State Consumer Disputes Redressal Commission
Bhartiben R Bajarange vs Hdfc Standard Life Ins Co Ltd on 17 August, 2023
Details DD MM YYYY
Date of Judgment 17 08 2023
Date of filing 09 10 2017
Duration 08 10 05
IN THE STATE CONSUMER DISPUTES REDRESSAL COMMISSION
STATE OF GUJARAT
COURT NO.4
Complaint no. 141 of 2017
COMPLAINANT: Mrs. Bhartiben Rasikbhai Bajarange
Address: Free Colony, Chharanagar
Shankarji Temple,
Ahmedabad-382345,
Gujarat
VS
RESPONDENT: HDFC Standard Life Insurance Co. Ltd.
Address: 201-202, 2nd Floor,
Shivalik Plaza II, Opp. Ahmedabad Mgt Assoc.
IIM Road, Ahmedabad-380015,
Gujarat
CORUM: Mr. R.N. Mehta, Presiding Member
Appearance: Mr. R.L. Kodekar with Anand Parikh Advocates for Applicant Mr. P.R. Jani Advocate for the Respondent By Mr. R.N. Mehta, Presiding Member, Dt.17/08/2023 [1]. Today, when the matter is called out, Mr. Anand Parikh for the complainant and Ms. S.R. Shelat for opposite party is present. I have heard both the parties in detail.
Sanjana CC 141 2017 Page 1 of 16[2]. The complainant herein is mother, legal heir and nominee of deceased Mr. Pankajbhai Bajarange, who had purchased HDFC Life Click 2 Protect insurance policy for the sum assured of Rs. 20,00,000/- by submitting a proposal on 20/12/2013 and paid initial premium of Rs. 4989. It is stated that the opponent Insurance Company, after verification of the records and documents submitted with the proposal form, issued a policy No. 16507915 issued for the term of 30 years with annual premium facility and the policy was effective from 31/12/2013. It is stated in the complaint that the life assured Pankajbhai Bajarange had paid the amount of premium through Debit Card and also paid renewal premium on 21/01/2015. It is also further stated in the complaint that on 31/12/2014, the deceased life assured was admitted in the hospital for the treatment of TB and he was discharged from the hospital on 03/01/2015. Thereafter, he was at home and his condition deteriorated thereafter and expired on 12/02/2015. The death was intimated to the local authority and certificate of death received from the said local authority. It is also further submitted that in the month of January, 2016, the opponent insurer when called for reminder of insurance premium, the complainant came to know about the insurance policy, thereafter, the complainant had searched for the policy. It is further stated that the complainant being the legal heir and nominee submitted a death claim to the opponent Insurance Company on 21/03/2016 and also provided necessary documents. It is alleged in the complaint that even after filing the death claim, opponent Insurance Company never responded and the complainant waited for a pretty long time. When the complainant approached the opponent Insurance Company in January, 2017, it was informed that the policy has been discontinued and no claim is payable. It is further stated in the complaint that the opponent Sanjana CC 141 2017 Page 2 of 16 company informed to the representative of the complainant that the company had discontinued policy on 07/01/2016 on the ground of none disclosure of correct facts regarding other policies. However, the complainant was unaware about the same as she has not received any such letter. The complainant has alleged that the letter dated 07/01/2016 is concocted letter because when it came to know to the Insurance Company that the life assured had expired, therefore, to run away from the liability, the opponent insurer has created a false letter and falsely submitted that it was sent. Thus, the reason which is given in the said cancellation letter is incorrect and wrong. The complainant has therefore, claimed for the life insurance claim of Rs. 20,00,000/- under the policy together with interest at the rate of 12% per annum and also claimed 25,000/- towards the compensation for harassment, Rs. 25,000/- by way of cost to the complaint. The complainant has produced on record a copy of letter dated 07/01/2016, a copy of welcome letter by the opponent Insurance Company together with policy documents, copy of annual premium receipt, copy of death certificate, copy of medical treatment papers, copy of death claim intimation letter, etc. [3]. On receipt of the complaint from the complainant, this Commission heard Mr. Popat for the complainant and vide order dated 02/11/2017, ordered to admit the complaint for adjudication and also further ordered to issue notice to the opponent to give their version. It seems from the records that the opponent has filed written statement in the form of affidavit of competent authority of the opponent Insurance Company, who has specifically contended that the complaint is wrong, illegal, not maintainable in law and complainant has no right to file any such complaint under the provisions of the Consumer Protection Act Sanjana CC 141 2017 Page 3 of 16 (hereinafter referred as the Act). It is also further contended that the contract of insurance is null and void ab initio as the same was obtained fraudulently by the insured by not disclosing material facts truly in the proposal form for insurance and concealed true facts. It is also further submitted that the proponent had suppressed true facts about his income. It is categorically submitted that both the parties to the contract of insurance are bound by the terms and conditions of the contract and therefore, the opponent insurer is not liable to pay any amount beyond the terms and condition of the policy contract. The insurer further contended that in fact the life assured had died within 2 years from the date of commencement of policy and therefore, under the provision of section 45 of the Insurance Act, the opponent insurer is only obliged to show that statement made in the proposal form for insurance or the documents submitted when the time of proposal were inaccurate or false.
[4]. On merits, it is stated that the life assured had proposed for two different policies on two different dates for the sum assured of Rs. 20,00,000/- each. On 18/12/2013, the proposal was submitted online, whereas on 28/12/2013, another proposal for Rs. 20,00,000/- of sum assured was submitted for the same plan. While making this another proposal, the proponent did not disclose that he had proposed online for another policy prior to this. The Insurance Company in good faith issued both the policies. However, the earlier policy was commenced from 30/12/2013 and the subsequent policy was issued with commencement date of 31/12/2013. It is stated that as such the proposer had no income proof but just to avail the insurance benefits, he has fabricated income tax return online on 23/10/2013 for the assessment year of 2012-13 and another ITR Sanjana CC 141 2017 Page 4 of 16 form dated 26/11/2016 for the assessment year 2013-14 and submitted it to the opponent. In the insurance contract it is assumed that the information provided by the proposer is true and correct and therefore, in good faith the policies were issued. It is also further stated that when it came to the knowledge of the opponent that the proposer has tried to defraud the Insurance Company by purchasing very high amount of insurance policies by creating the false profile of life assured, the opponent inquired in detail in to the matter. During the inquiry, it is surfaced that the life assured had purchased two policies from the opponent and one policy from IDBI Federal Life Insurance Company with the commencement date of the 31/12/2013 for sum assured Rs. 14,55,000/-. It also came to know that he purchased another life insurance policy from Metlife Insurance Company for sum assured of Rs. 22,75,000/- , which was commenced from 05/08/2015. Thus, in a shorts span of period, the proposer had purchased insurance policies of Rs. 75,00,000/-, which is over and above normal requirement of a person and therefore, the opponent found its suspicious transactions. During the inquiry it is also found that he has not answered the questions put to him in the proposal form to be more precisely the questions regarding the existing policies, lapse policies, existing pending proposals and plan to revive the lapse policies, he has answered in negative. The proposals of two insurance policies of the opponent and the IDBI Federal Life Insurance were purchased within period one month and all these policies commenced within fortnight. The life assured did not disclosed that he had proposed for the insurance and proposal is pending for action on the part of another insurer. It was also found that the premium paid by the life assured was financed by the third party. Therefore, it can be assumed that the false profile of the deceased life assured was created and the intention was Sanjana CC 141 2017 Page 5 of 16 wrongfully and fraudulently availed the benefits of insurance contracts. It is in these circumstances, the opponent Insurance Company decided to discontinue the policies and the decision of discontinuation was communicated vide letter dated 07/01/2016, a copy of which is produced by the complainant herself. It is most surprising that though the deceased life assured had expired on 12/02/2015, the insurance companies were not intimated about the death of life assured. The complainant has falsely created a story that Insurance Company has reminded for the premium and then it came to their knowledge that policies were purchased by the deceased life assured. The opponent insurer had discontinued the policy, communication to that effect was sent and thereafter, the complainant had submitted claim form on 21/03/2016 with other claim papers. Thus, the opponent has denied the liability on the ground of discontinued policy for none disclosure. The opponent has relied upon the declaration