National Consumer Disputes Redressal
Smt. Sunita vs Hdfc Standard Life Insurance Co. Ltd. & ... on 25 October, 2021
Author: R.K. Agrawal
Bench: R.K. Agrawal
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI FIRST APPEAL NO. 475 OF 2016 (Against the Order dated 20/01/2016 in Complaint No. 14/2012 of the State Commission Maharashtra) 1. SMT. SUNITA W/d. Sandeep khedekar, R/o. Hiren plaza No.1, 3rd floor near Radhika Mangal karyalaya sahakar nagar chandrapur ...........Appellant(s) Versus 1. HDFC STANDARD LIFE INSURANCE CO. LTD. & ANR. 5th floor Eureka towers mindplace complex link road, Malad west Mumbai - 440064 2. The Branch Manager, HDFC standard life insurance co ltd, 1st shri sanmati complex, near sapna talkies Zila parasihad road, chandrapur - 442401 ...........Respondent(s)
BEFORE: HON'BLE MR. JUSTICE R.K. AGRAWAL,PRESIDENT HON'BLE DR. S.M. KANTIKAR,MEMBER For the Appellant : For the Appellant : Mr. Prakash Ranjan, Advocate For the Respondent : For the Respondents : Mr. Joy Dip Bhattacharya, Advocate Dated : 25 Oct 2021 ORDER R. K. AGRAWAL, J., PRESIDENT
1. Delay condoned.
2. Challenge in this First Appeal is to the Order dated 20th January, 2016 passed by the State Consumer Disputes Redressal Commission, Maharashtra, Circuit Bench at Nagpur (for short, "the State Commission") in Complaint Case No. 14 of 2012 whereby the Complaint filed by the Complainant/Appellant herein, was dismissed holding that there was no deficiency in service on the part of the Opposite Parties/Respondents herein in repudiating the claim preferred by the Complainant.
3. Concisely put, the facts leading to the filing of the Complaint before the State Commission are that the Husband of the Complainant (for short, the "Deceased"), during his life time, had obtained two Insurance Policies from the Opposite Party No.1, namely, HDFC Standard Life Insurance Company Ltd. (for short, the "Insurance Company") bearing No.12992586 on 30.06.2009 with assured sum of ₹12,50,000/- and HDFC Term Assurance Policy bearing No.13006145 dated 25.08.2009 with assured sum of ₹75,00,000/-. During the validity of the said Policies, the Deceased was murdered by the Naxalites and a case was registered by the Police on 01.05.2011. The Complainant, being legal heir of the Deceased submitted the Claim under the said two Policies with the Insurance Company along with all necessary documents, which were acknowledged by the Insurance Company vide their letter dated 13.09.2011. By the said letter, the Complainant was also informed that since the death of the Deceased has taken place within two years of issuance of Policies, the Claim is an early Claim and the Insurance Company would verify certain facts before deciding the Claim and may call additional information or clarifications to be provided by the Complainant. However, subsequently, vide two separate Letters both dated 12.10.2011, the Complainant was informed by the Insurance Company that they were not able to accept the Claim of the Complainant under the said two Policies inasmuch as the Deceased had not disclosed the information regarding 'Existing Insurance Covers' at the time of applying for the subject Insurance Policies. Consequently, Complainant approached the Grievance Committee of the Insurance Company and the Insurance Ombudsman Office. The Grievance Committee, vide letter dated 21.12.2011, informed the Complainant that her claim had been repudiated by the Insurance Company as at the time of taking the aforesaid Policies her husband has not disclosed the material information about the existing Policies taken from the other Insurance Companies. The Insurance Ombudsman also, vide its letter dated 19.12.2011, informed the Complainant that she may approach any Appropriate Forum like Consumer Forum or Civil Court since the amount of compensation claimed was more than ₹20,00,000/- which was beyond their pecuniary jurisdiction.
