V.K. Jain ORDER
V.K. Jain, J. (Presiding Member)
1. Late Sh. Sudhir Kumar Jain husband of the complainant obtained an insurance policy namely Money Plus Plan from the petitioner corporation, insuring his life to the extent of Rs. 4 lacs. In the proposal form submitted by him, the assured was required to answer certain questions with respect to the state of his health. The assured while answering the said questions, stated as under:
It would thus be seen that the assured took a specific stand in the proposal form submitted by him that he had not consulted any medical practitioner requiring treatment for more than a week and he was not suffering from Diabetes, High BP or any other disease. The proposal was submitted on 11.08.2007.
2. A perusal of the discharge summary dated 15.07.2007 issued by Yenepoya Hospital, Managalore would show that the assured was admitted in the aforesaid hospital on 13.07.2007 and his ailment was diagnosed as Hypertension, Diabetes Mellitus and Vertebrobasilar Insufficiency. The aforesaid discharge summary further shows that he had been suffering from Diabetes Mellitus for the last ten years and was taking treatment for the said ailment. It also shows that he had Hypertension for the last three years.
It is thus evident that the assured made a false statement in the proposal form with respect to the state of his health. He concealed the fact that he had been suffering from Hypertension and Diabetes for years before the proposal form was submitted.
3. The declaration appended to the proposal form to the extent it is relevant, reads as under:
Sudhir Kumar Jain K., the person whose life is herein being proposed to be assured, do hereby declare that the forgoing statements and answers have been given by me after fully understanding the questions and the same are true and complete in every particular and that I have not withheld any information and I do hereby agree and declare that these statements and this declaration shall be the basis of the contract of assurance between me and the Life Insurance Corporation of India and that if any untrue averment be contained therein the said contract shall be absolutely null and void and all moneys which shall have been paid in respect thereof shall stand forfeited to the Corporation.
4. Section 45 of the Insurance Act, before it came to be amended w.e.f. 26.12.2014, reads as under:
"45. Policy not to be called in question on ground of mis-statement after two years - No policy of life insurance effected before the commencement of this Act shall after the expiry of two year 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 other report of 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, 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:"
5. It was observed by the Hon'ble Supreme Court in Life Insurance Co. Ltd. Vs. Asha Goel & Anr. MANU/SC/0804/2000 : (2001) 2 SCC 160 that the contracts of insurance including the contract of life assurance are contracts uberrima fides and every material fact must be disclosed, otherwise, it would be a good ground for rescinding of the contract. It was observed that the duty to disclose material facts continues right upto 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 misstatements or suppression of material facts, the policy can be called in question. It was further observed that for determining whether there is a suppression of 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 enquiry by a prudent person.
In P.J. Chacko vs. Chairman, L.I.C. of India, AIR 2008 SC 425 the insured was required to disclose in the application form for obtaining the policy, as to whether he ever had any accident or injury and had remained absent from place of work on the ground of health during last five years. The insured answered in negative to both the questions and also claimed that the state of his health was good. Later, it was found that the insured had undergone adenoma thyroid operation four years prior to submitting the proposal, though cause of his death was polyneuritis, which had no connection with the operation he had undergone. The suit filed by the legal heirs of the deceased for recovery of the amount of insurance was decreed by the Trial Court. On an appeal preferred by LIC, the learned single Judge of the Hon'ble High Court held that since there was nothing to indicate that had the insured disclosed the factum of previous operation, the corporation might not have been inclined to insure him and would have insisted on a higher premium, non-disclosure was not a material fact justifying repudiation of the policy. On an intra court appeal, the Division Bench of the High Court, however, opined that the parties were bound by the warranty clause contained in the agreement and the non-disclosure was to the material fact which were required to be answered correctly. Being aggrieved from the rejection of their claim, the plaintiffs approached the Hon'ble Supreme Court, by way of an appeal and inter alia submitted that insurance being a requirement of social security, the suppression in question could not have led to repudiation of the policy. The learned counsel for the LIC on the other hand submitted that undergoing operation had a direct nexus with the health of the insured and the suppression therefore was on a material fact. It was also contended by him that on account of untrue averments made in the declaration, the contract of the Insurance itself was null and void. It was also pointed out by him that the policy had been repudiated within two years.