made in the proposal form. In a sense the opposite party prayed for dismissal of complaint. Together with the reply the opponent Insurance Company submitted policy document, proposal form, proofs supplied by the deceased life assured at the relevant point of time, copy of letter dated 07/01/2016, copy of death claim submitted by the complainant, copy of death certificate, copy of discharge summery of Karnavati Super Specialty Hospital, copy of ration card belonging to deceased life assured family. The opponent thereafter, also submitted another list of documents wherein the proposal form, policy illustration copy and policy issued by IDBI Federal Life Insurance Company Limited produced. The opponent also submitted evidence affidavit of one Ms. Shikha Dedhia (page No. 88), which confirms the facts stated in the reply and also submitted the copy of proposal submitted online dated 18/12/2013, policy document etc. Sanjana CC 141 2017 Page 6 of 16 [5]. I have heard Mr. Anand Parikh. He submitted that though the complainant's son had purchased two policies within short span of period, she has put only one claim and therefore, she is entitled for at least one claim from these bundles of policies. He also submitted that the letter dated 07/01/2016 is a concocted letter, any such letter was never received by the complainant till the life assured expired. Mr. Parikh submitted that insurance contract is a contract between two parties and once the contract is concluded, any party to the contract cannot take unilateral decision to avoid the contract, unless it is proved on record that the other side has breached the terms and conditions of the contract. Mr. Parikh submitted that in the instant case, the contract was concluded on 31/12/2013. The opponent has received renewal premium also that was paid on 21/01/2015. Thus, the opponent had sufficient time to verify the documents submitted at the time of proposal but they kept silent till more than one year and when it came to know that deceased life assured had expired, created a false letter and stated that the letter had been issued to the insured at the addressed mentioned in the policy. Mr. Parikh also submitted that on the date of death, family members of the life assured were not aware that deceased had purchased the policies and therefore, they have not intimated the Insurance Company. But the day on which they received reminder call, they inquired and found that deceased had purchased policies, collected the documents and submitted the claim before the Insurance Company. Thus, there was no intentional delay on the part of complainant as alleged by the opponent Insurance Company. Mr. Parikh submits that the alleged none disclosure of a material fact would be relevant only when it is established by the insurer that the fact was within the knowledge of the proposer at the relevant point of time. In the instant case, the policies were issued within the short span so it Sanjana CC 141 2017 Page 7 of 16 was not possible for the deceased life assured to communicate it. The changes that has taken place during the pendency of the proposal, therefore, it cannot be said a willful dishonesty on the part of deceased life assured and therefore, the complainant is entitle for the claim under the insurance contract. He also further submits that the documents which the opponent have placed on record are not proved legal and therefore, also the same cannot be taken as a truth.
[6]. Mr. Parikh also submitted that the to avoid the liability of the contract, the Insurance Company must prove that the proponent had dishonesty in his action and with willful fraudulent intention suppressed the material fact. The opponent Insurance Company has not proved it and therefore, the claim is required to be allowed with the sum assured together with the cost and interest.
[7]. Ms. S.R. Shelat advocate for the opponent submitted that insurance is a contract of utmost good faith and therefore, the proposer is duty bound to disclose correct facts in the proposal forms. The facts which are not within the knowledge of the insurer then in that case, it is obligatory on the part of proposer to make complete and truthful disclosure, any suppression or misrepresentation will give right to the opponent Insurance Company to avoid the liability under the contract of insurance. She submitted that the reply, the opponent Insurance Company has given details of the simultaneous proposals made by the proponent and all these policies were came in to effect on 31/12/2013. It shows that the proponent was aware about all the facts that he has made more than one proposals for the life insurance policies and all those proposals are pending for consideration. Despite this, when the question was put to him, he has denied, this means the knowledge he had deliberately not disclosed before the insurer.
