VASANTIBEN HARESH KUMAR THAKUR vs Life Insurance Corporation of India

DISSATISFIED by the order of the State Commission Gujarat in Appeal No. 306/2003, the complainants have filed this revision petition before us.

THE dispute in this case falls in a narrow matrix. Whether the Life Insurance Corporation is justified in repudiating the claim of the complainants for the sum assured as the assured was medically examined in May 1989 and was declared unfit and his proposal for insurance was rejected 3-5 years prior to issuance of fresh policies in the year 1992-94. THE simple answer to this question is yes. The facts in brief are as follows : Mr. Harish Thakur had submitted a proposal for obtaining life insurance policy for a sum of Rs. 30,000 in May 1989 at Bhavnagar. After medical examination, he was found unfit and accordingly his proposal for life insurance was rejected. After three years, he submitted a fresh proposal form for a sum of Rs. 50,000 during the year 1992 at Sihore (not at Bhavnagar) and in the proposal he did not disclose the fact of rejection of earlier proposal on medical grounds by the LIC. He repeated this exercise in 1993 for further insurance cover of Rs. 50,000 and in 1994 for Rs. 10,000. The policies were issued by the LIC and Mr. Harish Thakur died on 16.12.1997. LIC rejected the claim but offered ex-gratia payment of Rs. 55,000 on 14.12.1998 which was not accepted by the complainants.

The District Forum after hearing the parties held that as the rejection was after two years of the issuance of policy, the repudiation was wrong as per Section 45 of the Insurance Act. Aggrieved by this order, the LIC filed an appeal before the State Commission which held that though the complaint did merit dismissal, as the LIC had offered an ex gratia amount of Rs. 55,000 in 1998, LIC was directed to pay reasonable interest as determined by them to the complainants. This was not acceptable to the complainants so they have come up in revision before us. Findings :

IT is not in dispute that the panel doctor of the LIC has submitted a report on 2.5.1989 when the assured (the deceased) Mr. Harish Thakur had submitted a proposal for obtaining the first policy. The medical report indicated as follows : The main office of LIC at Mumbai demanded further medical report of ECG Cholesterol, Blood, Sugar, Eco Cardiogram with TMT and these were sent by LIC Bhavnagar Office to Mumbai office. After obtaining these reports, LIC rejected the proposal on medical grounds.

DISSATISFIED with this rejection, the assured made a proposal for a policy of Rs. 50,000 on 24.7.1992 at Sihore. The assured was a resident of Bhavnagar, having business at Bhavnagar. Hence he had no business to go to Sihore, a town away from Bhavnagar and submit proposal forms of LIC-not one but three proposal forms in successive years in 1992, 1993 and 1994. It is too much to ex parte that Sihore office to be aware of the rejection of the policy proposals by their branch office at Bhavnagar way back in 1989 and accordingly after fresh medical test he was granted three policies for Rs. 50,000, Rs. 50,000 and Rs. 10,000. In the proposal forms in 1992-1994, he answered the relevant column requiring disclosure of fact of earlier proposal and approval/rejection thereof by saying ''no''. This is clearly a non disclosure of the material fact to the LIC which had issued three policies during the year 1992-94 on the basis of inadequate false assertion made by the assured. The celebrated case of Mithoolal Nayak v. Life Insurance Corporation of India, reported in AIR 1962 SC 817, has succinclty analysed the ramification of Section 45 of the Insurance Act in the following words: "It would be noticed that the operating part of Section 45 in effect (so far as it is relevant for our purpose) that no policy of life insurance effected after the coming into force of the 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; the second part of the section is in the nature of a provision which creates an exception. It says in effect that if 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, then the insurer can call in question the policy effected as a result of such inaccurate or false statement."

In view of the above analysis, it is clear that the assured had tried to manipulate and obtain three policies from LIC by not disclosing most crucial information of rejection of his earlier proposal on account of being medically unfit and, therefore, LIC was justified in repudiating the claim of the complainants. The complainants have been paid a sum of Rs. 55,000 as ex gratia by the LIC and the State Commission has ordered for payment of interest on this sum from 1998 to the complainants. Order of State Commission does not suffer from any illegality or jurisdictional error warranting interference in revisional jurisdiction under Section 21(b) of Consumer Protection Act. Accordingly revision petition is dismissed. No order as to costs. Revision Petition dismissed.