Y. VIJAYA LAKSHMI vs Life Insurance Corporation of India

THESE two appeals are filed by the complainant aggrieved by the orders by the District Forum-II, Hyderabad in C.D. Nos. 32 and 36 of 1999 dated 28.6.2001. Since both these appeals are arisen out of a common order and the complainant is also common in both the appeals, they are disposed of by this common order.

THE factual matrix leading to the filing of these appeals are set out as hereunder: THE complainant is the wife of late Y. Suryakant Reddy who took two insurance policies, one for Rs. 1 lakh under Policy No. 640600134 dated 29.3.1990 which has expired and revived on 31.1.1995 by paying Rs. 24,712/- and another policy bearing No. 641509210 on 15.11.1994 which came into effect from 28.11.1994 for Rs. 50,000/-. THE insured died on 18.3.1996. THE complainant submitted all the documents to the opposite party seeking to settle the amounts under the two policies. THE opposite party by their letter dated 31.3.1997 repudiated the claims under both the policies on the ground that the insured suppressed the information regarding his health condition at the time of affecting the issuance of the policy in November, 1994 and reviving the same in January, 1995. THE complainant states that the insured was not suffering from any disease much less any deadly disease at the time of issuance of the policy or reviving the first policy and the question of suppressing any material particulars regarding the personal health did not arise and the repudiations is illegal and unjust and amounts to deficiency in service. THE complainant, therefore, approached the District Forum seeking a direction to the opposite party to pay to the complainant in C.D. No. 32/1999 a sum of Rs. 50,000/- under the policy No. 641509210 with interest and compensation and also direct the opposite party in C.D. No. 36/1999 to pay to the complainant a sum of Rs. 1 lakh under Policy No. 640600134 with interest and compensation. The opposite party resisted the claim on the ground that the husband of complainant did not reveal that he was suffering from cancer of colon and was admitted as in-patient in Hyderabad Nursing Home on 13.8.1994 and was treated on 22.8.1994 for ''recurrency CA-colon'' which started in November, 1993 and that he was operated on 14.8.1994 for carcinoma colon. Hence the opposite party repudiated the claim under the two policies by their letter dated 31.3.1997. On behalf of the complainant Exs. A-1 to A-15 and on behalf of the opposite party Exs. B-1 to B-15 are marked.

The District Forum while holding that the Insurance Company has discharged its burden in establishing the requirements laid down under Section 45 of the Insurance Act, has dismissed the complaints by showing all sympathy to the complainant whose husband passed away at the age of 36 years.

AGGRIEVED by the said orders, these two appeals are filed by the complainant. In the present case, it has to be examined whether the opposite party Insurance Company was justified in repudiating the policies by their letter dated 31.3.1997? The case of the appellant/complainant in brief is that the policy was taken on 28.3.1990 for Rs. 1 lakh which was revived at the instance of the Insurance Company on 31.1.1995. On the date of taking of the insurance policy on 28.3.1990 the deceased was not suffering from any ailment and there is no evidence placed before the District Forum to that effect. Hence the question of suppressing any material particulars regarding his personal health does not arise.

THE District Forum has upheld the right of the complainant as a nominee to claim the amounts under the two insurance policies obtained by her husband late Suryakant Reddy. In the present case, the policy has been revived at the instance of the Insurance Company who took up a special drive for revival of the lapsed policies and induced the insured to pay the amounts and keep the policies alive. THE insured took advantage of this driver revived the policy and no fraudulent intention can be attributed in reviving the policy. THE opposite party cannot repudiate the policy under Section 45 of the Insurance Act. The opposite party Corporation being a State within the meaning of Article 12 of the Constitution of India has onerous responsibility and it should act with extreme care and caution. In all the matters of repudiation of the policy, the opposite party cannot act in a mechanical and a routine manner. The Apex Court in a judgment in LIC of India v. Smt. Asha Goel, I (2001) SLT 89=AIR 2001 SC 549, has succinctly took the responsibility of the opposite party as follows: "In the course of time the corporation has grown in size and at present it is one of the largest public sector financial undertakings. The public in general and crores of policy-holders in particular look forward to prompt and efficient service from the Corporation. Therefore, the authorities in-charge of management of the affairs of the corporation should bear in mind that its credibility and reputation depend on its prompt and efficient service. Therefore, the approach of the Corporation in the matter of repudiation of a policy admittedly issued by it should be one of extreme care and caution. It should not be dealt with in a mechanical and routine manner. Repudiation of claim by corporation merely on grounds that insured who died of acute Myocardial infarction and cardiac arrest had not disclosed correct information regarding his health at time of effecting insurance with corporation, is not proper. On a fair reading of Section 45 it is clear that it is restrictive in nature. Second part of section lays down that no policy of life insurance effected after the coming into force of this Act shall, after expiry of period prescribed from date on which it was effected 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. 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 of 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 mis-statement 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." (P. 550)

IN the present case the opposite party has revived the policy under a special drive and it is also to be noted that the original policy was taken in 1990. The opposite party has not established that the cause of death is on account of suppressed health information. Except filing the case sheets of Hyderabad Nursing Home nothing has been established regarding the cause of death. We are, therefore, of the opinion that the respondent/opposite party has not acted strictly in accordance with Section 45 of the INsurance Act in repudiating the policies. We, therefore, set aside the orders of the District Forum.

IN the result, the appeals F.A. Nos. 569 of 2001 and 570 of 2001 are allowed and the orders of the District Forum made in CD Nos. 32 of 1999 and 36 of 1999 dated 28.6.2001 are set aside and the respondent/opposite party is directed to pay to the complainants in C.D. Nos. 32 and 36 of 1999 the amounts claimed under the two policies, i.e., Policy No. 64600134 and 641509210 with interest at 9 per cent from the date of repudiation, i.e., 31.3.1997 till realization together with costs of Rs. 1,000/- each. Appeals allowed.