MADAN LAL vs Life Insurance Corporation of India

-THIS appeal has been filed by the complainant-appellant against order dated 5. 11. 2001 passed by the District Forum, Bharatpur in complaint No. 227/99 by which the complaint of the appellant was dismissed.

IT arises in the following circumstances: that the complainant-appellant had filed a complaint before the District Forum on 15. 7. 1999 inter alia stating that her wife Kusum, now deceased, had taken one insurance policy bearing No. 191067606 for a sum of Rs. 50,000 on 30. 9. 1996 from the respondents and there is no dispute in respect of that policy between the parties. It was further stated in the complaint that the deceased had taken another policy for a sum of Rs. 50,000 bearing policy No. 191067708 from the respondents on 28. 11. 1996 and it was further stated that the deceased had died on 19. 12. 1997 suddenly as she felt pain in heart. It was further stated in the complaint that so far as the payment in respect of the earlier policy bearing No. 191067606 was concerned, after the death of the deceased payment had been made by the respondents but in respect of another policy bearing No. 191067708, the payment had not been made by the respondents LIC and the claim of the complainant appellant was repudiated by the respondents through letter dated 28. 5. 1999 in the following manner- "we observe that your wife has taken another policy numbered 191067606 for Rs. 50,000 under Plan 89 wherein date of the proposal is 30. 9. 1996. The risk under this policy has commenced from 6. 11. 1996. Under the policy under reference i. e. 191067708, the date of proposal was 28. 11. 1996 and the risk has commenced since 28. 11. 1996 for Rs. 50,000 under Plan 89. The occupation of your wife has been shown as "housewife". Further there is no mention of the earlier policy numbered 191067606. Had this been mentioned, then we would not have granted the second policy i. e. Pol. No. 191067708. Hence, for failure to disclose the earlier policy, we regret to inform that claim under Pol. No. 191067708 is not payable and the premiums paid is forfeited. In case you are not satisfied with the above decision and feel that we have not considered any particular facts and circumstances in support of your claim, you may send your representation within a month for reconsideration of your claim to our Zonal office at the following address-The Zonal Manager, Life Insurance Corpn. of India "jeevan Bharti" 124-Connaught Circus, P. B. No. 630, New Delhi-110 001. "

Thereafter the present complaint was filed. A reply was filed by the respondents before the District Forum on 15. 9. 1999 and they have taken the same pleas which were taken by them in the repudiation letter dated 28. 5. 1999 and further it was averred by the respondents LIC that as per Table 89 pertaining to category III, self-employment woman could take an insurance policy maximum to a sum assured of Rs. 50,000 and since in the proposal form in respect of the policy in question in Col. 9 the deceased had not mentioned that she had taken earlier policy No. 191067606, therefore, it was a case of suppression of material facts on the part of the deceased regarding taking second policy. Hence complaint be dismissed. After hearing the parties, the District Forum, Bharatpur through impugned order dated 5. 11. 2001 had dismissed the complaint of the complainant appellant accepting the case as put up by the respondents LIC. Aggrieved from the said order of the District Forum, this appeal has been filed by the complainant-appellant. In this appeal the main contention of the learned Counsel for the appellant is that the claim of the complainant-appellant had been rejected by the respondents through letter dated 28. 5. 1999 without giving opportunity of hearing and further in respect of the policy in question bearing No. 191067708 under dispute, the proposal form was filled in up by the agent of the respondents and no information about the rules and regulations of the policy were made known to the deceased or to the complainant appellant at the time when the declaration form for second policy was filled in up by the deceased, therefore, the deceased as well as the complainant appellant being the husband was not aware of the rules and regulations and thus there was no mis-representation on their part. Hence repudiation of the claim by the respondents could not be justified and the District Forum has committed serious error and illegality in dismissing the claim of the complainant appellant. Hence, the impugned order cannot be sustained and this appeal deserves to be allowed.

On the other hand the learned Counsel for the respondents has vehemently supported the impugned order of the District Forum.

WE have heard the learned Counsel appearing for the parties and gone through the entire materials available on record. There is no dispute on the point that the first policy bearing No. 191067606 for a sum of Rs. 50,000 was taken by the deceased on 30. 6. 1996 and there is also no dispute on the point that the second policy was also taken by the deceased for Rs. 50,000 on 28. 11. 1996 bearing No. 191067708.

THERE is no dispute on the point that in Col. 9 in respect of the second policy it was not mentioned that the deceased had taken earlier policy on 30. 9. 1996. There is no dispute on the point that the deceased had died on 19. 12. 1997 from heart attack. There is no dispute on the point that the claim of the second policy was repudiated by the respondents through letter dated 28. 5. 1999 on the ground that in Col. 9 the fact of taking earlier policy was not mentioned by the deceased.

