State Consumer Disputes Redressal Commission
Sbi Life Insurance Company Ltd., vs Mrs. Shnyni Valsan Pombally, on 4 July, 2013
BEFORE GOA STATE CONSUMER DISPUTES REDRESSAL COMMISSION, PANAJI GOA FA No. 28/13 1. SBI Life Insurance Company Ltd., Central Processing Centre, Kapas Bhavan,Plot No.3A, Sector No.10, CBD Belapur, Navi Mumbai 400 614. ...Appellant/OP No.2 V/s. 1. Mrs. Shnyni Valsan Pombally, Wife of late Shri Valsan Sankaran Pombally, Suvarna Bakery, Near Raikar Hospital, Marcel, Ponda, Goa 403 107. Respondent No.1/ Complainant 2. State Bank of India, Santo Estevam Branch, Polwado, PO Santo Estevam, Tal Tiswadi Goa 403 106 ..Respondent No.2/ O.P No.2 Appellant/OP No.2 is represented by Adv. Shri. G. N. Mishra Respondent No.1/ Complainant is represented by Adv. Shri. G. Agni Respondent No.2 exparte Coram: Shri. Justice N.A. Britto, President Dated: 04/07/2013 ORDER
[Per Justice Shri. N. A. Britto, President] This appeal has been filed by OP No.2 in C.C. No.75/2010 and is directed against order dated 29/01/2013 of the Lr. District Forum, North Goa at Porvorim by which the complaint filed against OP No.2 has been allowed, and dismissed as against OP No.1.
2. The parties to this appeal are being referred to in the names as they appear in the cause title of the complaint.
3. The facts on record would show that the Complainant is a widow of late Valsan Shankaran Pombally. The Complainants husband (deceased, for short) had taken a housing loan from OP No.1 in the sum of Rs. 10 lacs on or about 31/01/2008, repayable in 222 monthly instalments of Rs.10,131/- each. The Complainant was also a guarantor for the repayment of the said loan. The deceased had also taken from OP No.2 a group insurance policy known as SBI Life Super Suraksha. It was a group insurance scheme meant for housing loan borrowers of SBI, OP No.1. Before joining the scheme or taking the said policy the deceased was required and had submitted to OP No.2 a consent cum - authorization cum - good health declaration on 04/02/2008 and a health questionnaire on 02/04/2008 duly signed by him. The said policy was to cover the housing loan borrowers of the SBI Group as a protection against the risk of death due to any reason during the tenure of the loan. The cover was available from the date of enrolment and during the tenure of the loan and was to cease at the completion of 70 years of age of the borrower or when the loan was reduced to nil balance. In the event of death, the sum assured would become payable to the Group Administrator and would have been the equivalent to the outstanding loan amount including interest as per original installment schedule.
4. The terms and conditions of the said Master Policy stipulated that the assurance would be rendered null and void, interalia, if it appeared that an untrue or incorrect averment was made or misstatement or suppression material information was contained in the good health cum consent letter, medical reports, statements or any other information relating to the assurance or that any of the particulars referred to above had not been truly and fairly stated; provided that the Company may, at its sole discretion grant relief subject to such conditions as the Company may prescribe.
5. The deceased was admitted on 21/10/2008 in Manipal Hospital at Dona Paula, Goa, and diagnosed with cirrhosis of liver with hepatic failure with hepato-renal shutdown, and the past history of the deceased was recorded as known case of diabetes mellitus on regular treatment. The deceased was discharged on 22/10/2008 on request to be admitted to Manipal Hospital at Mangalore for further management, and, on admission at Mangalore it was noted that the deceased had history of diabetes on treatment (name of medicine is mentioned which is illegible) was a smoker and chronic alcoholic for 20 years. The deceased expired on 07/11/2008 and according to the death summary produced by Manipal Hospital at Mangalore, the deceased was a known case of alcoholic liver disease presented with features of decompensation and was referred from Manipal Hospital, Goa with anuria and features of hepatic encephalopathy. On admission he had severe renal failure and features of spontaneous bacterial peritonitis. He was treated conservatively with standard anti hepatic coma measures, parenteral antibiotics and hemodialysis. His blood sugars were strictly monitored. Though he responded to the treatment initially, he subsequently deteriorated and found to have sebsis and expired on 07/11/2008. The actual cause of death was given as hepatic encephalopathy, hepatorenal syndrome, spontaneous bacterial peritonitis with alcoholic liver disease.