Sanjana CC 141 2017 Page 8 of 16This being the situation, it can be said that the opponent was having intention to defraud the Insurance Company and therefore, the Insurance Company has legitimate right to disown the liability as the contract of insurance was availed by making false and misleading representations at the time of entering in to the contract.
[8]. It is also submitted by Ms. S.R. Shelat that to provided the shelter to their misdeed the complainant has created a story that when the opponent insurer called for reminder of the premium, it came to their knowledge that they have availed insurance policies. It is more surprising that person who had availed the insurance policy, had expired and the intimation was given in January, 2016 telephonically. This is also a created story. As such the company wrote letter and informed the insured about the cancelation of policy, thereafter, they wake up and filed the death claim. All these activities of the complainant make it clear that it was preplanned and Insurance Company had rightly terminated the contract. Life assured was not having adequate income to pay the premium for four different policies, total sum assured of about Rs. 75,00,000/-. As he was from very poor family, shows that someone is financing the insurance policies for the deceased life assured. It is submitted that to cover the risk of the life of other person, it is very much necessary for an insurer to know the limit of insurability of the proposed life assured, his status of health, his premium paying capacity, his occupation and his income etc. to determine the correct financial status of the proponent and what amount of sum insurance he can be offered all these information are necessary. On the basis of this particular information, it can be ascertained that whether the proponent has having capacity to pay the premium regularly. These information were not given correctly and Sanjana CC 141 2017 Page 9 of 16 by suppressing the material facts about the previous policies, the life assured had proposed for the policy from the Insurance Company and thereby, committed breach of "Utmost Good Faith". When there is a violation of the "Utmost Good Faith", obviously the contract of insurance would not come in to existence and contract remains unconcluded. In this particular case, the Insurance Company relying upon the statements made in the proposal forms, the opponent Insurance Company had concluded contract by issuing policies but as soon as it came to know that the proponent had made a false statement, the Insurance Company immediately cancelled the policies and that was informed to the complainant. The advocate for the opponent Insurance Company relied upon the judgment of Hon'ble Supreme Court in the matter of Reliance Life Insurance Company Limited Vs. Rekhaben Nareshbhai Rathod (II (2019) CPJ 53 (SC)). Therefore, she submits that the complaint is required to be dismissed.
[9]. I have considered the pleadings of arrival parties, perused the documents produce by parties and considered the submissions canvassed by other parties. So far the submissions of Mr. Parikh that the complainant has claimed only one claim under policy out of these two policies, is not a good ground for claiming the insurance. Mr. Parikh's submission that the letter dated 07/01/2016 is a concocted letter cannot be believed because the complainant herself has produced the document at page 11, which clearly establishes that the letter has been received by the complainant. It is not even case of the Mr. Parikh that they have obtained a copy subsequently, no such pleading is found even in the complaint and therefore, it can be said that it is an afterthought. The another submission of Mr. Parikh is that the complainant had paid renewal premium on 21/01/2015 and copy Sanjana CC 141 2017 Page 10 of 16 of the receipt is also produce on record. I have seen the document which is at page No. 28. No doubt the renewal receipt is dated 21/01/2015 and the amount of Rs. 4,989/- has been paid in cash. But I cannot discard the fact that the deceased life assured was hospitalized prior to that and thereafter, this renewal premium has been paid. It is on the contrary averment made by the complainant in complaint in para 2.4 that the life assured was admitted in the hospital for the treatment of TB on 31/12/2014. This makes it clear that when relatives of life assured came to know that the condition has been deteriorated the premium was paid without informing the Insurance Company about the status of his health. The opponent insurer at page No. 72 of the compilation produced the record of treatment taken by the life assured and the said paper suggests that it was "old case of koch's leasion" meaning thereby the deceased life assured had TB previously, although, the date or duration is not mentioned therein. The complainant has not explained in the complaint from when the deceased life assured was suffering from TB. It is the personal detail and within the personal knowledge of a person who makes the statement, it cannot be expected to have the knowledge of the opponent insurer and the deceased life assured was expected to make a complete disclosure about his health status correctly in the proposal form, which he did not disclose. I do not appreciate a submission of Mr. Parikh that on the date of death, family members of the life assured were not aware that deceased had purchased policies and therefore, they have not intimated the death of the life assured to the opponent insurer. I am also not appreciating submission canvassed by Mr. Parikh that within very short period, the life assured was intimated about the commencement of different policies and therefore, he did not disclose the same to the opponent insurer.
