C N Mohan Raj vs NEW INDIA ASSURANCE COMPANY LTD

IN this revision petition there is challenge to order dated 8.2.2012, passed by State Consumer Disputes Redressal Commission, Chennai (for short, ''State Commission '') vide which appeal of the respondent/opposite party was allowed challenging the order of District Consumer Disputes Redressal Forum, Chennai (South) (for short as ''District Forum '') in Complaint Case No.17/2007) allowing the complaint of the petitioner/complainant, vide order dated 13.5.2010.

BRIEF facts are that petitioner took "Hospitalzation and Domicilliary Hospitalization Benefit "Mediclaim Policy alongwith his wife from the respondent for the period from 14.10.2004 to 13.10.2005 and renewed the same from 14.10.2005 to 13.10.2006. Petitioner was admitted in the hospital on 15.1.2006 and Angiogram Treatment was given to him on 6.1.2006 and was advised by the doctors for heart surgery. Petitioner was admitted himself in M/s. Madras Medical Mission Hospital at Moggappair, Chennai and had undergone Bypass Heart Surgery on 12.1.2006 and was discharged on 25.1.2006. Petitioner preferred a claim with the respondent for Rs.2,71,000/- being the medical and hospitalization expenses. The claim was repudiated by the respondent on the ground that the disease was a pre-existing disease. It is stated that respondent after satisfying the health condition of the petitioner and scrutinizing the tests report had issued International Mediclaim Policy to the petitioners for his USA visit from March 2005 to June 2005. The petitioner was hale and healthy at the time of taking the policy. The ECG reports and Blood Sugar Tests results on 15.3.2004, 5.11.2004, 6.12.2004 and 27.12.2004 would reveal his satisfactory health condition. Again, the report was given on 14.9.2005 by the laboratory. Therefore, the disease for which the petitioner had undergone Bypass surgery is not a pre-existing disease and the repudiation of the claim by the respondent amounts to deficiency in service. Respondent in its written version has pleaded that the petitioner had taken mediclaim policy for a sum of Rs.1,50,000/-. He underwent Bye-pass surgery at Madras Medical Mission on the basis of Angiogram done at Harvey Healthcare Hospital on 6.1.2006. The respondent had obtained and scrutinized the medical records pertaining to the treatment including the Discharge Summary and Operation Notes of both Harvey Heart Hospital and Madras Medical Mission. All records would reveal that the petitioner was suffering from various ailments for several years. Petitioner was having longstanding complaints of blood pressure, hypertension besides ischemic heart disease prior to taking of the policy. Hence, the claim was rightly repudiated by the respondent.

District Forum, allowed the complaint and directed the respondent to pay a sum of Rs.1,50,000/- as medical expenses, further a sum of Rs.10,000/-as compensation for mental agony and Rs.5,000/- as costs of the complaint.

AGGRIEVED by the order of District Forum, respondent filed appeal before the State Commission, which vide its impugned order allowed the same. It is contended by learned counsel for the petitioner that State Commission has erred in allowing the appeal of the respondent on the sole basis of the discharge report of the hospital. Petitioner at all stages has acted in good faith and followed all the procedure laid down by the respondent. Further, petitioner has not suppressed any material fact which it was aware of relating to his health condition from the respondent. All the requisite medical tests which petitioner under took for getting the policy, showed that he was fine and healthy. Once, respondent had issued the policy after taking all necessary precaution it should not have repudiated the policy at a later stage merely on the basis of the discharge report of the hospital.