6. The Complainant filed a claim with OP No.2 for honouring the insurance policy but OP No.2 by their letter dated 13/03/2009, repudiated the liability stating that the deceased had given a false good health declaration at the time of entering into the scheme. The cause of death was strictly attributable to the pre-existing medical disease of the deceased at the time of enrolment under the scheme. The claim was repudiated, as according to the OP No.2, as per records available with them, the deceased was suffering from diabetes mellitus and was on treatment prior to the enrolment of the policy.
7. The OP No.2 chose to remain absent on 17/06/2013 and again on 27/06/2013 and notwithstanding the absence of OP No.2, we have chosen to decide this appeal on merits, after hearing Shri Agni, the lr. Advocate of the Complainant, based on the principle laid down by the National Commission in G.M., Telecom vs. Jayantial H. Gandhi, 1993 (3) CPR 135 to the effect that an appeal ought not to be dismissed on the ground of default of appearance of the appellant but the merits of the case should be considered on the basis of material on record and appropriate order passed.
8. The question was whether OP No.2 was justified in repudiating the claim of the Complainant on the basis that the policy was vitiated by fraudulent suppression of material facts?
9. The case of the Complainant was that Complainants husband had never an adverse history of blood sugar and that the medical reports of her deceased husband from first admission till his death did not mention that her deceased husband was a known case of diabetes mellitus. Assuming and without admitting the Complainant stated that in case the deceased suffered from diabetes mellitus, the death of her husband was not due to it as mentioned by OP No.2 in their letter dated 13/03/2009 but was due to hepatic encephalopathy, hepatorenal syndrome, spontaneous bacterial peritonitis with alcoholic liver disease. It was the case of the Complainant that OP No.2 was falsely trying to co-relate the death to deny the claim of the Complainant which would amount to unjust enrichment and unfair trade practice.
10. On the other hand, OP No.2 in their written version as well as in the affidavit filed in support thereof, had stated that as the policy resulted in a claim in just 8 months 22 days, OP No.2 conducted an extensive investigation as to the cause of the death of the deceased and it was revealed during investigation as per consultation record of Manipal hospital at Mangalore, that the deceased was suffering from diabetes mellitus since 3 years and the deceased had history of cirrhosis of liver i.e. alcoholic disease. OP No.2 stated that on the basis of medical record maintained by the said hospitals, it was proved that the deceased was suffering from diabetes mellitus from last 3 years i.e. from year 2004 2005 with alcoholic disease and taking treatment for the same and these material facts were suppressed by the deceased in the consent cum authorization cum good health declaration and the good health questionnaire while taking the insurance cover under the said policy and had the deceased disclosed the same, the risk cover would not have been covered by OP No.2 and OP No.2 would have simply rejected the proposal and that there has been fraudulent suppression of pre-existing illness of diabetes mellitus and of alcoholic disease by the deceased and the said documents would show that the deceased had deliberately suppressed the material facts and obtained the insurance cover and therefore the claim was repudiated by their letter dated 13/03/2009 and the repudiation is just and legal and therefore the complaint ought to have been dismissed.
11. We have perused the records and heard Shri Agni the lr. Advocate of the Complainant.
Lr. advocate would submit that the OP No.2 had failed to produce the certificate issued by the doctor who had examined the Complainants husband prior to the issuance of the policy in his favour. Lr. Advocate would submit that even in case the Complainants husband was suffering from diabetes mellitus, the death of the deceased was not due to the said disease but was on account of cirrhosis of liver. Lr. advocate submits that OP No.2 did not examine any of the doctors from the said two hospitals to support their case. Shri Agni would submit that the deceased might have suffered from cirrhosis of the liver after the deceased had obtained the policy and not prior to that. Lr. advocate submits that the loan taken has been repaid. Lr.
advocate would support the impugned order.
12. There is no dispute that the deceased prior to obtaining the said policy had signed what is known as the housing loan insurance consent cum authorization cum - good health declaration and also health questionnaire. The deceased had given good health declaration wherein he had stated that he was in sound health, did not have any physical defect/ deformity, was performing his routine activities independently and he had never suffered or was suffering or was hospitalized or in critical illness or a condition requiring medical treatment for a critical illness, as on date. Critical illness is defined therein. The deceased had further certified that the said declaration was to be the basis of this admission into the Group Insurance Scheme and if any untrue averments be contained therein, he, his heirs, executors, administrators and assignees would not be entitled to receive any benefits under the said Group Insurance Scheme. In the health questionnaire, the deceased had given negative answers to question nos. 3, 4, 9 (a)and (b). The said questions are as follows:
Quest.
QUESTION ANSWER
3.
Have you ever been treated for or told that you have diabetes or raised blood sugar, high blood pressure, heart attack, chest pain or any heart disease, stroke/paralysis or any other disorders of the circulatory system, HIV Infection or a positive test to HIV?