THUS, in the facts and circumstances just narrated above, the question for consideration is whether repudiation of claim of the complainant by the respondents was justified or not or whether findings of the District Forum regarding dismissal of the complaint could be sustained or not and further the question whether non-mentioning in Col. 9 of taking earlier policy could be treated in the present case as suppression of material facts on the part of the deceased or not. On suppression of material facts

IT may be stated here that it is the fundamental principle of insurance law that utmost good faith must be observed by the contracting parties and good faith forbids either party from non-disclosure of the facts which the parties known. The insured has a duty to disclose and similarly it is the duty of the Insurance Company and its agents to disclose all material facts in their knowledge since obligation of good faith applies to both equally and in this respect, the decision of the Hon''ble Supreme Court in M/s. Modern Insulators Ltd. v. Oriental Insurance Co. Ltd. , I (2000) CPJ 1 (SC)=ii (2000) SLT 323=air 2000 SC 1014, may be referred to. The onus probandi, in cases of fraudulent suppression of material facts rests heavily on party alleging fraud namely the insurer. In this respect, the decision of the Hon''ble Supreme Court in Life Insurance Corporation of India v. Smt. G. M. Channabasamma I (1991) ACC 411 (SC), may be referred to where it was held that the burden of proving that the insured had made false representation and suppressed material facts is undoubtedly on the LIC of India. Furthermore, mere concealment of some facts will not amount to concealment of material facts and if there is fraudulent suppression of material facts in the proposal, the policy could be vitiated otherwise not.

Suppression of fact must be a conscious operation of the giver of the answer which he knowingly did not disclose.

THE Hon''ble National Commission in National Insurance Co. Ltd. v. Bipul Kundu, II (2005) CPJ 12 (NC)=2005 CTJ 377 (CP) (NCDRC) , has held that for repudiating a claim of an insured, it is for the insurer to show that a statement on a fact, which was material for the policy, had been suppressed by the insured and that statement was fraudulently made by him/her with the knowledge of the falsity of that statement. It may further be stated here that even if the death takes place within two years, mis-representation, if any, that should be material in the sense of having some effect upon life expectation whether direct or indirect and if it is found material, that defence could be taken by the Insurance Company, not otherwise.

THE word "misrepresentation" means suggestio falsi, in matter of substance essentially material to the subject, whether by acts or by words, by manoeuvres, or by positive assertions or material concealment (suppressio veri) whereby a person is misled and damnified. The word "fraud" means a conduct either by letter or words, which induces the other person, or authority to take a definite determinative stand as a response to the conduct of former either by word or letter. In this respect, the decision of the Hon''ble Supreme Court in Ram Preeti Yadav v. U. P. Board of High School and Intermediate Education and Ors. , V (2003) SLT 394=jt 2003 (1) Suppl. SC 25 , may be referred to. It is well settled that misrepresentation itself amounts to fraud in some cases.

THE word "misconduct" means an act or conduct in the nature of a breach of trust or an act resulting in loss to other party.

THE word "suppression of fact" envisages a deliberate or conscious omission to state of fact with the intention of deriving wrongful gain. In this respect, the decision of the Hon''ble Supreme Court in Collector of Customs, Calcutta v. Tin Plate Co. of India Ltd. , (1997) 10 SCC 538, may be referred to. Insurance Company is State within Article 12 of Constitution of India The Hon''ble Supreme Court in Biman Krishna Bose v. United India Insurance Co. Ltd. and Ors. , reported in III (2001) CPJ 10 (SC)=v (2001) SLT 558, had observed in the following manner: (i) That the Insurance Companies are "state" within the meaning of Article 12 of the Constitution of India and they are expected to act fairly and reasonably. (ii) That the Insurance Companies are required to satisfy the requirement of reasonableness and fairness while dealing with the customers. They must not take any irrelevant and extraneous consideration while arriving to a decision. Arbitrariness should not appear in their actions or decisions.

In this respect we may further add that agents of LIC are bound to disclose full information relevant and advantageous to the insured. The purpose of creating the Corporation is to serve the interest of consumers.

FURTHER in insurance practice generally insurer''s agent approaches proposers for insurance and gets the proposal form filled up and signed by them with a declaration that the answers are true and shall be the basis of the contract. Apart from that where the declartion form is filled in by the insured in presence of the agent and generally it is filled in by the agent himself in presence of the insured and if some untrue answers are made in the proposal and insured signs it without the knowledge of the implications, in such a case insured could not be put at fault and the policy would be enforceable against the insurer.