4. Complainant further averred in the Complaint that the Proposal Form for obtaining the Policy bearing No.12992586 dated 30.06.2009 for ₹12,50,000/-, was filled by the Agent of the Insurance Company and her husband had only signed the Proposal Form. The Proposal Form for taking the second policy for ₹75,00,000/- was also filled by the Agent of the Insurance Company, however, in the said Proposal Form, the Agent has specifically disclosed the information about the earlier Policy for a sum of ₹12,50,000/- taken by her husband on 30.06.2009. Since, her husband had disclosed the information about taking of the first policy for ₹12,50,000/- in the Proposal Form for taking the second Policy for ₹75,00,000/-, the Insurance Company was not justified in repudiating the claims.
5. It is further stated in the Complaint that in view of Section 45 of the Insurance Act, 1938, a Policy can be repudiated within two years from the date of its commencement for the reason of suppression of material fact and not afterwards. In the present case, the policies were taken on 30.06.2009 and 25.08.2009, however, the Insurance Company had repudiated the Claim on 12.10.2011 i.e. after expiry of the period of two years from the date of issuance of Policies as such the repudiation was not justified.
06. Complainant served a legal notice on 24.02.2012 upon the Insurance Company calling them to pay the sum assured under the two Policies with interest within a week of receipt of notice. The Insurance Company replied the legal notice denying any obligation and reiterating their stand that the Deceased did not disclose the information about the Policies obtained from other Insurance Companies, therefore, the claim was not payable.
07. Feeling aggrieved and alleging deficiency in service on the part of Insurance Company, the Complainant filed the Complaint before the State Commission, Maharashtra with the following prayers:
(i) direct the Insurance Company to release the amount of ₹87,50,000/-, the sum assured in both the policies, along with accrued interest from the date of death till payment to the Complainant;
(ii) to pay ₹5,00,000/- towards mental agony and harassment and (iii) to pay Rs.1,00,000/- as costs of litigation.
8. The Complaint was contested by the Insurance Company denying all the allegations of deficiency in service levelled against them and admitting the issuance of the subject Insurance Policies to the Deceased, death of the husband of the Complainant on 01.05.2011, submission of claim form along with documents, issuance of repudiation letter dated 12.10.2011 and the proceedings before the Grievance Committee as well as the Insurance Ombudsman. It was specifically denied that the Proposal Forms for both the Policies in question were filled up by the Agent of the Insurance Company. It was further pleaded that the claim of the Complainant was repudiated for non-disclosure of the true facts regarding the existing Policies taken from other Insurance Companies. Similarly, contention of the Complainant that her claim cannot be repudiated after expiry of the period of two years, as per Section 45 of the Insurance Act, 1938, was strongly resisted. It is contended that the Insurance Company while replying the legal notice dated 24.02.2012 made the Complainant apprised for the reasons of repudiation of the claim. The Insurance Company specifically contended that their action was strictly in consonance with the provisions of the Insurance Act as well as the rules followed by the IRDA from time to time. The dismissal of the Complaint, being devoid of merits, with compensatory costs was prayed for.
09. The State Commission, after perusing the material available on record and observing that number of life insurance policies were obtained by the deceased which were not disclosed in the Proposal Form at the time of taking the aforesaid two Policies, has dismissed the complaint as under:-
" However, the DLA in his proposal form which was submitted by him for obtaining policy No.12992586 for Rs.12.50 Lacs had informed that the he had not obtained any policy. However, in another proposal form submitted by him for policy No.13006145 for Rs.75.00 Lacs, he had given information only about the aforesaid first policy No.12992386 and about another policy bearing No. 10565923. The specific questions, in both proposal forms submitted by him for said both policies, was asked to him as to whether he has existing insurance cover of premium paying and or paid up policies. However, he suppressed about the policies in both proposal forms, which were obtained by him from Bajaj Allianz Life Insurance Company, ICICI Prudential Life Insurance Company and LIC of India as mentioned above, though the period of those polices was not over.
