New India Assurance Co. Ltd vs K.M.Babu Reddy

AGGRIEVED by the order dated 13.03.2007 passed by the Karnataka State Consumer Disputes Redressal Commission Bangalore (in short, ''the State Commission '') in Appeal No. 2093 / 2006, the New India Assurance Company (original party in the complaint before the District Forum) has filed the present petition under section 21 (b) of the Consumer Protection Act, 1986 ( in short, ''the Act ''). The appeal before the State Commission was filed by complainant K.M.Babu Reddy against the order dated 17.08.2006 passed by 3rd Additional Bangalore Urban District Consumer Disputes Redressal Forum Bangalore in complaint No. 1028 / 2006. By that order, the District Forum had dismissed the complaint filed by the complainant seeking reimbursement of medical expenses incurred by the complainant in connection with Coronary Bypass Grafting for Coronary Artery Disease impaired L.V. Function at Manipal Hospital, Bangalore which claim was earlier repudiated by the insurance company on the ground that at the time of taking the mediclaim policy, the complainant had concealed material facts in relation to the status of his health inasmuch as he failed to disclose that he was suffering from coronary disease several months prior to the making of the proposal. The complaint filed was also resisted on the same ground. The District Forum going by the facts and circumstances of the case and evidence and material brought on record particularly the medical records of Narayana Hrudayalaya hospital pertaining to the period 08.10.2004 came to the conclusion that the complainant indeed suffered from a coronary heart disease which he suppressed at the time of making the proposal and, therefore, was disentitled to claim the reimbursement of the expenditure incurred by him in his treatment. The State Commission, however, allowed the appeal and directed the insurance company to pay a sum of Rs.1,97,265/- to the complainant with interest @ 6% p.a. from the date of default of the complaint simply by observing as under: "The District Forum relying upon the Discharge Summary dated 6.10.2005 has held that the complainant has suppressed the fact that he was suffering from "Hypertension and Diabetes Mellitus " prior to the filing of the proposal form for issuance of the Policy with effect from 17.08.2005. In order to prove the contents of the said Discharge Summary, the OPs ought to have filed the Affidavit of one of the officials of the Hospital or the Doctor who issued the Discharge summary. But, in the instant case, no such Affidavit has been filed by the OPs. Further, the said Discharge Summary is subsequent to the issuance of the Policy. The Discharge Summary is dated 6.10.2006 whereas the Policy is with effect from 17.08.2005. The OPs have also not produced any case sheet maintained by any Hospital in respect of the Complainant to show that he had taken treatment for "Hypertension and Diabetes Mellitus ". Therefore, in the absence of such evidence by the OPs, in our view, the District Forum is not right in dismissing the Complaint of the Complainant ".

WE have heard Mr.Abhishek Kumar, learned counsel for the petitioner insurance company and Ms.Vaijanthi Girish, Advocate, learned counsel for the respondent and have considered their submissions. Counsel for the petitioner would assail the impugned order passed by the State Commission as not based on the correct and proper appreciation of the facts and circumstances of the case, the evidence and material brought on record. His first submission is that the State Commission has overlooked the important evidence filed on record and has misread most of the evidence so placed on record. In this connection he has invited our attention to the discharge summary dated 08.10.2004 of the complainant, relevant portion of which reads as under: "FINAL DIAGNOSIS : CAD : SINGLE VESSEL DISEASE SEVERE LV DYSFUNCTION (EF -30%) ACCELERATED HYPERTENSION DIABETES MELLITUS HISTORY OF PRESENT ILLNESS K/c/o IHD Single Vessel Disease, LV dysfunction H/o breathlessness on exertion since 3 weeks H/o swelling of feet on and off No h/o chest pain / palpitation / syncope / orthopnoea / PND PREVIOUS HISTORY CAG (08.10.2004) which revealed single vessel disease, LV dysfunction FAMILY HISTORY H/o CAD "