No
4. Have you been treated or told that you have cancer, tumor, growth or cyst of any kind, genitourinary or kidney disorder, hepatitis B, C or any other liver disease, and digestion disorders (eg. ulcer, colitis etc.) disease of the gall bladder or spleen, any musculoskeletal disorders, any blood disorder, or disorder of any gland (e.g. thyroid), asthma, tuberculosis, pneumonia, or any other disease of the lungs, any psychiatric disorder, mental or nervous disorder.
No 9(a) Do you consume more than 10 cigarettes, bidis per day, or chew more than 5 pouches tobacco per day?
No
(b) Do you consume more than 2 pegs of alcohol per day in any form, if yes, please provide the type of alcohol and daily quantity consumed?
No (emphasis supplied)
13. We are unable to accept the submissions made by Shri Agni, the lr. advocate of the Complainant in as much as we are also unable to uphold the findings given by the Lr. District Forum.
14. It is by now, fairly well settled, that three conditions are required to be fulfilled to invoke the second part of section 45 of the Insurance Act, 1938, and, they are as follows:
a) The statement must be on material matter or must suppress facts which it was material to disclose.
b) The suppression must be fraudulently made by the policy holder; and
c) The policy holder must have known at the time of making the statement that it was false or that it suppressed facts which it was material to disclose. (see Mithoolal Nayak, AIR 1962 SC 814)
15. The crucial question before us is whether these three conditions were fulfilled in the present case and we think that they are fulfilled.
16. It is also well settled that a contract of insurance is based on the principle of utmost good faith
- uberrimae fidei applicable to both the parties. The rule of non disclosure of material facts vitiating a policy still holds the field. The bargaining position of the parties in a contract of insurance is unequal. The insured knows all the facts, the insurer is unaware of anything which may be material to the risk. Very often, it is the insured who is the sole person who has this knowledge. The insurer may not even have the means to find out facts which would materially affect the risk. The law, therefore, enjoins on the insured an absolute duty to disclose correctly all material facts which are within his personal knowledge or which he ought to have known had he made reasonable inquiries. A contract of insurance, therefore, can be repudiated for non disclosure of material facts. What are material facts? Every circumstance and the law leans in favour of the insurer is material which would be relevant for a prudent insurer to fix the premium or to decide whether he should take the risk at all. That a proposer does not consider certain facts as not material is not relevant and if it is relevant for the insurer, it must be disclosed.
17. The Apex Court in LIC vs. Smt. G.M. Channabasemma AIR 1991 SC 392, has held that it is well settled that a contract of Insurance is a contract of uberrimae fide and there must be good faith on the part of the assured. The assured is thus under a solemn obligation to make full disclosure of material facts which may be relevant for the Insurer to take into account while deciding whether the proposal should be accepted or not.
While making a disclosure of the relevant facts, the duty of the insured to state them correctly cannot be diluted.
18. The Apex Court in Satwant Kaur Sandhu vs. New India Assurance Company Ltd., CDJ Law Journal, SC 1391/IV/2009 CPJ 08 has held that:
thus it needs little emphasis that when an information on specific aspect is asked for in the proposal form, an assured is under 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.
18.1. Referring to Carter vs. Boehm, the Apex Court noted:
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 circumstances does not exist. The keep 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 risqu (risk?) 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.
18.2 Referring to the expression material fact, the Apex Court noted that the expression was not defined in the Act.
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 and if the proposer has knowledge of such facts, he is obliged to disclose it particularly while answering questions in the proposal form and any inaccurate answers would be 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.
19. The Lr. District Forum rightly noted the legal position in para 21 of the impugned order but wrongly applied the same to the facts of the case as can be seen from the rantings in para 19 of the impugned order. The Lr. District Forum appears to have not accepted, and in our view rightly, the Complainants assertion that prior to the issuance of the policy, the deceased was examined by a doctor. That the deceased was examined by doctor prior to the issuance of the policy was a fact which was vehemently denied by the OP No.2 and was not proved by the Complainant. Complainant would have known the name of the doctor who examined the deceased and could have always given his name. That was not done. Even if the deceased was examined by doctor, the examination would have been only clinical which would not have revealed either that the deceased was suffering from diabetes or cirrhosis unless requisite pathological tests were done. In this context we may refer to the case of Maya Devi Vs. LIC, Rev. Pet.No. 2091/2007 decided on 31/05/2011 (copy of citation on record). This was a case where the deceased was a patient of diabetes for 10 years. The contention that diabetes was not detected at the time of medical examination by the doctor of LIC was rejected observing that these checkups were general in nature and do not include pathological/ blood tests, etc. In Panni Devi vs. LIC (2003 (3) CPJ 15) it was observed that the doctor records what the insured tells him. It is not the result of any test/ examination. If a person withholds any information, the doctor would not know it, unless it is visible.