IN support, learned counsel for the petitioner has relied upon a decision of Apex Court, Satwant Kaur Sandhu Vs. New India Assurance Company Ltd.(2009) 8 Supreme Court Cases 316. Short question which arise for consideration as to whether petitioner has suppressed the material facts with regard to pre-existing disease and whether he has taken any treatment also for that pre-existing disease or not. State Commission in its impugned order has observed ; "Ex .B1 is the proposal for mediclaim insurance, signed by the complainant, which mandates certain disclosures by the insured person, and one of the query is "Have you ever suffered from diabetes, hypertension chest pain or coronary insufficiency or myocardial infarction? ". For this the complainant said ''No '', thereby making the insurance company to believe that he is not a diabetic/ hypertensive patient, or had any problem, of chest pain, coronary disease, or myocardial infarction. Though, as indicated in the proposal forum, ECG, blood test was taken, reports are not made available, as if that had not disclosed that the complainant, is non-diabetic, and had no problem of heart disease. We do not find any certificate in the proposal, as urged by the learned counsel for the respondent/complainant, that a competent doctor tested the complainant, certified as if he had no pre-existing disease, on the basis of the blood test, ECG taken, as disclosed in the proposal, we cannot rule out the pre-existing disease, or the suppression of material facts, if otherwise made out. Admittedly, the complainant was originally admitted in Harvey Hospital for treatment, where the disease was diagnosed as "(1) unstable angina (2)Severe Three Vessel Coronary Artery Disease, (3) Old Anteroseptal Myocardial Infarction (4) Systemic Hypertension (5) Diabetes Mellitus ", and he was advised to undergo high risk of Coronary Artery Bye-pass Grafting, at the earliest. Apprehending safety, he got discharged himself from Harvey Hospital, admitted in M/s. Madras Medical Mission Hospital on 9.1.2006, where his problem was diagnosed as "Coronary Artery Disease, Triple Vessel Disease, Significant left main disease, and Severe LV Dysfunction ". Under the past history, it is said "smoker (period 5 years), known case of diabetic mellitus X 20 years on OHA. Known case of systemic HTN X10 years on treatment. Known case of allergic bronchitis (+), history of IHD X 10 years on Isodensil, recently on Ecosprin and clopilet since one year. No major hositalisation/surgeon ". The above report given by Harvey hospital and Madras Medical Mission Hospital are not under challenge, and it cannot be challenged also, since the complainant had taken treatment. . The discharge summary, makes it abundantly clear, without any shade of doubt, that the complainant was a known case of diabetic mellitus for 20 years, and known case of systemic HTN for 10 years on treatment, having history if ischemic heart disease for 10 years, for which he was also taken treatment. Therefore, it cannot be the case of the complainant, that he had no knowledge about his disease, and it should be presumed, based upon the discharge summary, that the complainant was suffering from diabetes mellitus, heart problem, etc, for the past more than 10 years. This being the proved position, he ought to have disclosed the disease, for which he was taken treatment normally, in the Insured Personal Details, which is attached with proposal form. On the other hand, as said above, he had given a false statement, as if he was not suffering from diabetes or chest pain or coronary problem. Thus, the opposite parties have proved undoubtedly, that even on the date of taking the policy, in the year 2004, he had all possible problems, affecting the heart, as well as body, especially diabetic, which he had suppressed, and that should be construed as suppression of material facts. For the disease, which the complainant had suppressed, admittedly he had taken treatment, for which alone, he had incurred expenses, whatever may be the amount. The insurance company, when a claim was lodged, collected the above documents, and justifiably, legally repudiated the claim, which was unsuccessfully challenged before the Ombudsman also, and in those findings, or conclusion, there may not be any fault, warranting to fix deficiency, which is supported by a decision of the Apex Court in Satwant Kaur Sandhu Vs. New India Assurance Company Ltd., reported in IV (2009) CPJ 8 (SC). The case involved in the above decision also, relates to mediclaim policy, wherein a defense was taken, suppression of material facts, including the basic principle for insurance viz. uparimae fede. In that case, the patient, who was on regular dialysis, failed to disclose the information in the proposed form, regarding the health condition, and similarly in our case also, the complainant has failed to disclose the pre state of health, though he was a known diabetic and heart patient. The Apex court, giving the meaning for material facts, to whom it is relevant also, has come to the conclusion, if a person had suppressed the material facts, had taken a policy, then he is not entitled to the benefits conferred under the policy, that too in our case for taking treatment for pre-existing disease, which is excluded under the exclusion clause. The District Forum, unfortunately not reading the documents properly, simply brushing aside the arguments of the opposite party "did not hold good ", has come to an erroneous conclusion, that the bye-pass heart surgery will not lead to presumption, that the same was pre-existing, forgetting the diagnosis made by the doctor, including diabetes mellitus, and other heart oriented disease. Therefore, we are of the view, the order of the District Forum is highly erroneous, should be upset by allowing this appeal. In the result, the appeal is allowed, setting aside the order of the District Forum in CC.No.17/2007 dt. 13.5.2010, and the complaint is dismissed. "

