Kokilaben Narendrabhai Patel vs Life Insurance Corporation of India

SHORTLY stated, the facts leading to the filing of the present complaint are:

DECEASED husband of the complainant/petitioner had taken a life insurance policy bearing No. 832261943 on 28.3.1993 for a sum of Rs. 1,00,000. Petitioner, being the wife, was nominated to receive the insured amount in case of his premature death. Insured, who was serving in the Bank of Baroda, died on 21.6.1996 due to heart attack. After the death of the insured, petitioner lodged a claim with the Life Insurance Corporation of India-respondent herein-which was repudiated on 9.6.1997 on the ground that to the questions put to him, during the course of filling up of the proposal form, the insured had not given correct answers regarding his health. Aggrieved against the repudiation of the claim, petitioner filed the complaint before the District Consumer Disputes Redressal Forum, Ahmedabad City, Ahmedabad (for short ''the District Forum'') with the averment that husband of the petitioner was quite healthy at the time of his death and was not suffering from any disease.

RESPONDENT, on being served, filed its written statement, inter alia, contending that during the course of investigation made by the respondent, it was found that the insured had applied for sick leave from 28.12.1992 to 13.1.1993, i.e., for 17 days because he was suffering from Enteric Fever. That the insured was under treatment of Dr. Dipesh V. Shah, who issued a certificate of treatment dated 13.3.1997, wherein it was stated that the deceased was admitted in the hospital for one day. This fact was not disclosed by the insured at the time of filling in of the proposal form. According to the respondent, the claim was rightly repudiated as the insured was guilty of suppression of material facts.

DISTRICT Forum came to the conclusion that Enteric Fever, from which the insured had suffered, was not a serious disease and, therefore, it could not be said to be a material fact, which ought to have been disclosed at the time of taking the policy. That under Section 45 of the Insurance Act, 1938 (hereinafter referred to as ''the Act'' for short), the onus to prove that the insured had suppressed the material fact with an intention to defraud, was on the Insurance Company which it failed to discharge by leading cogent evidence. Accordingly, the respondent was directed to pay Rs. 1,00,000 to the petitioner from the date of repudiation, i.e., 9.6.1997 till actual payment along with actual rate of interest @ 9% p.a. Rs. 1,000 were awarded as compensation and Rs. 1,000 were awarded as costs.

AGGRIEVED against the order passed by the District Forum, respondent filed an appeal before the Gujarat State Consumer Disputes Redressal Commission, Ahmedabad (for short, ''the State Commission''). The State Commission allowed the appeal and set aside the order of the District Forum. It was held that the insured was guilty of suppression of material facts. The contract of insurance is based on utmost good faith, which the insured had breached by withholding material facts about his health.

AGGRIEVED by the order passed by the State Commission, complainant/petitioner has filed this Revision Petition.

COUNSEL for the parties have been heard at length.

THE facts on which there is no dispute are that the insured had taken the policy on 27.11.1993 and he died on 21.6.1996, i.e., after two and a half years of the taking of the policy. Respondent repudiated the claim on the ground that the insured had suppressed the material facts fraudulently at the time of filling of the proposal form. The questions and the corresponding answers given by the deceased in the proposal form are: S. No. Question Answers 11(a) During the last five years did you consult a medical practitioner for any ailment requiring treatment for more than a week? No 11(b) Have you ever been admitted to any hospital or nursing home for general check-up, observation, treatment or operation? No 11(c) Have you remained absent from place of work on grounds of health during last 5 years? No 11(e) Are you suffering from or have you ever suffered from Diabetes, Tuberculosis, High Blood-pressure, Low Blood-pressure, Cancer, Epilepsy, Hernia, Hydrocale, Leprosy or any other disease? No 11(i) What has been your usual state of health? Good

DURING the course of investigation, it was found that the deceased had applied for sick leave from 28.12.1992 to 13.1.1993, i.e., for 17 days because he was suffering from Enteric Fever along with Malaria. As per Collins Dictionary Medicine by Robert M. Youngson, Enteric Fever-typhoid fever is defined to mean: "an infectious disease caused by the organism Salmonella typhi which is acquired in fecally contaminated food or water. The disease varies in severity from a mild upset, lasting for a week, to a major illness...."

"__Typhoid responds well to antibiotic treatment and can usually be controlled in matter of days, with the antibiotics chloramphenicol or ampicillin."

AS per certificate issued by Dr. Dipesh V. Shah, the deceased was suffering from Enteric Fever and was advised rest from 28.12.1992 to 13.1.1993 and he was advised to join his duties from 15.1.1993. The fact of taking the leave or that he had suffered from Enteric Fever was not disclosed by the insured while filling in the proposal form. To that extent, there is a suppression of fact.

THE question to be considered is as to whether the non-disclosure of the fact of suffering from Enteric Fever prior to the taking of the policy and taking of the leave is fatal to maintainability of the claim for the insured amount or that the policy was vitiated by fraudulent suppression of material facts by the insured in the light of the provision of Section 45 of the Act which provides that policy of insurance cannot be called in question by the insurer on the ground of mis-statement of facts after expiry of two years from the date of commencement of the Act. The relevant part of Section 45 of the Act, reads as under: "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 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 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."