19.1 The Lr. District Forum has also observed that they failed to understand why insurance cover of such a huge amount was accepted by OP No.2 without medical examination. The answer to it is that the policy was issued on the basis of the declaration and the questionnaire filed by deceased and believing in his word and further making it clear that in the event the information given was found not to be true then the claim would be repudiated as null and void. Declarations to that effect were signed by the deceased below the health declaration as well as the questionnaire.
19.2 We fail to understand as to from where the Lr. District Forum got that it was the duty of OP No.2 to have examined the deceased to find out whether he was medically fit. That is not the requirement of law nor of any uniform policy. The Lr. District Forum also observed that there was a possibility that on the date of taking the policy the deceased might not have been aware of the disease from which the deceased was suffering from. Is the Lr. District Forum trying to suggest that the deceased who was suffering from diabetes for 3 years and was on medication did not know about the same? Here was a case where the deceased was suffering from diabetes mellitus and was on regular medication for 3 years. Here was also a case where the deceased had history of habitually drinking alcohol for 20 years and eventually had died of cirrhosis of liver. These facts were recorded on the very documents produced by the Complainant as well as OP No. 2 including the Death Certificate of the deceased. These were the documents which were maintained by the hospitals in the due performance of their duty in treating of the patients and as such were relevant. The entries therein were made on the basis of the information given by the deceased or the relative accompanying him. Nobody gives false information regarding a patient at the time of admission or treatment in the hospital. The documents were not rebutted by the Complainant. As such maximum credibility was required to be given to them and they in turn prove that the deceased had given false answers in the declaration form as well as to the questionnaire and OP No.2 therefore was entitled to repudiate the claim of the Complainant in terms of declaration made by the deceased at the foot of the said declaration/ questionnaire. Shri Agni can derive no benefit from para 16 of P. J. Chacko and anr., AIR 2008 SC 424. There was no need for OP No.2 to have examined the doctors from any of the two hospitals in support of the medical records produced on record by the Complainant as well as by OP No.2 which clearly showed that the Complainant had given false answers to the said questions nos. 3, 4, 9 (a) & 9 (b). It is difficult to accept that a person who had history of habitually drinking alcohol for 20 years had developed cirrhosis of the liver within a period of 8 months 22 days.
20. As regards the submission that the deceased died due to hepatic encephalopathy and not due to diabetes, it may be firstly stated that ultimate cause of death of the deceased has no relevance whatsoever to the suppression of information regarding health as required by questions 3, 4, 9(a) and (b) ( see LIC of India v/s. Krishan Chandr Sharma, order dated 30/03/95 in RP No.1935/99 and LIC of India VS. Smt. Ayesha, order dated 21/09/2004 in R.P. No.3362/04 of the N.C.) and secondly because hepatic encephalopathy due to which the deceased died was attributable to alcoholic liver disease which the deceased had suppressed in giving answer to question no.4. The medical records show that the deceased was a regular smoker, drinker, a diabetic and suffering from the cirrhosis of liver and as such was almost a physical wreck and yet obtained the said policy by suppressing vital information sought for by OP No.2 and by committing fraud on OP No.2. As already stated, the Apex Court in Satwant Kaur Sandhu (Supra) has also held that any inaccurate answers 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.
21. To sum up, in the case at hand, the deceased obtained the Insurance policy by suppressing the information sought for by OP No.2 in question nos. 3, 4, 9 (a) & 9 (b) and or giving false answers and thus playing fraud on OP No.2 inspite of the fact that the deceased was a regular smoker, a drinker for 20 years, a diabetic for 3 years on medication who eventually died of cirrhosis of the liver. Had he disclosed the said ailments or given positive answers to the said questions, OP No.2 would not have accepted the proposal as stated by them. The deceased having suppressed material facts in the said questionnaire, OP No.2 could not be faulted in repudiating the claim of the Complainant and as such there was no question of any deficiency of service. The Lr. District Forum is not expected to make charity of public money when the contract/ policy was vitiated by the very acts of the insured (See P. J. Chacko, Supra)
22. For reasons aforesaid, the Lr. District Forum ought to have dismissed the complaint.
Consequently, we allow this appeal and set aside the impugned order and dismiss the complaint and considering the facts, with no order as to costs.
[Justice Shri N. A. Britto] President /lm