IN Satwant Kaur Sandhu (supra) Hon ''ble Supreme Court has observed; "18. A mediclaim policy is a non-life insurance policy meant to assure the policy-holder in respect of certain expenses pertaining to injury, accidents or hospitalisations. Nonetheless, it is a contract of insurance falling in the category of contract uberrimae fidei, meaning a contract of utmost good faith on the part of the assured. Thus, it needs little emphasis 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. Of course, obligation to disclose extends only to facts which are known to the applicant and not to what he ought to have known. The obligation to disclose necessarily depends upon the knowledge one possesses. His opinion of the materiality of that knowledge is of no moment. (See: Joel Vs. Law Union & Crown Ins. Co.) " 19. In United India Insurance Co. Ltd. Vs. M.K.J. Corporation, this Court has observed that it is a fundamental principle of insurance law that utmost faith must be observed by the contracting parties. Good faith forbids either party from non- disclosure of the facts which the party privately knows, to draw the other into a bargain, from his ignorance of that fact and his believing the contrary. (Also see: Modern Insulators Ltd. Vs. Oriental Insurance Co. Ltd.) 20. MacGillivray on Insurance Law (10th Edn.) has summarised the assured''s duty to disclose as under : " .....the assured must disclose to the insurer all facts material to an insurer''s appraisal of the risk which are known or deemed to be known by the assured but neither known nor deemed to be known by the insurer. Breach of this duty by the assured entitles the insurer to avoid the contract of insurance so long as he can show that the non-disclosure induced the making of the contract on the relevant terms. " 21. Over three centuries ago, in Carter Vs. Boehm, Lord Mansfield had succinctly summarised the principles necessitating a duty of disclosure by the assured, in the following words: (AII ER PP. 184 H-185 I) Insurance is a contract of speculation. The special facts upon which the contingent chance is to be computed lie most commonly in the knowledge of the assured only; the underwriter trusts to his representation, and proceeds upon confidence that he does not keep back any circumstance in his knowledge to mislead the underwriter into a belief that the circumstance does not exist. The keeping of back such circumstance is a fraud, and therefore the policy is void. Although the suppression should happen through mistake, without any fraudulent intention, yet still the underwriter is deceived and the policy is void; because the risque run is really different from the risque understood and intended to be run at the time of the agreement...The policy would be equally void against the underwriter if he concealed...Good faith forbids either party, by concealing what he privately knows, to draw the other into a bargain from his ignorance of the fact, and his believing the contrary. Having said so, as noted above, the next question for consideration would be as to whether factum of the said illness was a "material " fact for the purpose of a mediclaim policy and its non-disclosure was tantamount to suppression of material facts enabling the Insurance Company to repudiate its liability under the policy. 22. The term "material fact " is not defined in the Act and, therefore, it has been understood and explained by the courts in general terms to mean as 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 ". 23. As stated in Pollock and Mulla''s Indian Contract and Specific Relief Acts: "any fact the knowledge or ignorance of which would materially influence an insurer in making the contract or in estimating the degree and character of risks in fixing the rate of premium is a material fact. " 24. In this regard, it would be apposite to make a reference to Regulation 2(1)(d) of the Insurance Regulatory and Development Authority (Protection of Policy-holders'' Interests) Regulations, 2002, which explains the meaning of term "material ". The Regulation reads thus: "2. Definitions.--In these regulations, unless the context otherwise requires,-- (a)-(c) * * * (d) ''proposal form '' means a form to be filled in by the proposer for insurance, for furnishing all material information required by the insurer in respect of a risk, in order to enable the insurer to decide whether to accept or decline, to undertake the risk, and in the event of acceptance of the risk, to determine the rates, terms and conditions of a cover to be granted; Explanation----: ''Material '' for the purpose of these Regulations shall mean and include all important, essential and relevant information in the context of underwriting the risk to be covered by the insurer. " Thus, the Regulation also defines the word "material " to mean and include all "important ", "essential " and "relevant " information in the context of guiding the insurer to decide whether to undertake the risk or not. 25. The upshot of the entire discussion is that in a contract of insurance, any fact which would influence the mind of a prudent insurer in deciding whether to accept or not to accept the risk is "material fact ". If the proposer has knowledge of such fact, he is obliged to disclose it particularly while answering questions in the proposal form. Needless to emphasise that any inaccurate answer will entitle the insurer to repudiate his liability because there is clear presumption that any information sought for in the proposal form is material for the purpose of entering into a contract of insurance ".

KEEPING in mind above legal position as enumerated in the various judgments, it is to be seen as to whether petitioner has suppressed the material facts with regard to pre-existing diseases, if any, at the time of taking of mediclaim policy. Petitioner has deliberately and for reasons best known to him not placed the copy of proposal form alongwith this revision petition though the same was filed before the Fora below. However, petitioner has placed on record other medical record which goes in his favour.

Be that as it may, according to the impugned order the proposal form Ex.B-1 for mediclaim insurance policy was admittedly signed by the petitioner. As per findings of the State Commission quoted extensively above, petitioner in the proposal form has cleverly concealed about the pre-existing diseases.

THUS , looking from any angle, I have no hesitation in coming to the conclusion that the statement made by the petitioner/insured in the proposal form as to the state of his health was palpably untrue to his knowledge. Thus, there was clear suppression of the material facts with regard to the health of the insured, and, therefore, respondent was fully justified in repudiating the insurance contract. Accordingly, after going through the record, I do not find any infirmity or illegality in the impugned order. The present revision petition is hereby dismissed with cost of Rs.5,000/- ( Rupees Five Thousand Only).

PETITIONER is directed to deposit the cost of Rs.5,000/- (Rupees Five Thousand Only) by way of demand draft in the name of "Consumer Legal Aid Account " within four weeks from today. In case, petitioner fails to deposit the cost within the prescribed period, then it shall also be liable to pay interest @ 9% p.a., till realization. List on 23.11.2012 for compliance.