or nerves, usually associated with
a degenerative process.]
September
1994 (5.9.94 to 8.9.94) Br. Stomatitis
August 1993 (13.8.93
to 20.8.93) B.R.
Dysp.
[Br. Dysp. -
Imperfect painful digestion. Not a
disease in itself but symptomatic of other diseases of disorders. Characterized by vague
abdominal discomfort, a sense of fullness after eating, eructation, heartburn,
nausea and vomiting and loss of appetite.]
June 1994 (27.6.94 to 30.6.94) Illegible
November 1994 (25.11.94 to 1.12.94) Anemia
[Anemia :
(Aneamia) -
Reduction in red blood cells - Anemia is not a disease. It is symptom of disease.]
January 1995 (11.1.95 to 20.1.95) A.P.D.
March 1995 (15.3.95 to 22.3.95) Pyrexia
[Pyrexia - A condition in which the
temperature is about normal. It is like fever.]
March 1995 (23.3.95 to 28.3.95) Illegible
May 1995 (16.5.95 to 30.5.95) -do-
July 1995 (24.7.95 to 9.8.95) Pain
at upper
September, 1995 Amebic liver
August, 1995 Left
lobe liver
Tata
Memorial Hospital,
[Amebic : (Not amoebic) - It
pertains to amebae or it is caused by amebae.]
[Ameba - Agenus of protozoa
found in soil and water. It is also
found as parasitic in man.]
[Colitis - Inflammation of colon.
Note:
The above description of diseases are based on
Taber’s Cyclopeida Medical Dictionary edition of 1993
Vol.I &II.
Thereafter, the District Forum observed that the treatment which was taken by the complainant was for trivial ailments. We entirely agree with the findings recorded by the District Forum. Fever for some days, pain in abdomen, treatment for URI affecting the nasal passage or bronchitis at the relevant time, tenderness or pain muscles (in 1992), again URI in November, 1992 and February, 1993 or eruption some pimples on the skin in November, 1993 cannot be said to be serious ailments which are required to be noted at the time of taking the insurance cover. Admittedly, the insurance cover was taken under the salary saving scheme on 15.12.1993. Subsequent treatment would have no bearing in deciding this matter.
Dealing with
similar facts, the Bombay High Court observed in the case of Dipashri (supra) that the insured has
taken leave on various occasions by stating that he was suffering from pain on
account of Piles, Hyhypertension, Influenza
Dysentery, Influenza, Fever, Diarrhoea, Sprain in leg
and Fever. The Court held that
non-disclosure of such ailment would hardly be a ground for repudiating the
claim. After discussing the
“The action of the
Corporation in concluding from that certificate that the deceased was suffering from
serious ailments or illness \and thereby repudiating the contract is wholly
illegal. The Corporation has raised
false bogie of inaccurate statements only to defeat the just claim of the poor
widow and the action of the Corporation deserves to be deplored.
In the first
instance, there was no suppression whatsoever by the deceased. It was not necessary for the deceased to
disclose trivial ailments like fever, flue or dysentery.
In the judgement, the non-disclosure of the fact that the deceased
was suffering from fever or down with flue on some occasions is not material
matter and, therefore, the failure to disclose the same cannot be construed as
suppression of the relevant fact. As
laid down by the Supreme Court, it is not suppression of the fact which is
sufficient to attract second para of S.45 of the
Insurance Act but what is required is that such suppression should be
fraudulently made by the policy-holder.
The expression “fraudulently” connotes deliberate and intentional
falsehood or suppression and some strong material is required before concluding
that the policy-holder had played a fraud on the Corporation.”
In our view, the aforesaid observation would equally apply to the facts of the present case.
Undisputedly,
the insured deceased, who was a teacher, died on 29.8.1995 due to ‘left lobe of
liver tumor’, which was not noticed even by the doctor at Jhalawar
where the deceased took first treatment.
This fact was only clearly noticed by the
Apart from this fact, learned counsel Ms. Shobha contended that the ailment referred to by the Insurance Company has no connection with the death of the insured. Death was because of liver tumor and not because of the pain or fever for which the insured has taken leave from the school. In our view, in the facts of the present case, this submission is required to be accepted.
As against this, learned counsel for the Insurance Company relied upon the decision of this Commission wherein it has been held that the cause of death has no relevance with regard to the answer given by the insured at the time of submitting the proposal form. He referred the cases, i.e., R.P. No.3362/2001 [LIC V/s. Smt. Ayesha] decided on 25.10.2005, R.P. No. 1935/1999 [LIC V/s. Krishan Chander Sharma] decided on 23.1.2006 and R.P. No.2183/2004 [Subodh Chandra Shivlal Shah V/s. Bhartiya Jeewan Bima Nigam] decided on 29.3.2006.
In our view, the aforesaid judgements are solely based upon facts of each case, particularly where the ailments suffered by the insured were serious.
There is nothing on record to show that the insured was required to take treatment for more than a week. No doubt, with regard to the question whether the insured has been on leave on the ground of sickness in last five years, the answer given by him was incorrect. With regard to the question whether insured had suffered from a disease relating to stomach, heart, liver, lungs, brain and nerves and whether he was suffering at the relevant time, the answer was ‘no’. Hence, it cannot be said that the insured was suffering from such diseases. As such, he attended the school continuously as a teacher.
The learned counsel for the petitioner rightly referred to the decision of this Commission in the case of LIC of India Vs. Smt. Shobhadevi Sunder Lal Patni (in First Appeals Nos.421 of 1993 and 391 of 1994) decided on 26.4.1996, wherein five Members of this Commission have held that :
“The histopathlogy report indicates fat in the liver and mild
pulmonary hemorrhage and oedema in the lung, again
not directly related to schizophrenia.
There is no history of these two ailments, in respect of the deceased,
in the record produced by the LIC. We
are, therefore, of the opinion that it was indeed a callousness on the part of
the LIC to have put the widow of the deceased to a considerable inconvenience
and mental agony by not settling the claim in time: in fact, repudiating it on
the ground which is totally untenable.”
The aforesaid observation is equally applicable to the facts of the present case and the repudiation of the claim has caused serious prejudice to the widow of a teacher for years together.
In this view of the matter, impugned order passed by the State Commission is set aside. The complaint is allowed. The order passed by the District Forum is maintained. However, the order passed by the District Forum directing the insurance company to pay interest at the rate of 18% is modified and the insurance company is directed to pay the insured amount of Rs.50,000/- with interest at the rate of 10% per annum from 1.3.1996 (i.e. after a period of 6 months from the death of the insured) with cost of litigation quantified at Rs.5,000/-.
Revision Petition stands disposed of accordingly.
We highly
appreciate the hard work done by both, Ms.Shobha,
Advocate for the petitioner and Mr.Ashok Kashyap, Advocate for the insurance company.
Sd/xxx
…………………………………J.
(M.B. SHAH)
PRESIDENT
Sd/xxx
……………………………………
(RAJYALAKSHMI RAO)
MEMBER
Sd/xxx
……………………………………
(S.K. NAIK)
/sra/