A perusal of the same shows that no policy of insurance effected after the coming into force of the Act shall after the expiry of 2 years from the date on which it was effected, be called in question by an insurer only on the ground that the statements made in the proposal for insurance or in any report of medical officer or referee or friend of the insured or in any other document leading to the issue of policy was inaccurate or false. The second part of the section is in the nature of a proviso which creates an exception. On establishing of following 3 conditions, the policy would be vitiated at the instance of the insurer: (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 onus to prove all these conditions is on the insurer. The question before us is whether these 3 conditions have been fulfilled in the present case?

HON''ble the Supreme Court of India in Mithoolal Nayak v. LIC, reported in AIR 1962 SC 814, examined the scope of Section 45 of the Act. On the facts of the case, the Supreme Court found that the insured was guilty of suppression of facts, which it did with fraudulent intention. That the contract of insurance is based on utmost faith. The insured is duty bound to disclose all material facts at the time of taking of the policy and, any failure on its part to do so with the intention to defraud, would vitiate the policy.

SUPREME Court of India in Life Insurance Corporation of India and Others v. Asha Goel and Another, reported in I (2001) SLT 89=(2001) 2 SCC 160, reiterated the law laid down in Mithoolal''s case (supra) and observed as under: "12. 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 must be disclosed, otherwise, there is good ground for rescission of the contract. The duty to disclose material facts continues right 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 mis-statements or suppression of material facts, the policy can be called in 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 inquiry by a prudent person."

(Emphasis supplied)

IN the aforesaid case, the policy-holder had failed to disclose that he had been treated for serious ailments as anaemia, shortness of breath and asthma in the answers to the questions put to him by the Insurance Company.

THEN, in P.C. Chacko and Another v. Chairman, Life Insurance Corporation of India and Others, reported in III (2008) CPJ 78 (SC)=IX (2007) SLT 533=IV (2007) ACC 773 (SC)=IV (2007) CLT 229 (SC)=(2008) 1 SCC 321, Supreme Court of India, again reiterated the principles laid down in Mithoolal''s case (supra), and Asha Goel''s case (supra).

IT is not in doubt that the insured had suffered from Enteric Fever 11 months prior to the taking of the policy and, for getting it treated, he had taken leave for 17 days. He did not disclose these two facts while filling in the proposal form for taking the policy. To the specific question put to the insured in the proposal form that as to whether he had consulted any medical practitioner in the last 5 years requiring treatment for a week; the answer given was in the negative. Similarly, to the question as to whether he was ever admitted to the hospital or nursing home for general check-up, observation, treatment or operation, the answer given was in the negative. Thirdly, on the question as to whether he had remained absent from place of work on grounds of health any time during last 5 years, the answer given was in the negative. There is no satisfactory reply coming forth as to why these facts were not disclosed by the insured in the proposal from.

IN a recent judgment in Satwant Kaur Sandhu v. New India Assurance Company Limited, reported in IV (2009) CPJ 8 (SC)=VI (2009) SLT 338=2009 CTJ 956 (SC) (CP), the Apex Court, considering the facts and circumstances of the case as well as the declaration made by the insured in the policy and after considering the effect of Section 45 of the Act as well, came to the conclusion that Insurance Policy is a contract falling in the category of utmost faith on the part of the assured and if the assured has not made full disclosure correctly or, In other words, if the declaration made is found to be false to the knowledge of the declarant, then, the Insurance Company is entitled to repudiate the claim. Good faith forbids either party for non-disclosure of the fact which the party privately knows to draw the other into a bargain from his ignorance of the facts and his believing the contrary. In paragraphs 16 and 17 of the aforesaid judgment, Supreme Court of India considered as to what the term ''material fact'' means. The term ''material fact'' is not defined under the Act. In paragraph 17 of the said judgment, it was observed as under: "17. The term ''material fact'' is not defined in the Act and, therefore, it has been understood and explained by the Courts in general terms to mean as any fact which would influence the judgment of a prudent insurer in fixing the premium or determining whether he would like to accept the risk. Any fact which goes to the root of the Contract of Insurance and has a bearing on the risk involved would be ''material''."

THEIR Lordships also considered the Regulations issued by the Insurance Regulatory and Development Authority where they have given explanation for ''material''. In paragraph 19 of the aforesaid judgment, it was further observed as under: ".... Needless to emphasise that 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."

AS per Enteric Fever-typhoid fever, the disease varies from an illness for a week to a major illness. Non-disclosure of the fact by the insured that he had suffered from typhoid 11 months prior to the taking of the policy or that he had taken leave for 17 days for getting the treatment of the said disease, was a material fact which he had failed to disclose. The contract of insurance is based on utmost good faith. The insured has to make true full disclosure of facts while filling in the proposal form. The insured made a wrong statement while filling in the proposal form that he had suffered from Enteric Fever and that he was admitted in the hospital for one day and had taken leave. It cannot be accepted that the insured did so innocently or that he might have forgotten to disclose this as he had suffered from Enteric Fever only 11 months prior to the taking of the policy. He with held these facts deliberately which had a great bearing on the contract of insurance. Had he disclosed these facts, the Insurance Company would have been put at caution and put the insured to a rigorous medical examination.

WE have no hesitation in coming to the conclusion that the statement given by the insured in the proposal form as to his state of health was palpably incorrect to his knowledge. There was clear suppression of material facts with regard to his health and the insured was fully justified in repudiating the contract of insurance.

FOR the reasons stated above, we agree with the view taken by the State Commission and find no merit in the Revision Petition and dismiss the same leaving the parties to bear their own costs. Revision dismissed.