Life Insurance Corporation of India vs USHA RANI BANSAL

VIDE this order, two appeals being disposed of Nos. 637 and 687 of 1997, challenging order of District Forum, Patiala dated 8.5.1997.

APPEAL No. 637 of 1997 has been filed by the complainant Smt. Usha Rani Bansal and APPEAL No. 687 has been filed by LIC-opposite party. Main judgment is prepared in APPEAL No. 687 of 1997. The complainant''s deceased husband Ashok Bansal proposed on 25.9.1994 to insure his life for a sum of Rs. 1,00,000/- which was to commence retrospectively under rules. The opposite party-LIC issued a Policy No. 160915591 dated 28.8.1994. The complainant''s husband duly paid the premiums and during the subsistence of the policy, he died on 8.6.1995.

The complainant who is the wife and nominee of insured preferred a claim, but the opposite party-Life Insurance Corporation of India repudiated the liability on the ground that the assured suppressed the material information/ facts about his previous illness while completing/ signing the proposal of insurance. The complainant filed a complaint before the District Forum, Patiala which was contested by the LIC that the claim was repudiated because the deceased was guilty of suppression of facts about his state of health. Both the parties led their evidence on affidavits and documents which resulted in passing the impugned order of the District Forum, Patiala directing the opposite party to pay Rupees One Lac, the amount of insurance but without interest and costs with direction to the opposite party to make this payment in favour of complainant No. 1 for herself and on behalf of the minor children by issuing a Bank Draft Payee''s Account Cheque by 15.7.1997.

WE have gone through the records and heard the arguments of the learned Counsel for both the parties, both on facts and on the legal propositions. In appeal, the complainant has prayed for payment of interest @ 18% and for costs of litigation. On the contrary, the opposite party LIC in Appeal No. 687 of 1997 prayed for setting aside of the order of District Forum.

THE insurance policy was issued on the basis of proposal dated 25.9.1994. Sh. Ashok Bansal died on 9.6.1995 due to pneumonia and jaundice. THE death of the insured have taken place within a year. Investigations were conducted and found that the deceased had not been maintaining good health since prior to the submission of proposal dated 25.9.1994 and he had been taking treatment of the same. He also remained on leave due to ill health. Mr. B.J. Singh, Advocate for LIC argued that the insured died due to pneumonia and jaundice which has nexus with the diseases suffered prior to taking insurance policy. It is also alleged that the deceased/insured fraudulently failed to disclose this information in the proposal papers. Due to this, deliberate suppression of the material facts, the complainant is not entitled to any claim. Reliance has been placed on the decision of Hon''ble National Commission in Life Insurance Corporation of India v. Smt. Lily Rani Roy, I (1997) CPJ 46 (NC). wherein it was held that where a decision has been taken in good faith after due application of mind based on reasons material and duly communicated to the complainant there is no deficiency in service. THE Counsel asserted that in this case the decision of repudiation was taken in good faith based on the material collected pursuant to the inquiries made. Hence there is no deficiency in service on the part of opposite party-LIC. THE Counsel for LIC also opposed allowing interest @ 18% on compensation. The burden of proving the complainant''s husband suppressed the material fact with regard to health at the time of the proposal is on the opposite party, LIC. Hon''ble National Commission in the New India Assurance Co. Ltd. and Others v. P.P. Khanna, II (1997) CPJ 1 (NC)=1997 (2) CPR 21. enunciated the relevant law on this point as under : "The onus probandi, in cases of fraudulent suppression of material facts rests heavily on party alleging fraud namely the insurer. The insurer cannot avoid consequences of insurance contract by simply showing inaccuracy or falsity of statement. Burden is cast on the insurer to show that the statement was on a material matter or facts have been suppressed which it was material for the policy-holder to disclose. It is further to be proved that the statement was fraudulently made by the policy-holder with the knowledge of the falsity of statement or that the suppression was of material facts which had not been disclosed. The Courts will not be satisfied with proof which falls short of showing that intentional misrepresentation was made with the knowledge of perpetrating fraud."

The Counsel for the complainant asserted that the deceased was enjoying normal health throughout his life. He took medical leave in routine which has no relevance in the present case. The deceased never concealed any material facts in the proposal form. In the proposal form for insurance on own life, Ex. R-2 (2 sheets), the deceased has furnished the answer as below : (h) Do you use/have you ever used alcoholic drinks, narcotics or any other drugs ? No, except a peg or two of fine Whisky.

IN the light of the foregoing statement made by the deceased in the proposal form the question arises for consideration is whether the proposal of insured/deceased was accepted by the LIC bearing in mind the facts as stated in proposal form And whether there was any objection raised by the LIC to this effect. The answer is obvious from the fact that the policy was issued and the contract concluded. It is implied that the material facts disclosed in the proposal form were kept in view before issuing the insurance policy. Once the policy is issued in token of acceptance of the proposal, the LIC is liable for payment of the insurance claim and as such contract should be construed to have been concluded. At this stage, the LIC cannot wriggle out of its liability. The insured disclosed that he was habitually taking liquor. It was for the Corporation to have other tests at the time of medical examination as it deemed necessary. LIC has failed to lead direct evidence that the deceased was suffering from pneumonia and jaundice at the time of taking insurance policy. Applications for leave on medical grounds are of no importance in the absence of evidence of medical treatment taken. The complainants have proved deficiency on the part of the Corporation. The finding of the District Forum is upheld.

PLEA taken by the LIC to justify the non-payment of claim to the widow and minor children is wholly untenable in eyes of law. It is a settled principle of law that undue delay in settlement of insurance claim amounts to deficiency in service entitling the complainants to compensation. We allow interest @ 18% as compensation on the insured amount with effect from the date 4 months from the date of filing of claim till realisation. Appeal of LIC dismissed.