We find that this is a suppression of material fact on the part of DLA. There is no evidence to show that the agent had filled the proposal form and he had obtained the signature of the DLA on the proposal form without explaining contents of both said proposal forms to the DLA. Moreover, as per provisions of Sec. 45 of Insurance Act, claim can be repudiated, if it is proved that the assured knowingly and fraudulently suppressed the material facts. We find that as the DLA knowingly and fraudulently suppressed the material fact about his obtaining various policies as noted above from aforesaid four other insurance companies, the OP No.1 has rightly repudiated the claim of the complainant about both the policies. The aforesaid decisions of Hon'ble Supreme Court relied on by the learned advocate of OP are applicable to the present case since all the three conditions contemplated under section 45 of Insurance Act, 1938 as clarified by Hon'ble Supreme court are attracted in this case."
10. Feeling aggrieved, the Complainant has filed this First Appeal.
11. We have heard the learned Counsel for the Parties at some length and also perused the material available on record as well as Written Submissions filed by them.
12. In brief, it is the case of the Complainant that her husband has obtained two Policies from the Insurance Company bearing Nos. 12992586 on 30.06.2009 for ₹12,50,000/- and 13006145 on 25.08.2009 for ₹75,00,000/- which fact is also not denied by the Insurance Company. Her husband was killed by the Naxalites on 01.05.2011 during the currency of the Policies and being the legal heir of the deceased husband, she filed the claim with the Insurance Company under the aforesaid two Policies. However, her claim was repudiated by the Insurance Company on the ground of suppression of material fact by her husband while filling up the Proposal Forms for obtaining the aforesaid policies.
13. As recorded in the Order of the State Commission, the Deceased during his life time, had obtained the following Policies:-
Sl.
No. Name of Insurance Company Name of Policy Policy No. Date of Commence-ment of policy
1.
HDFC Life Insurance Unit Linked Pension Plan Unit Linked Wealth Term Assurance Regular Premium Plan Unit Linked Pension maximiser 10565923 12992586 13006145 13540941 27.03.2006 30.06.2009 25.08.2009 15.03.2010
2. Bajaj Allianz Life Insurance Unit Linked Century Plan Unit Linked - New Unit Gain Unit Linked Century Plus Unit Linked Unit Gain Plus Gold Unit Linked Max.Gain 93019397 119193181 119192118 119194878 151561384 20.03.2008 28.01.2009 28.1.2009 28.01.2009 29.01.2010
3. ICICI Prudential Life Insurance Unit Linked Pinnacle Policy Smartkid New Unit Linked RP Policy Unit Linked Smartkid RP Policy Health Saver Policy 12861823 12951616 13011688 15165194 11.11.2009 10.12.2009 31.12.2009 03.03.2011
4. LIC of India Jeevan Shree Without Profit Bima Kiran Policy (without profit) Jeevan Chaya Policy (without profit) + acc.Benefit Jeevan Chaya Policy (without profit) + acc.Benefit Jeevan Anand (without profit) + acc.Benefit Jeevan Anand (without profit) + acc.Benefit Jeevan Anand (without profit) + acc.Benefit Unit Linked 188 Plan LIC's Profit Plus Unit Linked 188 Plan LIC's Profit Plus LIC's Jeevan Tarang Policy (with profit) 970627206 971499059 971502508 974191295 974524114 974531638 974934336 975786593 975786593 975786729 10.07.1998 28.12.2001 15.03.2002 28.12.2002 28.12.2003 14.09.2004 28.08.2005 14.09.2007 14.09.2007 24.09.2007 However, while filling up the Proposal Form for obtaining Policy No.12992586 for ₹12,50,000/-, he mentioned that he had not obtained any other Policy and while taking the Policy No.13006145 for ₹75,00,000/-, he gave information only about the Policy No.1299586 and Policy No.10565923 in the Proposal Form. A specific information was sought in Column 6 of the first Proposal form that "Do you have any existing insurance cover of premium paying and/or paid up Policies". The answer to the said question was "No". Even in the second Proposal Form, the Deceased gave information about two existing Policies. Thus, he suppressed the material information by not disclosing all the existing Policies in both the Proposal Forms, which were obtained by him from Bajaj Allianz Life Insurance Company, ICICI Prudential Life Insurance Company and LIC of India. Ld. Counsel appearing for the Appellant contended that the Agent of the Respondent Insurance Company had filled up the Proposal Forms and obtained Signatures of the insured without explaining the contents of both the Proposal Forms and as such the deceased had not suppressed any material information. However, the Complainant has failed to adduce any documentary evidence to that effect.