Rejecting the appeal, filed by the plaintiffs, the Hon'ble Apex Court, inter alia, noted the following three conditions for application of the second part of Section 45 of the Insurance Act, which postulates repudiation of the policy within a period of two years in case a statement made in the proposal for Insurance was found to be inaccurate or false:-
"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."
The Hon'ble Supreme Court observed that if a person makes a wrong statement, with the knowledge of consequence therefrom, he would ordinarily be estopped from pleading that even if such a fact had been disclosed it would not have made any material change. It was further observed that the proposer must show that his intention was bona fide and a proposal can be repudiated if a fraudulent act is discovered. It was also observed that in such a case, it was not necessary for the insurer to establish that the suppression was fraudulently made by the policy holder or that he must have been aware at the time of making the statement that the same was false or that the fact was suppressed which was material to disclose. The Hon'ble Apex Court quoted its earlier observation that the effect of mis-representation on the contract is precisely the same as that of non-disclosure; it affords the aggrieved party a ground for avoiding a contract.
In Satwant Kaur Sandhu Vs. New India Insurance Co. MANU/SC/1164/2009 : (2009) 8 SCC 316 , the Hon'ble Supreme Court emphasized that when an information on a specific aspect is asked for in the proposal form, an assured is under a solemn obligation to make a true and full disclosure of the information on the subject which is within his knowledge. It is not for the proposer to determine whether the information sought for is material for the purpose of the policy or not.
6. Though the term "material fact" has not been defined in the Insurance Act, it is understood to mean any fact which would influence the judgment of a prudent insurer in fixing the premium or determining whether he would like to accept the risk. Any fact which goes to the root of the Contract of Insurance and has a bearing on the risk involved would be "material".
7. The disease having expired more than two years after the policy came into force, the question which arises for consideration is as to whether the inaccurate or false statement made by the assured was on a material matter or whether he had suppressed the facts which it was necessary for him to disclose. It has also to be established by the insurer that the false or inaccurate statement was fraudulently made and the policy holder, at the time of making the statement, knew it to be false. When this petition came up for hearing on 07.09.2016, the petitioner corporation was directed to file an affidavit disclosing therein as to what its decision on the proposal would have been had the insured disclosed that he was suffering from Hypertension and Diabetes. In compliance of the aforesaid direction, the petitioner corporation has filed an affidavit of its Manager (L & HPF). In his affidavit, the Manager has inter-alia stated as under:
3. I say that had the DLA disclosed the aforesaid illness in the Proposal Form, the petitioner insurance company, in the facts and circumstances of the present case, would have called for the following Special Reports:-
a) For Diabetes Mellitus and Hypertension - ECG, BST, S. Creatinine, Physician Report, RUA, HBA1C and Lipidogram;
b) For Vertebrobasilar Insufficiency - C.N.S. (Central Nervous System) Questionnaire;
c) For Diplopia - Opthalmic Questionnaire
4. I say that the above reports would have been placed before the Medical Referee and based on his opinion, the Underwriting decision, viz. either of (1) postponement. Or (2) Acceptance with Health Extra, or (3) Declined, would have been taken.
Even otherwise, any fact which would have influenced the decision of the insurer whether to grant insurance or not, is considered to be a material fact and suppression of such a fact would entitle the insurer to repudiate the claim.
8. It is evident from the aforesaid affidavit filed by the corporation that had the assured disclosed that he was suffering from Hypertension and Diabetes Mellitus, the corporation would have asked for special medical reports which would have been placed before a medical referee and based upon the report of the medical referee, a decision would have been taken whether to accept the proposal or not. Therefore, it would be difficult to dispute that the false or inaccurate statement by the assured was on a material aspect which influenced the decision of the insurer on whether to accept the proposal or not. Consequently, the insurer was justified in repudiating the claim on account of the above referred false statement made by the assured in the proposal form.
9. For the reasons stated hereinabove, the impugned orders cannot be sustained and the same are accordingly set aside. The complaint is consequently dismissed with no order as to costs. The amount if any deposited by the petitioner corporation shall be refunded to it alongwith interest which may have accrued on that amount.
© Manupatra Information Solutions Pvt. Ltd.