JAY PRAKASH AGARWAL vs Life Insurance Corporation of India

THIS is a complaint filed by complainant Shri Jay Prakash Agarwal against opposite parties Life Insurance Corporation of India (for short ''L.I.C.I.''), Senior Divisional Manager, LICI, Jorhat, and Branch Manager, LICI, Sibsagar praying for direction to the opposite parties to settle his insurance claim of Rs. 4,35,000/- only and pay bonus, interest, etc.

THE facts of the case lying in narrow compass are as follows : Complainant''s mother Dropodi Devi Agarwalla made a life insurance policy bearing No. 440371882 for a sum of Rs. 4,35,000/- only and the first instalment of premium amounting to Rs. 33,570/- was duly paid to L.I.C.I. Unfortunately the insured mother of the complainant expired on 25.4.1994. THE proposal was made on 31.3.1993 and the policy was obtained on 31.7.1993. THE complainant was the nominee of his mother in the said policy. THE complainant lodged the claim with O.P. No. 3 on 27.6.1994 by submitting all necessary documents including the original policy which were duly received by the latter. It is alleged by the complainant that the claim was not settled by the opposite parties for a long time inspite of his various letters dated 23.11.1994, 25.1.1995 and 17.10.1995 requesting for settlement of the claim. Ultimately by the letter dated 7.2.1996 from a O.P. No. 2, the L.I.C.I. repudiated the claim on the ground of non-disclosure of another existing policy of Rs. 5.00 lakhs of the assured and variation in her signature in the policy with that in another policy. It is said that the insured amount of the present policy excluded the permissible limit and hence the opposite parties are not liable to pay any amount under the policy. The complainant has filed an affidavit in support of the statements made in the complaint and in reply to the written statement of opposite parties.

In reply to the show cause notice the opposite parties have filed one written version initially and again on additional version subsequently. The contention of the opposite parties is that the complaint is not maintainable under the Consumer Protection Act, 1986 as there was no deficiency of service on their part and the claim under the policy was repudiated by L.I.C.I. after duly considering the .material facts by issuing letter dated 7.2.1996. Besides the question of discrepancies in the signatures of present proposal form with those in the other policies has been raised as another ground for repudiation. According to the opposite parties the facts being complicated the complaint is not maintainable in this Commission. Delay in repudiating the claim has been explained as it requires sufficient time to follow the procedural formalities in a pre-matured death claim like the present one.

THE main ground for repudiation of the claim by the opposite parties is suppression of material facts by the life assured in the proposal form of the present insurance policy regarding the policy taken earlier for a sum assured Rs. 5,00,000/- on 28.1.1989 from Sibsagar Branch being policy No. 440170080. In the heading details about the previous insurance in the proposal form of the present only insurance policy No. 76575395 taken on April 4, 1986 with Sibsagar Branch Office for a sum assured of Rs. 65,000 /- has been mentioned. According to the opposite parties had the life assured disclosed the particulars of the previous policy taken for Rs. 5,00,000/- in the proposal form of the present policy No. 440371822 the proposal would not have been accepted by LICI. THE proposal has been accepted on the basis of the statement of the life assured with "utmost good faith". It is alleged by the opposite parties that the suppression of material facts by the life assured in the present Case was intended to cheat LICI which is a public undertaking. We have heard learned Counsel for both the parties and perused the complaint and subsequent affidavit filed by the complainant as also the written versions filed by the opposite parties in response to the show cause notice. Besides, we have gone through all the relevant papers on record including the Manual for Agents published by LICI and furnished to us by the learned Counsel.

THE main ground for repudiation of the claim by LICI is suppression of material facts by the life assured. It appears from the record that the insured person did not declare the earlier policy of Rs. 5,00,000/- only in the proposal form of the present policy whereas she declared another existing policy of Rs. 65,000/-. THE contention of opposite parties is that originally it was proposed to have the present insurance for Rs. 5,00,000/-, but when the earlier policy of Rs. 65,000/- was declared it was reduced to Rs. 4,35,000/- only. Had it been known that the insured person had already another insurance of Rs. 5,00,000/- the present proposal of third insurance of Rs. 5,00,000/- would not have been accepted in view of the provision in Appendix IX of the Manual for Agents of LICI. We have gone through the relevant provision in the Manual. It provides under the heading "Maximum Sum Assured" at page 323 of the Manual, as follows: "2. Married Women - Maximum Rs. 5,00,000/- but not exceeding in force insurance on husband''s life." This provision is a guideline and it is usually followed by the Agents. Learned Counsel for LICI has not been able to satisfy us that this provision in the Manual has got statutory force. He has not been able to draw our attention to any legal provision on the matter. This restriction provided in the Manual is not widely known to the public. If such a restriction is imposed by LICI or any other statutory body it should be made known to the public by valid notification. It is not known whether this has been done. It is also not known whether the concerned Agent explained about it to the insured person. It is quite likely that the insured person was not aware of the consequences of having insurance exceeding the limit. THEre is strong suspicion that Agent himself did not guide the insured person properly in the instant case. In this connection the following observation of the Apex Court in United India Insurance Co. Ltd. v. M.K.J. Corporation, reported in III (1996) CPJ 8 (SC), is relevant- "It is a fundamental principle of insurance law that utmost good faith must be observed by the contracting parties. Good faith forbid? either party concealing (non- disclosure) what he privately knows, to draw the other into a bargain, from his ignorance of the fact and his believing the contrary, just as the insured has a duty to disclose, similarly it is the duty of the insurers and their agents to disclose all material facts within their knowledge, since obligation of good faith applies to them equally with the assured."

In our opinion the possibility of the concerned agent in the present case not disclosing to the insured the aforesaid restriction in the Manual for Agents and consequences of not declaring earlier policies can not be ruled out. The other ground for repudiation of the claim is discrepancy in the signatures of the life assured as found out by LICI, during the investigation of this pre-matured death claim the opposite parties have not been able to prove it to our satisfaction. There may be some variation in the signatures of a particular person with the passage of time. We are, therefore, not inclined to accept this as a valid ground in absence of concrete evidence. If the opposite parties insist on their allegation of forgery expert evidence will be required to establish it. Such a procedure will be complicated one and for a decision on it the parties will have to approach competent Civil Court. This Commission does not feel it necessary to go into this complicated procedure of taking evidence including opinion of hand-writing expert. Considering the facts and circumstances of the case stated above we are unable to uphold the claim of the complainant as it is. It appears from the complaint itself and the copy of the proposal that the insured paid only the initial instalment of premium of Rs. 33,550.00. There is no record of paying any other instalment subsequently to the LICI. In the facts and circumstances of the case, we direct the LICI to refund to the complainant-nominee the entire amount of premium paid to them by the insured alongwith interest at the rate of 15% per annum. The interest will be payable from the date of receipt of the premium by LICI till the date of refund of the entire amount of premium. The amount of premium with interest shall be paid within one month from the date of receipt of this order.

THE complaint is disposed of with the above direction. In the circumstances of the case, we do not pass any order as to costs. Complaint disposed of.