LIC OF INDIA vs SHEELA PANDEY

THE following order of the Commission was delivered by Smt. Saroj Rajwade, Member : This appeal is directed against order dated 30.10.1998 passed by District Consumer Disputes Redressal Forum, Durg (for short District Forum) in Complaint Case No. 83/93, whereby the appellant was directed to pay the insurance amount of Rs. 1,00,000/- together with cost of proceedings Rs. 1,000/-.and Advocates fee Rs. 500/-. While passing this order, the District Forum in their impugned order held that complainant, who is wife of diseased late Shri B. Pandey, had suppressed the fact of his suffering from diabetes much prior to obtaining the insurance policy.

THE facts of the case are that the deceased husband of respondent Shri B. Pandey was employed with the Bhilai Steel Plant. Shri B. Pandey obtained a policy from L.I.C. Bhilai -II branch for Rs. 1,00,000/-. Insurance Policy No. was S-381042502 and the date of commencement of policy was 28.7.1989. It was a endorsement assurance with profits policy. After taking this policy the policy holder the husband of respondent died on 29.4.1990 at 12.15 noon in the factory. It was reported that he vomited blood and fell on the ground. On being taken to the hospital of the factory, the doctor declared him dead. Post-mortem was conducted and it was found that blood was oozing from the mouth and nostrils of the deceased, cause of death could not be ascertained in the post-mortem. THE claimant respondent filed a claim for the insured amount on the strength of being nominee in the insurance policy. Investigation was made by the appellant (Insurance Company) and it was found that the deceased had allegedly suppressed very material facts about his suffering from diabetes much before he obtained the policy. Appellant produced the evidence about the deceased suffering from diabetes and taking treatment. Investigations also revealed that while filling the proposal form the insured had replied to various questions as to the state of his health. Two question Nos. 19 and 20 regarding his suffering from diabetes and consequently passing sugar in urine and regarding taking any treatment for this ailment during previous 5 years, for more than a week, the replies given were "No". THEse replies, it was alleged by appellant were false replies within the knowledge of the insured. On this ground the claim was repudiated as the death had occurred within 2 years of taking the insurance, vide letter dated 12/16.2.1993 from the appellant to the respondent. Respondent, who was original complainant in the District Forum, Durg filed a complaint on 30.8.1993 and prayed for directions to the opposite party/appellant to pay her the insurance amount of Rs. 1,00,000/-. In the reply filed by the opposite party/appellant in this case, the allegations in the complaint were vehemently denied. It was stated on their behalf that insured was not enjoying good health and was taking treatment for diabetes for a long time (1987-1990) before obtaining the policy. It was further contended that he was a known "diabetic" in his department as per findings of the departmental enquiry held on 7.8.1990. It was further contended that insured late Shri B. Pandey had signed the declaration on 15.7.1989 on his proposal form, which has been reproduced in para 6 of the reply. It was further stated that insured gave replies to question Nos. 19 and 20 in the negative, although he was having personal knowledge that the replies were false. Opposite party/appellant therefore contended that the contract with the LIC became null and void because of concealing material facts about his health and treatment. This, it was alleged by the opposite party was a vital information for the LIC of India to arrive at a decision to accept the risk or not. Opposite party contended that the decision to repudiate the claim was arrived at after due consideration and application of mind and was a bona fide decision. Opposite party prayed for rejection of the complaint.

The District Forum after hearing the parties and going through the record held that on the basis of evidence produced it is established that insured was suffering from diabetes and was taking treatment for diabetes from Bhilai Steel Plant Hospital from 1987 to 1990. Records also reveal that this fact was suppressed. However, the District Forum held that as per record death of the insured was not mentioned as due to diabetes and therefore-relying on decisions of the National Commission and State Commission cited in para 12 of the order, the repudiation of claim was wrong and amounted to deficiency in service. District Forum therefore, passed the impugned order mentioned in para 1 above.

IN the appeal memo filed before us the appellant has challenged the order of District Forum on the following main grounds, amongst several others listed in para 5 of the appeal memo under heads A to H. (i) It was not necessary for the appellant to prove nexus between death and diabetes. (ii) Diabetes cannot be detected by physical examination at the time of insurance. No doctor can do so. Therefore, specific questions are put to the insured and it was his bounded duty to disclose his ailments like diabetes for which he was regularly taking treatment since 1987. (iii) District Forum failed to appreciate that insurance is done on bonafide belief of the facts stated by the insured. IN such a case if proof of breach of faith is furnished, repudiation cannot be challenged. (iv) District Forum erred in holding that blood, urine and stool tests should be done together with use of modern methods in medicine before insurance policy is given. This was not a practical proposition because lot of time will be required. (v) District Forum erred in misinterpreting the rulings. We have heard Counsel for both parties at length and have carefully perused the weighty record of the case. It must be observed at the outset that appellant''s case is based on Section 45 of the Insurance Act, 1938. It is admitted that the date of commencement of the policy was 28.7.1989 and that claim was repudiated on 12/16.2.1993 that is after 3 years. Section 45 of Insurance Act is reproduced below for proper understanding of its implications in the present case. "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."