14. On the contrary, Ld. Counsel appearing for the Insurance Company rigorously urged that as per provisions of Section 45 of the Insurance Act, 1938, the claim can be repudiated, if it is proved that the assured knowingly and fraudulently suppressed the material facts. The deceased has obtained the two policies in question by suppressing the information about various policies taken by him from different Insurance Companies in the Proposal Form and hence, the claim was rightly repudiated by the Insurance company.
15. The question which falls for our consideration is as to whether the suppression of the information about existing policies was material or not for the Insurer to accept the risk or not".
16. A Co-ordinate Bench of this Commission in the case of Sanjay Atmaram Patel Vs. Divisional Manager, LIC of India - (Revision Petition No. 1573 of 2012 decided on 14.12.2017), while dealing with the question of suppression of material facts with regard to existing policies, has held as under:-
" It is trite that the term "material fact" is not defined in the Act and, therefore, it has to be 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". Any fact the knowledge or ignorance of which would materially influence an insurer in making the contract or in estimating the degree and character of risks in fixing the rate of premium is a material fact [See: Satwant Kaur Sandhu Vs. New India Assurance Company Ltd. IV (2009) CPJ 8 (SC)].
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."
17. Similarly, the Hon'ble Supreme Court in the case of Reliance Life Insurance Company Ltd. Vs. Rekhaben Nareshbhai Rathod - (2019) 6 SCC 175, has laid down the principal that a contractual duty so imposed on the Insured 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. In the said case, the spouse of the Complainant obtained a Life Insurance Policy on 10.07.2009 from Max New York Life Insurance Company Ltd. for a sum of ₹11,00,000/-. Barely two months thereafter, on 16.09.2009, he submitted a Proposal for a Life Insurance Term Plan Policy for an assured sum of ₹10,00,000/-. Among the questions that the Proposer was required to answer in the Proposal Form was whether he was currently insured or had previously applied for Life Insurance Cover, Critical Illness Cover or Accident Benefit Cover. The answer to these queries was "negative". The Insured died on 08.02.2010 within the two years of the issuance of the Policies. The claim filed by the Complainant was repudiated by the Insurance Company in terms of Section 45 of the Insurance Act, 1938 on the ground of suppression of material information in the Proposal Form. The Complaint filed by the Complainant was dismissed by the District Forum. However, the State Commission, in appeal, reversed the order of the District Forum relying on a decision of the National Commission in the case of Sahara India Life Insurance Co. Ltd. Vs. Rayani Ramanjaneyulu - III (2014) CPJ 582. The said order was also upheld by the National Commission. Finally, matter went to the Apex Court. The Hon'ble Supreme Court referring to the provisions of Section 45 of the Insurance Act, 1938 and earlier case laws, has held as under:-
"25. 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 MacGillivray on Insurance Law 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..."
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 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.
26. 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. Boehm (1766) 3 Burr 1905, 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 underwriter 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 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) "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.
27. In the present case, the insurer had sought information with respect to previous insurance policies obtained by the assured. The duty of full disclosure required that no information of substance or of interest to the insurer be omitted or concealed. Whether or not the insurer would have issued a life insurance cover despite the earlier cover of insurance is a decision which was required to be taken by the insurer after duly considering all relevant facts and circumstances. The disclosure of the earlier cover was material to an assessment of the risk which was being undertaken by the insurer. Prior to undertaking the risk, this information could potentially allow the insurer to question as to why the insured had in such a short span of time obtained two different life insurance policies. Such a fact is sufficient to put the insurer to enquiry.
