LIC OF INDIA vs Dalbir Kaur

MRS. Vineeta Rai, Member-The present revision petition has been filed by the Life Insurance Corporation of India (hereinafter referred as the ''Petitioner'') against the order of the State Consumer Disputes Redressal Commission, Punjab (hereinafter referred as the ''State Commission'') which has decided in favour of one Smt. Dalbir Kaur (hereinafter referred to as the ''Respondent'') who was the original complainant before the District Forum. The facts of the case are that the Respondent''s deceased husband, Nachhatar Singh (insuree) who was working in Punjab Armed Police had taken a life insurance policy from the Petitioner for a sum of Rs. 50,000 commencing w.e.f. 31.5.2002 at a monthly payable premium. According to Respondent, her husband who was otherwise healthy suddenly fell ill and died in hospital of septicaemia on 29.11.2002. After his death, as his nominee, Respondent raised a claim which was declined by the Petitioner/Insurance Corporation. Aggrieved by this, she filed a complaint before the District Forum seeking the following reliefs: (a) Rs. 50,000 i.e. the sum assured on the life insured. (b) Rs. 10,000 as punitive damages for mental tension, pain, agony and harassment. (c) Interest @ 18% per annum from the date of death of the deceased husband till the date of actual payment.

THE Petitioner''s contention is that since this was an early death claim, it was investigated and found that the life assured prior to taking the policy had been admitted in the Sony Nursing Home w.e.f. 8.5.1999 to 16.5.1999 for treatment of gastroentitis. He was again admitted in same Nursing Home from 1.2.2002 to 28.2.2002 for treatment of Typhoid, Jaundice and Disc problem. He remained on leave from his place of work for over two months. He continued to be under treatment as an out-patient in the same Nursing Home till 22.4.2002 i.e. just before taking the policy on 31.5.2002. On 17.11.2002 he was again admitted in the hospital where he ultimately died on 29.11.2002 of septicaemia. The facts of his admission in hospital and his treatment there, were admitted by him in a written certificate that he submitted to his employers. However, when he took a life insurance policy in May, 2002 (i.e. after his hospital admission and treatment) and filled up the proposal form, he suppressed all these facts with a view to play fraud and thus violated the terms and conditions of the insurance policy. He further took two more policies for Rs. 1 lakh each on 8.5.2002 and 14.8.2002 whose claims are still pending. Since it is settled law that an insurance policy is a contract entered into between the parties in utmost good faith, the insuree by giving wrong statements and suppressing facts violated the terms of the contract/insurance policy. Under these circumstances the Petitioner rightly repudiated the claim.

THE District Forum after hearing both parties allowed the complaint by concluding that the insured had not deliberately made false statements since there was no pre-existing disease which caused his death. The District Forum directed the Petitioner to pay the Respondent the entire insured amount with 8% interest with effect from three months from the date of submission of claim till payment and that interest would serve as compensation. Rs. 3,000 was awarded as litigation costs. The compliance of the order was to be made within one month.

AGGRIEVED by the order of the District Forum, the Petitioner filed an appeal before the State Commission. The State Commission confirmed the order of the District Forum and dismissed the appeal. The relevant part of the order of the State Commission reads as follows: "We have been taken through the Form No. 3816 prepared by New Ruby Hospital, Jalandhar. It was submitted that Nachhatar Singh insured had got himself admitted in that hospital on 17.11.2002 where he ultimately dies on 29.11.2002. The insured had died of septicaemia. It may be observed here that in the form No. 3816 in which the date of admission in the Hospital in shown as 17.11.2002, it was also mentioned that earlier he was also getting the treatment from the same hospital and got admission on 16.9.2002 and was discharged on 29.9.2002. He also got admission in October and November in the same hospital prior to the admission on 17.11.2002. These date of admission in the hospital are after the date of the insurance policy. As far as, his OPD treatment is concerned, it was only mentioned that he was suffering from fever, malaria, and acute pain in the backbone in the lumber region. We are of the view that no fault can be found in the approach of the District Forum inasmuch as the treatment, which was undertaken by the insured as OPD patient on 28.2.2002 and 22.4.2002, was for high-grade fever and backache. This has nothing to do with the ultimate cause of death. Moreover, the treatment of high-grade fever and backache, which the insured had taken as OPD need not have been mentioned in the answers to the questionnaire in the proposal form."

