State Consumer Disputes Redressal Commission
Sh. Raj Kumar Saini vs L.I.C. Of India on 25 August, 2020
IN THE STATE COMMISSION: DELHI
(Constituted under section 9 of the Consumer Protection Act, 1986)
Date of Hearing: 21.08.2020
Date of Decision: 25.08.2020
First Appeal No. 283/2018
IN THE MATTER OF
SH. RAJ KUMAR SAINI
S/o Late Kishan Lal
R/o 140/1, Bhagwan Nagar
Ashram, New Deli-110014 ....Appellant
VERSUS
LIC OF INDIA
Through its General Manager/Branch Manager/AR
12F, Branch office
13-14, DDA Shopping Centre
Pocket-II, Phase-I, Mayur Vihar
Delhi-110092 ....Respondent
HON'BLE SMT. JUSTICE SANGITA DHINGRA SEHGAL (PRESIDENT)
HON'BLE SH. ANIL SRIVASTAVA, MEMBER
1. Whether reporters of local newspaper be allowed to see the judgment? Yes
2. To be referred to the reporter or not? Yes
Present: Sh. Vipin Saini, Counsel for the appellant
Sh. Abhishek Nanda, Counsel for the respondent
PER: ANIL SRIVASTAVA, MEMBER
(FA-283/2018) SH. RAJ KUMAR SAINI VERSUS LIC OF INDIA PAGE 1 OF 9
JUDGEMENT
1. The order dated 11.05.2018 passed by the District Consumer Disputes Redressal Forum (East) in CC-37/2015 in the matter of Sh. Raj Kumar Saini versus Life Insurance Corporation of India, upholding the repudiation done by the insurer and dismissing the complaint being devoid of merit, has been assailed before this Commission by the complainant (before the Forum), Sh. Raj Kumar Saini, for short appellant here, by way of an appeal under Section 15 of the Consumer Protection Act 1986, the Act, against M/s Life Insurance Corporation Ltd., hereinafter referred to as respondents, alleging that the order so passed is wholly illegal, arbitrary and not sustainable, in the eyes of law and praying for setting aside the orders impugned in this appeal.
2. Facts of the case necessary for the adjudication of the appeal are these.
3. The appellant /respondents issued one cheque no. 239220 of Rs. 52531/- as a premium amount dated 14.07.2007 in favour of LIC of India on the sum assured of Rs. Ten Lakh for his minor daughter, Lavanya Saini and had duly signed the proposal form. The appellant received thereafter a policy no. 124209824 dated 28.07.2007 with a sum assured of Rs. 500000/-. The appellant/complainant soon thereafter called Mr. Manish Gupta, the agent of respondent and sought for the clarification as to how the policy was issued with sum assured Rs. Five Lakhs whereas he had applied for the policy with sum assured as Rs. Ten Lakhs. In response thereto the appellant was informed that he had taken the policy split in two parts with a sum assured Rs. 5 lakh each. The appellant was issued thereafter another policy with a sum assured of Rs. Five Lakhs was issued. The premium of the both the policy were paid by the appellant to OP under a single cheque until the demise of the appellant daughter.
4. On 10.11.2012 Lavanya Saini the daughter of the appellant however passed away due to Encephalitis. After the demise of his daughter Lavanya Saini, the insured. Appellant approached the (FA-283/2018) SH. RAJ KUMAR SAINI VERSUS LIC OF INDIA PAGE 2 OF 9 respondent for the realisation of the claim over the death of Lavanya Saini. In response thereto the respondents released the payment of Rs. 6,29,000/- on one policy no. 124207663 on 09.07.2013 by cheque and repudiated the claim amount of the policy No. 124209824 on the ground that the appellant did not disclose the details of the previous policy taken by him in the proposal form with Q. No. 9. The appellant claimed that the second policy referred to by respondents was never in his knowledge. The fact of second policy's proposal form came into their notice on receipt of reply from the opposite parties filed before the Consumer Dispute Redressal Forum and this fact was duly agitated before the ld. Forum. But the forum failed to take into consideration the act of the forgery committed by the respondents in the process.
5. The District Forum not having appreciated the facts in true spirit dismissed the complaint, leading to filing of this appeal on the ground that the impugned order is based on incorrect facts presented before the forum. Secondly the ld. Forum below failed to consider the fact that only one proposal form was supplied by the appellant to the OP on 14.07.2007 and got issued cheque of Rs. 52,531/- in favour of OP. Thirdly the forum below failed to consider the fact of splitting of policy from Rs. Ten Lacs to Rs. 5 Lacs each was a unilateral act of respondent for which the complainant cannot be held guilty of concealing the fact of question no. 9 regarding the details of the previous policy. Fourth, the forum failed to appreciate the use of the false/forged and fabricated documents on record which bears manipulation, alteration and cutting in the proposal form and also in another proposal form to which the signature of appellant was forged which contains false information. Fifth, the forum failed to appreciate the fact that the respondent is under contractual obligation to verify the contents and information furnished in the proposal form with supplementary documents filed along with the proposal form.
