State Consumer Disputes Redressal Commission
Life Insurance Corporation Of India vs Shahida Begum on 2 August, 2010
IN THE STATE COMMISSION : DELHI
IN
THE STATE COMMISSION : DELHI
(Appeal
against the order dated 03.07.2008 passed by District Forum, (Central) in
complaint case no 196/2004 )
Date
of Decision : 02.08.2010
Appeal
No. FA-08/987
Life
Insurance Corporation of India,
Divisional
Office No. 1,
Jeevan Parkash Building,
25,
Kasturba Gandhi Mart,
New Delhi.
.. Appellants/OP.
VS
Smt. Shahida Begum,
w/o
Shri Saleemuddin,
R/o
J-301, Taj Enclave,
Geeta Colony, Gandhi Nagar,
Delhi-110031.
..Respondents/Complainant.
CORAM
Justice B.A. Zaidi,
President
M.L. Sahni,
Member
1. Whether reporters of local newspaper be allowed to see the judgment?
2. To be referred to the reporter or not?
M.L. Sahni, Member(Judicial)
1. This is the second round when LIC has come in appeal before this Commission against the relief given to the complainant Smt. Shahida Begum w/o Saleemuddin whose complaint bearing No. 196/2004 has been twice allowed by the District Forum , Kashmere Gate, Delhi . According to the appellant, late Shri Azmimudin had taken following policies as per following details :-
Schedule-A S.No. Policy No. Sum Assured Date of commencement 1 120843735 Rs 5 lacs 23.3.1998
2. 120846944 Rs 5 laks 28.8.1998 3 112619591 Rs 2 lacs 28.11.1998 4 112619609 Rs 2 lacs 28.11.1998 Total Rs 14 lacs Schedule -B S.No. Policy No. Sum Assured Age at entry Period of insurance Date of commencement of insurance/ date of effecting insurance Duration after which death took place 1 121178981 5 lacs 18 yrs 25 yrs 15.12.199 / 29.02.2000 2 yrs 1 month 2 121179440 1 lacs 18 yrs 20 yrs 28.2.2000/ 13.3.2000 2 yrs. 3 months 3 121181932 2 lacs 18 yrs 20 yrs 1.4.2000/ 06.06.2000 1 yr. 1 month 4 121184660 3 lacs 19 yrs 25 yrs 1.7.2000/ 24.10.2000 1 Yr. 5 months 5 121177721 1 lac 18 yrs 25 yrs 12.1.2000 / 13.1.2000 2 yrs 3 months Total 12 lacs
2. The said assured person died on 18.4.2002 and the respondent Smt. Shahida Begum his mother and nominee lodged the claim for all the policies. The appellant treated the policies mentioned in Schedule-A as non-early claim and paid the entire insured amount under those policies without any investigation. But in case of the polices mentioned in Schedule-B the appellant found that since the policies were early-claim and have been obtained by the assured person concealing material facts about taking of other policies worth Rs. 14 lacs as mentioned in Schedule-A, therefore, declined payment as the same were worth lakhs of rupees, i.e. Rs. 12,00,000/-.
3. Aggrieved by the repudiation of her claim for policies mentioned in Schedule-B, the complainant filed complaint before District Forum which was allowed on 20.10.2005 by the District Forum. The appellant filed an appeal against that order before this Commission on 19.2.2008 and order dated 20.10.2005 was set aside observing that in the remaining four polices the repsondnet-1 had not declared the five policies is of no relevance as out of nine, five policies have been declared in one of the four policies. Another proposal form which is in respect of one of the four policies shows another two policies obtained by the respondent bearing no. 12117721 & 121179440. Since all the five policies were taken on different point of time, the reference of these policies in the first policy has not been mentioned. All these facts have not been considered by the District Forum at all, nor has the District Forum made any reference to the particular policies mentioned in one or two out of the four policies already obtained by the respondent. We deem that the matter needs to be re-examined by the District Forum and the complaint is sent back to the District forum for deciding it afresh. Accordingly , the complaint was sent back to District Forum for deciding it afresh and the Ld. District Forum thereafter passed impugned order dated 30.07.2008 which is now again impugned before us.
3. The Ld. District Forum framed the following issues for adjudication and decided the same against the appellant :
i. Whether the complainant concealed the facts of existing policies in the proposal form of policies forming part of Schedule-A ?
ii. If so, can the concealment be termed as concealment of facts so as to repudiate the claim in view of law laid down by Honble Supreme Court in AIR 1997, SC 376 ?
iii. What is the scope of application of section 45 of Insurance Act, in this case ?