THUS, it is not very false statement or suppression that can ipso facto enable the insurer to avoid the policy when it is repudiated after the expiry of two years from the date of the insurance contract being effected. After the expiry of two years, the three necessary conditions, as explained by the Hon''ble Supreme Court must be established. The Hon''ble Supreme Court in Mittoolal Nayak v. Life Insurance Corporation of India, AIR 1962 SC 814=1962 Suppl. 2 SCR 5710, has held that when the claim is repudiated by the insurer after the expiry of the two years'' period, three conditions are necessary for the applicability of Section 45 of the Insurance Act, namely : (i) That statement must be on material matter, or must suppress facts which it was material to disclose; (ii) Suppression must be fraudulently made by the policy holder, and (iii) The policy holder must have known at the time of making the statement that it was false, or that it suppresed facts which it was material to disclose.

Section 45 of the Insurance Act places the burden of proof on the insurer to establish the above circumstances and unless the insurer is able to do so there is no question of the policy being avoided simply on the ground of mis-statement of facts. The onus probandi, in all such cases, rests heavily on the party alleging fraud. The insurer cannot avoid the consequences of the insurance contract by simply showing inaccuracy or falsity of the statement made in the proposal for insurance or in any report of the medical officer, or in any other document leading to the issue of Policy (ILR (1995) Punj. 353; AIR 1962 Assam 65,AIR 1959 Pat. 540; 1964-2 MLJ 2131). The expression "fraudulently" connotes deliberate intentional falsehood and some strong material is required before concluding that the policy holder had played a fraud on the LIC. Mere failure to mention some minor ailment cannot be construed as fraudulent suppression of material facts as to repudiate the contract of insurance (1991) ACJ 813.

THE word "material" imports things that are likely to influence prudent insurer qua the question of acceptance of offer and the rate of premium (1972 ACJ 444). A matter is regarded to be material when it has some relation with the longevity of the assured (ILR 1975 Cutt. 442).

IN the letter dated 12/16.2.1993 by which the claim was repudiated the appellant was mentioned that insured has suppressed material facts in reply to the questions No. 19 and 20, regarding his health and therefore the claim is repudiated. It was further mentioned that insured had personal knowledge about his replies being false and still he deliberately gave false replies. Therefore in accordance with the declaration made by the insured in the insurance policy proposal documents the claim is repudiated. As observed by us in para 7 Section 45 of the INsurance Act places the burden of the proof on the insurer to establish the above circumstances and unless insurer is able to do so there is no question of policy being avoided simply on the grounds of mis-statement. We are, therefore, unable to agree with the appellant that it was not necessary for him to establish the nexus between ailment of diabetes and the death of the insured. IN fact, legally this duty was cast on him, squarely and the insurer had to perform it before repudiating the insurance claim. Record reveals that death of the insured occurred on 29.4.1990 while the claim was repudiated on 12/16.2.1993, in nearly three years of investigation, appellant failed to produce oral evidence of any expert in the field of medicine to substantiate their version that diabetes could lead to death of an individual in this fashion. National Commission and Supreme Court have held that in medical cases before the Consumer Forum, the testimony of an expert in the relevant field is the only evidence that can be relied upon. It was admitted that the insured was suffering from diabetes and also that he suppressed the information in his replies. However their suppression of facts can be called suppression of material facts only if the nexus between diabetes and death is established. Also from the record it is seen that even in postmortem report the cause of death could not be ascertained. If post mortem could not reveal the cause the burden to prove their case was very heavy indeed on the appellant. As per evidence before us appellants have failed to discharge this burden. Appellants have paid great stress in their appeal that suppression of fact by respondent about his suffering from diabetes, affected their decision to accept the policy significantly, we are afraid we can only term it as an after-thought, because appellant has failed to demonstrate on affidavit that they have as a matter of policy refused a policy in the past in such cases. We, therefore, agree with the view taken by District Forum in the impugned order that repudiation of the claim was wrong and unjustified as appellants have failed to prove that insured suppressed material facts which he was duty bound to disclose. Similar view has been taken by this Commission in the case of Savitri C. Pillai v. LIC of India, 1998 CTJ 188 (CP) (SCDRC).

National Commission in the case of United India Insurance Co. Ltd. v. Pushpalaya Printers, I (1998) CPJ 5 (NC), have observed as follows : "It is a settled law that in a contract of insurance, if there is ambiguity or doubt, the contract is to be construed ''Contra proferantum'' that is against Insurance Company (AIR 1966 SC 1644). The rule of construction against the insurer and favourable, to the insured stems from the rule of ''contra proferantum'' which is based on the "Maxim verba chartarum fortus accipiuntur contra proferantum". It is also settled law that the Courts will lean against forfeiture of policy.

IN view of above decision, there are enough grounds to reject the appeal and affirm the order of District Forum. In the context of discussion in the preceding paragraphs the appeal fails and is dismissed. Order dated 30.10.1998 of District Forum, Durg is hereby affirmed. No order as to costs. Appeal dismissed.