State Consumer Disputes Redressal Commission
Lic Of India vs Ladu Lal Luhar on 26 May, 2010
APPEAL NO: 466/2009 1. Br.Manager, LIC of India, Man Town, Sawaimadhopur (Raj.) 2. Sr.Divisional Manager, LIC of India, Divisional Office Bhawani Singh Road, Jaipur. Through The Manager (Legal) LIC of India Divisional Office- Jeevan Prakash Bhawani Singh Road, Jaipur. Opposite parties-appellants Vs. Sh.Laddu Lal Luhar s/o Hardeva Luhar r/o Allapura, Tehsil Khandar Distt. Sawaimadhopur (Raj.) Complainant- respondent 26.5.2010 Before: Mr.Justice Sunil Kumar Garg-President Mrs.Vimla Sethia-Member
Mr.Shashi Kumar Pareek-Member 2 Mr.Ram Kalyan Sharma counsel for the appellants Mr.Prashant Sharma counsel for the respondent BY THE STATE COMMISSION( PER HON. MR.JUSTICE SUNIL KUMAR GARG, PRESIDENT ) This appeal has been filed by the appellants LIC which were opposite parties before the District Forum against order dated 26.2.09 passed by the District Forum, Sawaimadhopur in complaint no. 309/2008 by which the complaint of the complainant respondent was allowed against the appellants in the manner that the appellants were directed to pay to the complainant respondent a sum of Rs. 1 lac the amount of the LIC policy alongwith interest @ 12% p.a. from the date of filing of the complaint i.e. 27.7.08 and further to pay a sum of Rs. 1000/- as cost of litigation.
2. It arises in the following circumstances-
That the complainant respondent had filed a complaint before the District Forum, Sawaimadhopur on 26.7.08 against the appellants inter alia stating that he is a BPL card holder bearing no. 5284 and is a very poor man and his wife Gauri Devi, now deceased had taken a life insurance policy with accidental benefit known as New Bima Gold Policy for a sum of Rs.1 lac from the appellants bearing policy no. 195484950 on 28.4.06. It was further stated in the complaint that on 26.1.07 when the deceased was in the area of municipality 3 Sawaimadhopur and was doing the job and was sitting behind the tree, a snake had appeared there and had bite her as a result of which she was got admitted in General Hospital, Sawaimadhopur and thereafter she had died on 30.1.07 and after the death of the deceased claim was preferred by the complainant respondent being the husband and nominee of the deceased before the office of the appellants but that claim was repudiated by the appellants through letter dated 10.1.08 on the ground that at the time of taking the policy a declaration form regarding health was filled in up by the deceased on 27.11.06 and in respect of illness she had answered all the questions in negative though the appellants had indisputable proof to prove the fact that about one week before 27.11.06 she was suffering from enlargement of liver and pain in abdomen asthamatic and since these facts were not disclosed by the deceased in her declaration form on 27.11.06 at the time of taking the policy, therefore, the deceased was guilty of suppression of material facts regarding her health but according to the complainant respondent repudiation of claim of the complainant by the appellants was not justified at all as the facts mentioned in the repudiation letter dated 10.1.08 were not correct one and thereafter the present complaint was filed.
A reply was filed by the appellants in shape of affidavit of Mr. M.L.Chaudhary on 29.1.09 and in the reply they have taken the same pleas which were taken 4 by them in the repudiation letter dated 10.1.08 .Apart from that it was stated in the reply that since the cause of death of the deceased was Cardiac Respiratory Arrest, therefore, the case of the complainant respondent that the deceased had died due to snake bite was wrong one but on the contrary as per record of the hospital, she was a patient of COPD and thus she had made incorrect statement in her declaration form dated 27.11.06 and thus ,it was a case of suppression of material facts regarding health on the part of the deceased and it was prayed that claim was rightly repudiated by the appellants and complaint be dismissed.
After hearing the parties; the District Forum, Sawaimadhopur through impugned order dated 26.2.09; had allowed the complaint of the complainant respondent in the following manner inter alia holding that -
(i) That since the appellants had failed to prove the fact that prior to filling in up the declaration form regarding health on the part of the deceased i.e on
27.11.06 the deceased was a patient of COPD and further she was an illiterate lady and she had put her thumb impressions on the declaration form, without knowing what was written in that declaration form therefore, she was not aware of the fact that what was written in the declaration form and further the same was filled in up by 5 the agent of the appellants and thus it was not a case of suppression of material facts regarding health on the part of the deceased though the fact that the deceased had died because of snake bite had not been proved by the complainant respondent .
(ii) That the appellants were not justified in repudiating the claim of the complainant respondent and it had amounted to deficiency in service on the part of the appellants.