KEEPING in mind the above legal position, if the facts of the present case are examined in broad prospective it clearly appears that the respondents LIC had failed to prove the fact of non-mentioning of taking earlier policy in Col. No. 9 of the present policy was with any ulterior motive or with any fraudulent intention or any misrepresentation on the part of the deceased or on the part of the complainant appellant. . . The present case is a case where the deceased had died because of heart attack and it was not a case of suppression of material fact on the part of the deceased regarding her health. Thus in such a case, it could not be said that the deceased was aware that she would die of heart attack in near future and, therefore, from that point of view also it could not be said that the deceased had knowingly and fraudulently had not mentioned in Col. No. 9 the fact of taking earlier policy. The death by heart which had taken place suddenly could not be visualized by any one in expectation or in advance. Whether a fact is material or not has to be decided in the light of and in the context of cause of death. If the fact has bearing on the cause of death it would become material be said to be material, otherwise it could not said to be Mere incorrect or wrong answer to questions which ultimately do not have any bearing or connection with the death of the insured would not absolve the Corporation from its liability under the policy. Therefore, even if the fact of taking earlier policy was not mentioned by the deceased in subsequent policy, judging it from the point of view of cause of death, it was not material and the Corporation cannot escape from its liability on the ground of suppression of material facts. When onus in cases of fraudulent suppression of material facts rests heavily on the party alleging fraud, viz. the insurer, therefore, that burden has to be discharged by the LIC and in the present case the respondents LIC had failed to discharge that burden and, therefore, the stand taken by the respondents LIC in repudiating the claim of the complainant-appellant under the policy could not be accepted.

THUS, non-mentioning of the fact of taking earlier policy in the declaration form by the deceased would not amount to suppression or concealment of material fact or misstatement in real sense and, therefore, the respondents LIC were not justified in repudiating the claim of the complainant-appellant on the ground of suppression of material facts and thus the District Forum was not right in dismissing the complaint of the complainant-appellant.

SO far as point No. (c) of Category III pertaining to insurance by women where maximum limit for self-employed woman for taking policy was limited upto Rs. 50,000 is concerned, in our considered opinion the benefit of that clause could also not be given to the respondents LIC for the simple reason that unless and until the condition pertaining to the policy in respect of woman were made known to the deceased or her husband, the respondents could not take the benefit of that also as stated above it was the bounden duty of the agent of the LIC to have disclosed such information prior to filling in the declaration form. From that point of view also, for that the insured should not suffer. Life Insurance Corporation is a social welfare institution "the Hon''ble Supreme Court in the case of Life Insurance Corporation of India v. Anuradha, II (2004) SLT 1065=ii (2004) ACC 44 (SC)=iii (2004) CLT 5 (SC)= (2004) 10 SCC 131, has observed that the Life Insurance Corporation is a social welfare institution, more so when life insurance has been nationalised and the service is not available in the private sector. Thus it could be said that the institution of LIC has been established as a welfare measure and similarly the C. P. Act, 1986 is also a benevolent welfare statute for the protection of consumers. Taking into that consideration also the repudiation of the claim of the complainant-appellant by the respondents could not be justified.

Thus it is held that the present case was not a case of suppression of material facts on the part of the deceased or complainant appellant and, therefore, the respondents were not justified in repudiating the claim of the complainant-appellant on ground of suppression of material facts regarding taking earlier policy and the District Forum was wrong in dismissing the complaint of the complainant appellant.

FOR the reasons stated above, it is held that the present case was not a case of deliberate suppression of material facts on the part of the deceased and the claim of the complainant-appellant was wrongly repudiated by the respondents LIC on wrong assumption and in an arbitrary manner. Hence repudiation of the claim of the complainant-appellant was not justified and it had amounted to deficiency in service on the part of the respondents LIC. Thus the findings of the District Forum dismissing the complaint of the complainant-appellant are suffering from basic infirmity and illegality and are not based on correct appreciation of entire materials and evidence available on record and thus interference is called for with the findings recorded by the District Forum and appeal deserves to be allowed. Accordingly, the appeal filed by the complainant-appellant is allowed and the impugned order passed by the District Forum, Bharatpur dated 5. 11. 2001 is quashed and set aside and the complaint filed by the complainant is allowed in the manner that the respondents LIC would pay a sum of Rs. 50,000 an amount of insurance in respect of policy No. 191067708 to the complainant-appellant along with interest at the rate of 9% p. a. from the date of repudiation of the claim i. e. 28. 5. 1999. Appeal allowed.