Reference is then made to the patient ''s history recorded at Manipal Hospital, Bangalore, where the complainant underwent CABG procedure for which the reimbursement is claimed, where again there is a clear mention that case of the complainant was evaluated in October 2004 for preoperative assessment and LV was found to be dilated, moderate and was advised PTCA / stunt to LAD. Counsel then invited our attention to the copy of the proposal form where against the relevant coloumns in regard to the diseases, the complainant had declared that he was not suffering from any disease whatsoever. On going through this material, we have no hesitation to conclude that as on the date of making the proposal i.e. 17.08.2005, the complainant must be having special knowledge of he having got himself evaluated at Narayana Hrudayalaya Hospital in the month of October 2004 where after investigations, the said Hospital in no uncertain terms diagnosed that the complainant was suffering from single vessel disease, LV dysfunction and that he was advised to undergo stent to LAD which he did not undergo immediately thereafter or uptil October 2005 and when the situation became acute, he had to undergo coronary bypass grafting for coronary artery disease in October 2005.

Not only this, it may be noted that in August 2005, while renewing the policy, the complainant had enhanced the mediclaim insurance from Rs.1,00,000/- to Rs. 2,00,000/-. Coupled with the fact that complainant was suffering from the above noted cardiac problem as diagnosed in October 2004 which he did not disclose at the time of renewal of policy in August 2005 and the fact that he had undergone a CABG procedure in October 2005 i.e only 2-3 months after renewal of the policy, leaves no doubt in our mind that the complainant had enhanced the amount of mediclaim insurance to the above extent and had suppressed the fact about his pre existing disease only with a view to seek reimbursement of the expenditure which was to be incurred by him in connection with CABG procedure held in October 2005. This suppression of such existing disease cannot be explained on any hypothesis and it must be considered as non bonafide attempt on the part of the complainant. A contract of insurance is based on utmost faith of the parties and if there is lack of bonafides on the part of the insured at the time of making the proposal, the insurer in exercise of its right under section 45 of the Insurance Act, 1938, is well within its right to deny the insurance claim as such a policy was based on fraudulent representation made by the insured. What constitutes a material fact and what is the effect of suppression of such fact (s) has been considered by the Supreme Court in detail in the cases of P.C.Chacko and Anr. Vs.Chairman, Life Insurance Corporation of India and Ors. (2008) 1 SCC 321 and Satwant Kaur Sandhu Vs. New India Assurance Co. Ltd. (2009) 8 SCC 316. The later case related to the mediclaim policy provided by the insurer based on representation made by the insured. Having considered the facts of that case, the Supreme Court allowed the appeal filed against the order of the National Commission by observing as under: There is no dispute that Section 45 of the Insurance Act, 1938 (for short), which places restrictions on the right of the insurer to call in question a life insurance policy on the ground of mis-statement after a particular period, has no application on facts at hand, inasmuch as the said provision applies only in a case of life insurance policy. The present case relates to a mediclaim policy, which is entirely different from a life insurance policy. 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 hospitalizations. 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. 13. 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.

MacGillivray on Insurance Law (Tenth Edition) 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;

Over three centuries ago, in Carter Vs. Boehm4, Lord Mansfield had succinctly summarised the principles necessitating a duty of disclosure by the assured, in the following words:- 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 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 risqui run is really different from the risqui 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 ".

The facts and circumstances of the care are squarely covered by the said decisions and, therefore, there is no escape from the conclusion that insurance company was justified in repudiating the claim and has committed no deficiency in doing so. The findings of the State Commission ( supra) are neither based on correct and proper appreciation of the cogent evidence produced on record nor it is in consonance with the settled legal position and is, therefore, legally unsustainable.

IN view of our above discussion, revision petition is allowed and the impugned order passed by the State Commission is hereby set aside and order passed by the District Forum is restored and as a result, complaint is dismissed, leaving the parties to bear their costs through out.