Aggrieved from that order dated 26.2.09 passed by the District Forum, Sawaimadhopur , this appeal has been filed by the appellants.
3. In this appeal the main contention of the learned counsel for the appellants is that before issuance of policy in question, the deceased was suffering from the disease of COPD and since these facts were not disclosed by the deceased deliberately in her declaration form on 27.11.06, therefore, she was guilty of suppression of material facts regarding health and thus the claim of the complainant respondent was rightly repudiated by the appellants through letter dated 10.1.08 and simultaneously the fact that the deceased had died due to snake bite had not been proved by the complainant respondent and thus the District Forum had committed serious error and illegality in decreeing the claim of the complainant respondent and therefore, the impugned 6 order could not be sustained and liable to be quashed and set aside and this appeal deserves to be allowed.
4. On the other hand, the learned counsel appearing for the respondent has supported the impugned order of the District Forum .
5. We have heard the learned counsel for the appellants as well as for the respondent and gone through the entire materials available on record.
6. There is no dispute on the point that the deceased had taken a life insurance policy with accidental benefit known as New Bima Gold for a sum of Rs.1 lac from the appellants bearing policy no.
195484950 on 28.4.06. 7. There
is also no dispute on the point that at the time of taking insurance policy , a declaration was made by the deceased and in that declaration dated 27.11.06 she had not mentioned that she was suffering from any kind of disease and all the questions were answered in negative.
8. There is also no dispute on the point that deceased had died on 30.1.07 meaning thereby within two months of issuance of the policy.
9. There is no dispute on the point that the claim of the above mentioned policy was repudiated by the appellants 7 through letter dated 10.1.08 on the grounds mentioned therein.
10. No doubt a bare perusal of the declaration form which was filled in up by the deceased on 27.11.06 shows that the deceased had put her thumb impressions only , meaning thereby the declaration form was not filled in up by the deceased herself and thus it could easily be said that she was fully illiterate lady and the proposal form in question was filled in up by the agent of the appellants .
11. On file there is a certificate of the doctor of Govt. Hospital, Sawaimadhopur in which it was stated that the deceased had died on 30.1.07 and cause of death of the deceased was COPD + Chronic respiratory arrest.
12. On file there is a medical attendent's certificate dated 3.1.08 issued by Dr. R.K.Sharma, a Medical Officer of Govt. Hospital, Sawaimadhopur which itself shows that it was erassed at many places and in that certificate primary cause of death of the deceased was mentioned as COPD and secondary cause was mentioned as Respiratory failure.
13. Further on file there is a bed head ticket of the Govt. Hospital, Sawaimadhopur which shows that the deceased was admitted in the hospital on 26.1.07 and she had died on 30.1.07 but in that bed head ticket it was not mentioned that she was a patient of COPD.
814. Thus, in the facts and circumstances just narrated above the question for consideration is whether repudiation of claim of the complainant respondent by the appellants on the ground of suppression of material facts could be justified or not or whether the findings of the District Forum decreeing the claim of the complainant respondent could be sustained or not.
On suppression of material facts
15. It may be stated here that it is the fundamental principle of insurance law that utmost good faith must be observed by the contracting parties and good faith forbids either party from non-disclosure of the facts which the parties known. The insured has a duty to disclose and similarly it is the duty of the insurance company and its agents to disclose all material facts in their knowledge since obligation of good faith applies to both equally and in this respect, the decision of the Hon'ble Supreme Court in M/s.Modern Insulators Ltd. Vs. Oriental Insurance Co. (AIR 2000 SC 1014) may be referred to.
16. The onus probandi, in cases of fraudulent suppression of material facts rests heavily on party alleging fraud namely the insurer. In this respect, the decision of the Hon'ble Supreme Court in LIC Vs. Smt. G.M.Channabasemma (1996 (III) CPJ 8 (SC) may be referred to where it was held that the burden of proving that the insured had made false representation and suppressed material facts is undoubtedly on the LIC of India. Furthermore, mere concealment of some facts will not amount to concealment of material facts and if there is fraudulent 9 suppression of material facts in the proposal, the policy could be vitiated otherwise not.
17. Suppression of fact must be a conscious operation of the giver of the answer which he knowingly did not disclose.
18. The Hon'ble National Commission in National Insurance Co. Ltd. Vs. Bipul Kunda (2005 CTJ 377 (CP) (NCDRC) ) has held that for repudiating a claim of an insured, it is for the insurer to show that a sttement on a fact, which was material for the policy, had been suppressed by the insured and that statement was fraudulently made by him/her with the knowledge of the falsity of that statement.
