LIFE INSURANCE CORPORATION OF INDIA vs CONSUMER EDUCATION AND RESEARCH SOCIETY

THE Life Insurance Corporation of India is the Appellant in this appeal. The first respondent is the Consumer Education & Research Society-a well known consumer organisation having its main office in Ahmedabad-and the second respondent is the complainant in the case on whose behalf the Consumer Education & Research Society had filed a complaint against the Life Insurance Corporation of India before the State Commission, Gujarat at Ahmedabad.

LATE Smt. Kashmiraben K. Shah, the wife of the second respondent herein, had insured her life with the Life Insurance Corporation of India for a sum of Rupees One Lakh under a policy dated July 17,1987. Annexure-A is a copy of the said insurance policy. It is seen therefrom that it was a policy with Double Accident Benefit. The proposal form for taking out the said policy for the sum of Rupees one lakh with Double Accident Benefit had been submitted by the deceased on April 18,1987. Smt. Kashmiraben K. Shah died on June 14, 1989 as a result of accidental burns sustained by her. Thereafter the second respondent herein forwarded a claim to the Life Insurance Corporation of India for payment to him of the amount due under the policy on the life of his deceased wife. However, the appellant herein (Life Insurance Corporation of India) took the stand that nothing more than a mere refund of the premium amounts paid by the deceased was admissible in view of the provision contained in Clause 4B of the insurance policy. Despite further representations made to the Insurer the second respondent directly as well as through the first respondent herein requesting for a reconsideration of the matter, the L.I.C adhered to the aforesaid stand taken by it and repudiated the claim beyond the liability to refund only to the premium amount. Hence the complaint petition was preferred by the respondent herein before the State Commission at Ahmedabad.

BEFORE the State Commission the claim of the complainatns was resisted by the Life Insurance Corporation of India by contending inter alia that the deceased had suppressed material facts while submitting the proposal form for insurance inasmuch as she had failed to disclose that she had been assessed to Income-tax and Wealth-tax and by reason of such suppression the insurer was entitled to treat the policy as null and void. It was also pleaded by the Life Insurance Corporation that Clause 4B had been incorporated in the policy and under its terms the benefit of payment under the policy would be available to the heirs of the insured only in the event of a death having taken place as a result of an accident in a public place.

CLAUSE 4B which was relied on by the Life Insurance Corporation of India runs as follows: "CLAUSE 4B Notwithstanding anything within mentioned to the contrary, it is hereby declared and agreed that in the event of death of the life assured occurring as a result of intentional self-injury, suicide or attempted suicide, insanity, accident other than an accident in a public place or murder at any time on or after the date on which the risk under the policy has commenced but before the expiry of three years from the date of this policy, the Corporation''s liability shall be limited to the sum equal to the total amount of premiums (exclusive of extra premiums, if any), paid under this policy without interest." From the written statement filed by the Life Insurance Corporation of India before the State Commission, it is clear that Clause 4B will get attracted only when the proposer is a female below the age of 35 years and who does not have any earned income of her own. It is further seen stated therein, that if a female proposer below the age of 35 years is earning income of her own, that is, out of her personal skill and educational qualification and out of her individual efforts, Clause 4B will to be applicable.

In the instant case, it has clearly been established by the materials produced on record that the deceased Kashmiraben K. Shah had her own income personal in respect of which she was assessed to income-tax as well as wealth-tax since the year 1975-76 and the income for the two previous years before the date of the proposal for insurance as given was Rs. 31,736/- for the year 1985-86 and Rs. 29,696/- for the year 1986-87. The certificate of M/s. P.H. Parekh and Company, Chartered Accountants, Ahmedabad which is accompanied by copies of income-tax returns filed by the deceased furnish ample and acceptable proof of these facts. The State Commission, was therefore, perfectly right in upholding the contention of the complainant that since his wife was a married woman having an income of her own she was eligible to take insurance upto a sum not exceeding V4th of the amount for which her husband stood insured at the relevant time and Clause 4B cannot be applied to such a case. Respondent No. 2 " husband of the insured was having a total insurance of Rs. 2 lakhs at the relevant time and as such his wife could validly take out a policy of insurance for an amount of upto Rs. 1,50,000/- without attracting the imposition of Clause 4B in her case. Actually, the policy that the deceased took was for Rupees one lakh only and since that amount did not exceed 3/4th of her husband''s total insurance amount, it was well within the limit provided in Appendix-IX of the Life Insurance Corporation of India Agents Manual which sets out the conditions for attracting the applicability of Clause 4B.