Sanjana CC 141 2017 Page 11 of 16[10]. The case papers produce on record, do suggests that the proponent was aware of the simultaneous proposal made by him not only before present opponent but also with other Insurance Companies. The treatment papers produced by the complainant along with the complaint, where there is no name of hospital is mentioned on the history and examination sheet. In the said case papers also it is mentioned that the proponent had habit of Tobacco Chewing. The proposal form, copy of which is produced on record also suggests that he has not disclosed even this fact before the Insurance Company. This means, the proponent had deliberately made false statement to avail the insurance policies. Question No. 11 in the proposal form reads as under:
"Please give the following Details:
Substance Consumed Yes/No Consumed As Quantity
a. Alcohol No Units per week
b. Tobacco No Units per day
"
There are enough evidences to believe that the life assured had made false statements to get the insurance policies. Since, the Insurance Company has terminated the contract prior to the intimation of death claim, it cannot be said that the termination of contract was deliberate to avoid the insurance contract. When it is known to the complainant that the person had expired on 12/02/2015, there is no reason why the claim was not intimated up to January, 2016, when the opponent Insurance Company has terminated the contract. It was well within the knowledge of complainant herein that the life assured was hospitalized during last week of year 2014 and the premium was thereafter paid during his critical health condition, gives clue that the family members of the deceased life assured were aware of insurance policies from the opponent insurer. Even the documents pertaining Sanjana CC 141 2017 Page 12 of 16 to the insurance police issued by IDBI Federal Life Insurance Company Limited and its proposal form, policy document etc. have been produced on record and not denied by the complainant. I have reason to believe that the deceased life assured had in fact proposed for the same and not disclosed to the opponent Insurance Company and therefore, the complainant cannot be given benefits of doubt. I have referred judgment of Reliance Life Insurance Company Limited Vs. Rekhaben Nareshbhai Rathod (II (2019) CPJ 53 (SC)), wherein the Hon'ble Supreme Court has observed 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 [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 ..."
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 Sanjana CC 141 2017 Page 13 of 16 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 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 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 Sanjana CC 141 2017 Page 14 of 16 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 inquiry.
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 [Twelfth Edition, Sweet and Maxwell (2012). See Pg. 257 for cases relied upon] 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 lakh. We are of the view that the failure of the insured to disclose the policy of insurance obtained Sanjana CC 141 2017 Page 15 of 16 earlier in the proposal form entitled the insurer to repudiate the claim under the policy. "
In view of the aforesaid observations of the Hon'ble Supreme Court, I am of the opinion that the deceased life assured had not disclosed the correct fact and the restrained the opponent Insurance Company from making justified decision to accept the risk of insurance and therefore, I would pass final order as under.
(ORDER) [1]. Complaint No. 141 of 2017 is hereby dismissed.
[2]. There shall be no order as to cost.
[3]. The office is directed to supply the copy of this order to the parties to free of cost at earliest.
R.N. Mehta Presiding Member Sanjana CC 141 2017 Page 16 of 16