19. As already stated above, the death of the deceased had taken place within one year of the issuance of the policy.
20. It may be stated here that where the insurer wishes to call ain question a policy within two years of its being effected, it is enough if the insurer is in a position to show that a statement made in the proposal for insurance or in any report of a medical officer or referee or friend of the insured or in any other document leading to the issue of the policy is inaccurate or false.
21. It may further be stated here that even if the death takes place within two years, mis-representation, if any, that should be material in the sense of having some effect upon life expectation whether direct or indirect and if it is found 10 material, that defence could be taken by the Insurance Company, not otherwise.
22. The word "misrepresentation" means suggestio falsi, in matter of substance essentially material to the subject, whether by acts or by words, by manoeuvres, or by positive assertions or material concealment (suppressio veri) whereby a person is misled and damnified.
23. The word "fraud" means a conduct either by letter or words, which induces the other person, or authority to take a definite determinative stand as a response to the conduct of former either by word or letter. In this respect, the decision of the Hon'ble Supreme Court in Ram Preeti Yadav Vs. UP Board of High School & Intermediate Education and ors. (JT 2003 (Supp.I) SC 25 ) may be referred to.
24. It is well settled that misrepresentation itself amounts to fraud in some cases.
25. The word "misconduct" means an act or conduct in the nature of a breach of trust or an act resulting in loss to other party.
26. The word "suppression of fact" envisages a deliberate or conscious omission to state of fact with the intention of deriving wrongful gain. In this respect, the decision of the Hon'ble Supreme Court in Collector of Customs Calcutta Vs. 11 Tin Plate Co. of India Ltd. ( (1997) 10 SCC 538 ) may be referred to.
Whether appellants had proved the fact that prior to filling in up the declaration form regarding health on 27.11.06, the deceased was a patient of COPD or not.
27. Before proceeding further it may be stated here that what the word ' COPD ' means and the word ' COPD ' means Chronic Obstructive Pulmonary Disease and thus the word chronic itself means an old disease.
28. It may be stated here that there is nothing on record to prove the fact that prior to taking the policy in question, the deceased was ever admitted in any hospital or had consulted any doctor for taking the treatment of COPD and when the appellants had failed to prove the fact that the deceased was a patient of COPD prior to taking the policy in question and further she had died due to respiratory failure, meaning thereby her death was due to heart failure and that could take place at any time and from that point of view also the present case could not be said to be a case of suppression of material facts regarding health on the part of the deceased.
29. Further in the doctors' certificate, the primary cause of death of the deceased has been stated as COPD and secondary cause of the death has been stated as Respiratory heart failure and for proving the case of COPD, the appellants had to prove the fact that prior to 27.11.06 she had taken the 12 treatment from any doctor or hospital; especially when the disease of COPD starts with the word ' Chronic' ( old one ) and if the deceased was a patient of COPD with some years back, there must have been something on record to show that she had taken the treatment for the disease of COPD and that fact could not be said to have been proved merely on the basis of the certificate of doctor without any prescription or without any record of the hospital.
30. Thus the appellants had misrably failed to prove the fact that the deceased was a patient of COPD prior to taking the policy in question and thus repudiation of claim of the complainant respondent on ground of suppression of material facts ws not justified.
31. Not only this it may be stated here that since the deceased was of the age of 43 years and if she had died suddenly and cause of death of the deceased could be heart failure though the case of the complainant that she had died due to snake bite had not been found established by the complainant respondent but it would not make any difference.
32. It may further be stated here that since in the declaration form regarding health the deceased had answered all the questions in negative and if for the sake of arguments the appellants feels that some of the questions are answered in negative by the deceased, that too would not be helpful to the appellants in the present case as the declaration form in question was filled in up by the agent of the LIC as the 13 deceased was fully illiterate lady putting her thumb impressions on the relevant papers.
33. Before proceeding further, it may be stated here that since in the present case the proposal form of deceased was filled in up by the agent of the LIC, in his own writing, therefore, something should be said about the legal position in respect of agents and principal ; especially when the insured was an illiterate lady and had put her thumb impressions on the proposal form as well on the declaration form regarding her health.
Agents and Principal
34. Chapter 10 of the Contract Act comprising sections 182 to 238 relates to the appointment and authority of agents and the rights and duties of the principal and agent. Section 182 defines an "agent" as a person employed to do an act for or to represent another, who is called the 'principal'.
35. An agent represents his principal and acts not only for him but also in his place and thus, agent could not be treated as servant.
Authority of agents
36. Sections 186 to 189 of the Contract Act relate to authority of agents. The power of the agent to bind the principal may consist of three general kinds, namely, express, 14 implied and apparent authority.
Express authority
37. Express authority is the authority actually given to the agent, whether verbally or in writing and which the principal intends to give. The life insurance agent's authority to solicit proposal and to collect initial premiums is an example of express authority to perform these acts. When the agent's act is within his express authority, the principal is bound by it with regard to the agent's motives.