Hence, the present revision petition.

COUNSEL for Petitioner was present. Despite completion of service, none appeared on behalf of the Respondent.

COUNSEL for Petitioner had filed a written statement and made oral submissions wherein he stated that the Petitioner after due inquiry had rightly repudiated the claim on the ground that the insuree had suppressed material facts fraudulently at the time of filling up the proposal form and giving wrong answers to specific questions in the said form by denying that he had ever consulted a medical practitioner during the last five years, that he had ever been admitted to any hospital for treatment and that he had remained absent from work on grounds of health during the last five years. These were blatantly wrong statements in the face of clear documentary evidence confirming to the contrary. Counsel for Petitioner pointed out that had these facts been known to the Petitioner/Insurance Company then the Insurance Company would have been put at caution and could have put the insuree through a more rigorous medical examinations before agreeing to insure his life. There have been a number of judgments of the Hon''ble Supreme Court as well as the National Commission ruling that an insurance policy is a contract falling in the category of utmost good faith on the part of the life assured and if the life assured does not make a full disclosure correctly or his declaration is found to be false, then the Insurance Company is entitled to repudiate the claim. Therefore, these were adequate grounds to repudiate the claims.

WE have heard learned Counsel and have carefully gone through the evidence on record.

THERE is no dispute that the Respondent''s late husband had taken a life insurance policy on 18.7.2002 vide proposal dated 31.5.2002 and that he died on 29.11.2002 i.e. about five months later. There is also documentary evidence that he had given the following answers to the specific questions in the prescribed proposal form pertaining to the insurance policy: S. No. Question Answer 1. During the last five years did you consult a Medical Practitioner for any ailment requiring treatment for more than a week? No 2. Have you ever been admitted to any Hospital or Nursing Home for general check-up, observation, treatment or operation? No 3. Have you remained absent from place or work on grounds of health during the last five years? No

IT is also in evidence that the insuree had, prior to taking the insurance policy, been under treatment as an in-patient in Sony Nursing Home from 8.5.1999 to 16.5.1999 and from 1.2.2002 to 28.2.2002. He was also an out-patient in the same Nursing Home till 22.4.2002. Further, it is on record that the insuree had been sanctioned two months earned leave on 11.4.2002 by the Commandant, 27 Bn. of the Punjab Armed Police on the basis of a medical certificate submitted by the insuree himself indicating that he was admitted to the hospital from 1.2.2002 to 28.2.2002 and after that he was treated as an out-patient from 21.4.2002. This clearly establishes the fact that the insuree had willfully given wrong replies to the specific questions relating to his health thus suppressing facts in his insurance declaration. He had also given a false declaration that he had not withheld any information although it was clearly stated in the policy document that this declaration would the basis of a contract of insurance between him 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 therefor shall stand forfeited to the Corporation". In P.C. Chacko and Anr. v. Chairman, LIC of India and Ors., III (2008) CPJ 78 (SC)=IX (2007) SLT 533=IV (2007) ACC 773 (SC)=(2001) 1 SCC 321, as well as a number of other judgments of the Hon''ble Supreme Court of India and the National Commission, it has been ruled that an insurance policy is a contract between two parties falling in the category of utmost faith on the part of the assured and if the assured has not made full disclosure correctly or in other words if the declaration made is found to be false to the knowledge of the declarant the Insurance Company is entitled to repudiate the claim. In the instant case, this contract was violated by the Respondent''s husband by suppressing material information and giving incorrect answers in the insurance document in respect of the specific questions pertaining to his health. Under the circumstances, the Petitioner was entitled to repudiate the insurance claim. The District Forum and the State Commission clearly erred in not taking into consideration these important rulings which are relevant in the instant case. Further, the State Commission''s finding that the insuree was hospitalized only after the issuance of his policy is factually not correct.

IN view of all these reasons, we are unable to agree with the order of the State Commission which is accordingly set aside. The revision petition is accepted with no order as to costs.