6. Respondents were noticed and in response thereto they have filed their reply resisting the appeal both on technical ground and on (FA-283/2018) SH. RAJ KUMAR SAINI VERSUS LIC OF INDIA PAGE 3 OF 9 merit stating that the appellant had deliberately concealed material fact pertaining to the previous policy. The details of the previous policy bearing no. 124207663 was not disclosed. Had the policy details under policy no. 124207663 been disclosed under the relevant question no. 9 proposal form no. 300 on the life of proposer the OP would have not issued the second policy of insurance bearing no. 124209824. Secondly after considering material suppression of facts by the appellant in concealing details of previous policy they decided to repudiate the liabilities under policy bearing no. 124209824. However in the second policy no. 124209824 the respondent has sanctioned an ex-gratia payment of Rs. 1,57,593 being refund of all paid premium under policy bearing no. 124209824 on 30.11.2013. Thirdly the factum about what is material has been defined in the regulation 2(d) of the Insurance Regulatory and Development Authority (Protection of Policyholder's Interest), Regulations, 2002 reads as under:-
"Proposal Form" mean a form to be filled in by the proposer for insurance, for furnishing all material information required by the insurer in respect of a risk, in order to enable the insurer to decide whether to accept to decline, to undertake the risk, and in the event of acceptance of the risk, to determine the rates, terms and conditions of the cover to be granted.
Explanation- "Material" for the purpose of these regulations shall mean and include all important, essential and relevant information in the context of underwriting the risk to be covered by the insurer.
7. This matter was listed before this Commission for final hearing on 21.08.2020 when the counsel for both sides appeared and advanced their arguments as per their pleadings, the appellant for setting aside the order impugned here and for the relief claimed in the complaint and the respondents for upholding the orders, no case having been made out for interfering with the order and for dismissal of the appeal, factum about the concealment of the previous since writ (FA-283/2018) SH. RAJ KUMAR SAINI VERSUS LIC OF INDIA PAGE 4 OF 9 large on the face. We have perused the records of the case and given a thoughtful consideration to the subject matter.
8. In the first instance we may advert to the column 9 of the proposal form to examine and verify about the disputed fact about holding of the previous policy. The appellant has indicated nil against column 9 of the proposal form indicating that he was not holding any previous policy.
9. We have perused the records of the case and we notice from the testimony of the complainant as also of Sh. D.K. Joshi, Manager (Legal) of LIC of India stating that LIC of India did not allow the claim under policy no. 124209824. Further the complainant was issued policy no. 124207663 with commencement on 08.08.2007 and again complainant filed another proposal for issuance of a policy and policy no. 124209824 with commencement on 28.07.2007 issued. In the second policy, the complainant concealed particulars of previous policy bearing no. 124207663 under question no. 9 of the proposal form regarding the holding of this policy.
10. It is a trite law that in the event of suppression of material fact the insured is not entitled for indemnification. And what is material has been defined to mean and include relying on the judgement of the Hon'ble NCDRC in the matter of Asha Garg versus United India Insurance Co. Ltd. as reported in [2005] 4 CPJ 269 (NC), all of important, essential and relevant information in the context of underwriting the risk to be covered by the insurer.
11. The Hon'ble NCDRC in yet another matter, in the matter of Seema Begum versus HDFC Standard Life Insurance Company Ltd. and ors as reported in I [2020] CPJ 411 (NC) is pleased to hold as under:-
"The deceased having withheld a material information with respect to state of his health and such withholding of information having influenced decision of insurer on the question as to whether insurance cover should be given to him or not, insurer is not liable to make payment to the complainant in terms of insurance policy taken by her".
(FA-283/2018) SH. RAJ KUMAR SAINI VERSUS LIC OF INDIA PAGE 5 OF 9
12. Having dealt with the point regarding material fact we may examine whether on the face of having not disclosed the factum about the subsistence of policy the insurer is under an obligation to make the payment. The Hon'ble Supreme Court of India in the matter of Reliance Life Insurance Co. Ltd. and anr. versus Rekhaben Navenbhai Rathod as reported in II [2019] CPJ 53 (SC) is pleased to hold as under:-
The expression "material" in the context of an insurance policy can be defined as any contingency or event that may have an impact upon the risk appetite or willingness of the insurer to provide insurance cover. In Mac Gillivray on Insurance Law (Twelfth Edition, Sweet and Maxwell (2012). See Pg. 493 for cases relied upon] it is observed thus:-
The opinion of the particular assured as to the materiality of a fact will not as a rule be considered, because it follows from the accepted test of materiality that the question is whether a prudent insurer would have considered that any particular circumstance was a material fact and not whether the assured believed it so ...‖ Twelfth Edition, Sweet and Maxwell (2012). See Pg. 493 for cases relied upon.