28. Learned Counsel appearing on behalf of the insurer submitted that where a warranty has been furnished by the proposer in terms of a declaration in the proposal form, the requirement of the information being material should not be insisted upon and the insurer would be at liberty to avoid its liability irrespective of whether the information which is sought is material or otherwise. For the purposes of the present case, it is sufficient for this Court to hold in the present facts that the information which was sought by the insurer was indeed material to its decision as to whether or not to undertake a risk. The proposer was aware of the fact, while making a declaration, that if any statements were untrue or inaccurate or if any matter material to the proposal was not disclosed, the insurer may cancel the contract and forfeit the premium. MacGillivray on Insurance Law formulates the principle thus:
"... In more recent cases it has been held that all-important element in such a declaration is the phrase which makes the declaration the "basis of contract". These words alone show that the proposer is warranting the truth of his statements, so that in the event of a breach this warranty, the insurer can repudiate the liability on the policy irrespective of issues of materiality."
29. We are not impressed with the submission that the proposer was unaware of the contents of the form that he was required to fill up or that in assigning such a response to a third party, he was absolved of the consequence of appending his signatures to the proposal. The proposer duly appended his signature to the proposal form and the grant of the insurance cover was on the basis of the statements contained in the proposal form. Barely two months before the contract of insurance was entered into with the Appellant, the insured had obtained another insurance cover for his life in the sum of Rs. 11 lakhs. We are of the view that the failure of the insured to disclose the policy of insurance obtained earlier in the proposal form entitled the insurer to repudiate the claim under the policy.
30. We may note at this stage, that the view which was taken by the NCDRC in the present case was contrary to its earlier decision in Vidya Devi (supra). In that case, the NCDRC upheld the repudiation of an insurance claim under a life insurance cover by the LIC on the ground of a non-disclosure of previous insurance policies. In taking this view, the NCDRC relied on its earlier decision in Chandarana (supra). Subsequently in Sahara India (supra), the NCDRC took a contrary view. Having noticed its earlier decisions, the NCDRC did not even attempt to distinguish them. Indeed, the earlier decisions were binding on the NCDRC. This line of approach on the part of the NCDRC must be disapproved.
31. Finally, the argument of the Respondent that the signatures of the assured on the form were taken without explaining the details cannot be accepted. A similar argument was correctly rejected in a decision of a Division Bench of the Mysore High Court in VK Srinivasa Setty v. Messers Premier Life and General Insurance Co. Ltd. MANU/KA/0032/1958 : AIR 1958 Mys 53 where it was held:
" Now it is clear that a person who affixes his signature to a proposal which contains a statement which is not true, cannot ordinarily escape from the consequence arising therefrom by pleading that he chose to sign the proposal containing such statement without either reading or understanding it. That is because, in filling up the proposal form, the agent normally, ceases to act as agent of the insurer but becomes the agent of the insured and no agent can be assumed to have authority from the insurer to write the answers in the proposal form.
If an agent nevertheless does that, he becomes merely the amanuensis of the insured, and his knowledge of the untruth or inaccuracy of any statement contained in the form of proposal does not become the knowledge of the insurer. Further, apart from any question of imputed knowledge, the insured by signing that proposal adopts those answers and makes them his own and that would clearly be so, whether the insured signed the proposal without reading or understanding it, it being irrelevant to consider how the inaccuracy arose if he has contracted, as the Plaintiff has done in this case that his written answers shall be accurate."
32. For the reasons which we have adduced, we are of the view that the SCDRC was in error in reversing the judgment of the District Forum. The NCDRC has similarly erred in affirming the view of the SCDRC. We, accordingly, allow the appeal and set aside the impugned judgment and order of the NCDRC dated 20 February 2015. The consumer complaint filed by the Respondent shall stand dismissed."
18. Respectfully following the decisions of the Hon'ble Supreme Court and the Co-ordinate Bench of this Commission as well as for the reasons stated above, we do not find any illegality in the impugned order passed by the State Commission holding that there was no deficiency in service on the part of the Insurance Company in repudiating the claim filed by the Complainant on the ground of suppression of material facts. Consequently, the First Appeal is dismissed as devoid of any merits.
Yd/* ......................J R.K. AGRAWAL PRESIDENT ...................... DR. S.M. KANTIKAR MEMBER