FROM what is stated above, it becomes very clear that the incorporation of Clause 4B in the policy issued to deceased wife, complainant No. 2 was totally illegal and was opposed to the terms of Appendix IX aforementioned. It is obvious that it was done only under some mistake and it is the said mistake that is attempted to be capitalised upon by the Life Insurance Corporation of India for repudiating its liability to pay to the complainant No. 2, the amount that has become payable under the policy consequent on the death of his wife.

THE deceased wife of complainant No. 2 does not appear to have been an educated woman and it is reasonable to assume that the proposal form must have been filled up for her by the Life Insurance Corporation''s Agent with whose assistance the policy was taken. From the facts that have emerged in the evidence the inference is inevitable that the person responsible for filling up the details in the proposal form which was got signed by the deceased had not exercised due care inasmuch as he had omitted to indicate that the deceased had taxable income of her own and was regularly assessed to income-tax. When a person on whose behalf the proposal form was being filled up was not sufficiently educated so as to be able to understand all the implications of the questions contained in the proposal form and the answers to be given thereto, it is the bounden duty of the Agent of the insurer to explain matters fully to such person so that the proposer may affix his or her signature to the proposal form with full awareness of the consequences of the statements contained therein. There has been a breach of this elementary obligation while getting the proposal form filled up by the deceased and hence the ommission on the part of deceased to supply the information that she had independent income of her own and had been assessed to income-tax cannot be taken advantage of by the insurer as a ground for denying to her legal heir this rightful and just claim for payment of the full amount due under the insurance policy inclusive of the double accident benefit. The Life Insurance Corporation being an instrument of the State is expected to conduct its business of insurance fairly, justly and reasonably and its policy should be guided by considerations of service to the people of this land as distinct from an unprincipled, commercial, profit oriented approach. On its being clearly found that the incorporation of Cluase 4B in the policy issued to the deceased wife of the second respondent was the result of a mistake in the present case. The proper course of conduct expected of a public sector organisation like the Life Insurance Corporation was to ignore the said offending clause in the policy and promptly offer payment of the full amount due under the policy to legal heir (husband) of the deceased without subjecting him to unnecessary harassment and expensive litigations. We are in complete agreement with the observations to this effect made by the State Commission in the impugned order.

WHAT remains is only to deal with the plea which appellant had strenuously urged before the State Commission and has also reiterated in this appeal that a contract of insurance being one of utmost good faith uberrime fidei, the policy of insurance stands vitiated by reason of the fact that material facts had been suppressed by the deceased Kashmiraben K. Shah while submitting the proposal for taking out the insurance. This contention ignores the fact that the principle of uberrime fidei gets attracted only where some material fact has been suppressed by one party to the contract and by reason of such suppression the other party has been induced to enter into the contract which he might not have done had the correct facts been made known to him. It is of the essence that by the process of suppression of some material facts the person indulging in such suppression must have gained an advantage which he was not otherwise entitled to, namely to induce the other party to enter into the contract. The broad principle underlying the doctrine is that no one will be allowed to take advantage of his own wrong especially while entering into a contract while utmost good faith on both sides is called for. In the present case, quite apart from the aforesaid finding recorded by us that Kashmiraben K. Shah cannot be held to be responsible for suppressing the so called material facts, the non-disclosure of the fact that she had separate income of her own and had been assessed to income-tax did not have the effect of conferring on her any advantage but, on the other hand, it operated to her prejudice by inviting the incorporation in the policy of Clause 4B, which really had no application at all to her case. If the correct facts had been incorporated in the proposal form by the agent, Clause 4B could not have been incorporated in the policy. We are therefore, in complete agreement with the finding recorded by the State Commission that the contention taken by the Life Insurance Corporation it has been absolved of its liability under the policy by reason of alleged suppression by the insurer on material facts is totally devoid of any merit.

IN the result, we reject all the contentions advanced on the side of the appellant and confirm the order passed by the State Commission. This appeal is accordingly dismissed with costs of Rs. 10,000/- payable by the appellant to respondent Nos. 1 and 2 to be shared by them equally.