Implied authority
38. Implied authority is defined in section 187 of the Contract Act as authority which is " to be inferred from the circumstances of the case; and things spoken or written, or the ordinary course of dealing, may be accounted circumstances of the case." Thus, the agent is said to have implied authority to transact in accorcance with the general customs of the business. According to section 188, ' an agent having an authority to do an act, has authority to do every lawful thing which is necessary in order to do such act '. This is referred to as the incidental authority of the agent who has an authority.
Apparent or Ostensible Authority
39. Section 237 of Contract Act provides that when an agent 15 has, without authority, done acts or incurred obligations to third persons on behalf of his principal the principal is bound by such acts or obligations if he has by his words or conduct induced such third persons to believe that such acts and obligations are within the scope of the agent's authority. The principal is then estopped from denying that the agent had the authority which the third person who dealt with him in good faith believed he had. This is also known as 'agency by estoppel'. But the agent's own assertions cannot give him apparent authority or estop the principal. If a person employs another as an agent in a character which involves a particular authority, he cannot by a secret reservation divest him of that authority.
When an agent carries out his instructions properly, no complications arise and the principal will be bound by his acts as if it was his own act. If the agent fails to conform to the instructions, the principal may seek to avoid to be bound by the acts of the agent. If any agent's act are within the scope of his authority, the principal is bound by those acts irrespective of the agent's mistake and the prejudice caused to him by the acts. See Zurich General Accident and Liability Insurance Co. Vs. Roberts (1954 ) 2 Lloyd's Rep 55 ).
Proposal forms filled in up by agents
40. In insurance practice generally the insurer's agent approaches proposers for insurance and gets the proposal form 16 filled in up and signed by them with a declaration that the answers are true and shall be the basis of the contract.
Where the agent himself signs the proposal form or where the agent fills in up the proposal form with untrue answers after the insured signs it and without his/ her knowledge, the insured is not at fault and the policy is enforceable against the insurer.
Where the proposer is illiterate and free from blame in allowing the incorrect answer to reach the insurer, the insurer cannot take advantage of any breach of warranty that the facts are otherwise and this principal clearly applicable in the present case as the deceased was an illiterate lady as she was putting her thumb impressions on the papers.
41. It may be stated here that since in this case the proposal form of the deceased was filled in up by the agent of the appellants and where the deceased had put her thumb impressions on the proposal form and if in such a case some untrue answers are found, for that insured could not be blamed and the policy would be enforceable against the insurer ( in the present case LIC, the appellants ).
42. Further since in this case the proposer was illiterate lady and free from blame in allowing the incorrect answer to reach the insurer, the insurer LIC cannot take advantage of any breach of warranty that the facts are otherwise.
1743. Apart from the above, the proposal form was filled in up by the agent of the appellants LIC, in his own writing and deceased who is fully illiterate lady , hailing from village and did not know the language of the proposal form, has simply put her thumb impressions and therefore, it could not be expected from her that she was aware of all the facts mentioned in the declaration form regarding her health and thus, it could not be said that the deceased was at fault and thus, the policy in question was enforceable against the insurer.
40. Taking into consideration that the appellants had failed to prove the fact that the deceased was a patient of COPD prior to filling in up the declaration form regarding her health dated 27.11.06 and taking into consideration that the deceased was an illiterate lady and the proposal form was filled in up by the agent of the appellants LIC and if some untrue answers are found in the proposal form, for that the insured could not be blamed and thus, the appellants were not justified in repudiating the claim of the respondent complainant and the appellants have repudiated the claim of the complainant respondent without any basis and on wrong assumption and in an arbitrary manner and in view of this, the findings of the District Forum decreeing the claim of the complainant respondent are liable to be confirmed as they are based on correct appreciation of entire materials and evidence available on record and they do not suffer from any basic infirmity, illegality or perversity and hence, no interference is called for 18 with the same and this appeal on merits deserves to be dismissed.
On point of rate of interest
41. In this case the District Forum has awarded interest @ 12% p.a. on the decreetal amount.
42. In our considered opinion, the rate of interest awarded by the District Forum appears to be on higher side and looking to the entire facts and circumstances of the case, we deem it proper to award interest at the rate of 9% p.a. instead of 12% p.a. and to that extent, the impugned order of the District Forum is liable to be modified.
Accordingly, this appeal filed by the appellants on merits is dismissed. However, the complainant respondent would get interest on the decreetal amount at the rate of 9% p.a. instead of 12% p.a. and to the above extent on point of rate of interest the impugned order of the District Forum,Sawaimadhopur dated 26.2.09 stands modified accordingly.
Member Member President