Materiality from the insured's perspective is a relevant factor in determining whether the insurance company should be able to cancel the policy arising out of the fault of the insured. Whether a question concealed is or is it not material is a question of fact. As this Court held in Satwant Kaur (supra):
Any fact which goes to the root of the contract of insurance and has a bearing on the risk involved would be ―material Materiality of a fact also depends on the surrounding circumstances and the nature of information sought by the insurer. It covers a failure to disclose vital information which the insurer requires in order to determine firstly, whether or not to assume the risk of insurance, and secondly, if it does accept the risk, upon what terms it should do so. The insurer is better equipped to determine the limits of risk-taking as it deals with the exercise of assessments on a day-to-day basis. In a contract of (FA-283/2018) SH. RAJ KUMAR SAINI VERSUS LIC OF INDIA PAGE 6 OF 9 insurance, any fact which would influence the mind of a prudent insurer in deciding whether to accept or not accept the risk is a material fact. If the proposer has knowledge of such fact, she or he is obliged to disclose it particularly while answering questions in the proposal form. An inaccurate answer will entitle the insurer to repudiate because there is a presumption that information sought in the proposal form is material for the purpose of entering into a contract of insurance.
Contracts of insurance are governed by the principle of utmost good faith. The duty of mutual fair dealing requires all parties to a contract to be fair and open with each other to create and maintain trust between them. In a contract of insurance, the insured can be expected to have information of which she/he has knowledge. This justifies a duty of good faith, leading to a positive duty of disclosure. The duty of disclosure in insurance contracts was established in a King's Bench decision in Carter v Boehm19, where Lord Mansfield held thus:
Insurance is a contract upon speculation. The special facts, upon which the contingent chance is to be computed, lie most commonly in the knowledge of the insured only; the under writer trusts to his representation, and proceeds upon confidence that he does not keep back any circumstance in his knowledge, to mislead the under-writer into a belief that the circumstance does not exist, and to induce him to estimate the risque, as if it did not exist.‖ It is standard practice for the insurer to set out in the application a series of specific questions regarding the applicant's health history and other matters relevant to insurability. The object of the proposal form is to gather information about a potential client, allowing the insurer to get all information which is material to the insurer to know in order to assess the risk and fix the premium for each potential client. Proposal forms are a significant part of the disclosure procedure and warrant accuracy of statements. Utmost care must be exercised in filling the proposal form. In a proposal form the applicant declares that she/he warrants truth. The contractual duty so imposed is such that any suppression, untruth or inaccuracy in the statement in the proposal form will be considered as a breach of the duty of good faith and will render the policy voidable by the insurer. The system of adequate disclosure helps buyers and sellers of insurance policies to meet at a common point and narrow down the gap of information asymmetries. This allows the parties to serve their interests better and understand the true extent of the (FA-283/2018) SH. RAJ KUMAR SAINI VERSUS LIC OF INDIA PAGE 7 OF 9 contractual agreement. The finding of a material misrepresentation or concealment in insurance has a significant effect upon both the insured and the insurer in the event of a dispute. The fact it would influence the decision of a prudent insurer in deciding as to whether or not to accept a risk is a material fact. As this Court held in Satwant Kaur (supra) (1766) 3 Burr 1905 there is a clear presumption that any information sought for in the proposal form is material for the purpose of entering into a contract of insurance‖. Each representation or statement may be material to the risk. The insurance company may still offer insurance protection on altered terms.
13. The NCDRC in the matter of LIC of India & anr versus Vidya Devi & anr. in RP/382/2011 decided on 16.07.2012 is pleased to take the same view.
14. In the celebrated authority reported in Satwant Kaur Sandhu versus New India Assurance Company Ltd. IV [2009] CPJ 8 (SC) it has been held as under:-
"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 propose 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."
It was further held as under:-
"17.The term "material fact" is not defined in the Act and, therefore, 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 (FA-283/2018) SH. RAJ KUMAR SAINI VERSUS LIC OF INDIA PAGE 8 OF 9 Insurance and has a bearing on the risk involved would be "material".
15. The Hon'ble NCDRC in yet another matter, in the matter of Sanjay Atmaram Patel versus Divisional Manager, LIC of India & 2 ORS in RP/1573/2012 decided on 14.12.2017 is pleased to hold as under:-
It is not in dispute that in the present case, the Insured did have two previous insurance policies but failed to disclose this fact at the time of obtaining the policy in question. In our opinion, in the light of the afore-noted settled proposition of law, non-disclosure of earlier policy amounted to suppression of a material fact, particularly in a medi-claim policy and, therefore, the Insurance Company was justified in repudiating the claim in question. In that view of the matter, we do not find any jurisdictional error in the impugned order, warranting our interference in the Revisional Jurisdiction.
16. Having regard to the discussion done and the legal position explained we are of the considered view that there exists no infirmity in the repudiation done and thus there are no good ground to interfere with the orders impugned here.
17. Ordered accordingly.
18. A copy of this order be forwarded to the parties to the case free of cost as is statutorily required. A copy of this order be forwarded to the District Forum for information.
19. File be consigned to records.
(Dr. JUSTICE SANGITA DHINGRA SEHGAL) PRESIDENT (ANIL SRIVASTAVA) MEMBER PRONOUNCED ON 25.08.2020 sl (FA-283/2018) SH. RAJ KUMAR SAINI VERSUS LIC OF INDIA PAGE 9 OF 9