4. We have heard Ld. Counsel appeared on behalf of parties and have carefully examined the record. We have also thoughtfully considered the rival contention of both the parties in the light of case law referred to in their appeal.
5. According to the appellant, had there been revelation of facts required to have been stated by the assured person in the proposal form while obtaining policies as mentioned in Schedule-B worth 12 lacs of rupees, they would have called for special medical report such as ECG, CBC, ESR, Tele, SMA-12, RVA Elisa fro HIV etc, and also called for additional documents regarding personal financial status , like CAs certificate, Income Tax return with computation of income tax statement or Income-Tax orders etc. to satisfy as to whether the deceased life assured was actually entitled for such an insurance amount of Rs. 26 lacs. It is further their case that in such situation they would have also asked for Special Moral Hazard report to be given by senior officers of the Appellant-Company after personal interview with regard to health of the person to be insured being of sound financial status. It is submitted on their behalf that such safeguards are taken by the Corporation in order to ensure as to whether the insured person is actually in need of insurance ; that they are public sector undertaking catering to the life insurance requirement of the public at large and act as trustees of public funds, hence are duty bound to ensure that all claims are paid strictly in accordance with terms and conditions of the contract of insurance and nobody takes undue advantage of the public funds. It is also contended that after carefully going-through the entire matter and after due application of mind, the competent authority of Corporation while repudiating the claim had observed that principal of ubbirima fides i.e. Utmost Good Faith has been violated by the deceased life insured at the time of effecting insurance and as per declaration given in the proposal form and as per condition subject to which the insurance is granted, the claim lodged by the respondent in respect of policies mentioned in Schedule B merited repudiation.
6. As against these contentions of the appellant, it has been contended on behalf of respondent, that the appellant have not disputed that all the policies issued by them were valid when the unfortunate death of the policy-holder took place ; that all the polices are for the period ranging between 20 to 25 years which clearly imply that the policy-holder had been having good health excepting long life, who therefore, invested his money for long term in the insurance policies. The appellant could not be allowed to take plea of concealment of material facts regarding huge amount of insurance because they had accepted huge amount of premium as against those policies and not any single policy had ever lapsed during the life time of the assured person on account of non-payment of premium. The assured person being a young man, hale and hearty was a good business client for the appellant on whose behalf proposal form had been filled by their agent. It is also the case of the respondent which is not denied by the appellant and has been categorically observed in the impugned order that the policies were issued by the same branch of Corporation where branch manager, manager of the business and the agents were also the same persons who had calculated huge premium, therefore, they were well aware of the policies having been issued to the assured person. According to the complainant it was rather the appellant who could be held guilty of concealment of material facts, when it is apparent on the face of record that the policy holder knew only Urdu language and signed proposal form only in that language while proposal form and declaration form was bilingual and printed in Hindi and English and these forms are filled by their own agent whom the appellant can not disown by any arguments. The appellants were very well aware of the previous policies being held by the assured person and onus was on the appellant to prove that policy holder obtained the policies with any mala-fide intention or that he was suffering from any life threatening disease at the time of taking policy ; that no medical opinion is produced by them to hold that non-disclosure of the previous policy justified repudiation of the genuine claim on the basis of genuine policies.
6. To fortify his contention the respondent placed reliance on the judgment in case of Madan Lal Vs LIC & Othrs II(2008) CPJ- 67 decided by Rajasthan State Commission (Jaipur) holding that fact of non disclosure of prior policy is not material and the Corporation cannot escape the liability on the ground of suppression of material facts. Similar view was taken by Orissa State commission (Cuttak) in LIC VS Ghanshyam Naik III (2007) CPJ- 246 that existence of previous policy is not relevant. In this case it has been observed that it is a practice that life insurance agent take the proposal form and fill the same without asking relevant questions to the proposer and the deceased life assured cannot be held guilty of suppression of material facts due to existence of previous life policy. It is not relevant so as to invalidate subsequent policy.
7. Similarly UP State Commission ( Lucknow) in case of LIC VS Shaukeen & Anr. II (2002) CPJ-319 has held that the Corporation was liable to pay the amount to the assured alongwith interest even if the insurance policy had been obtained by concealing real age of the life assured in the proposal form because proposal form had been filled up by the agent of the Corporation while the person assured had signed in Urdu and was not aware of what age had been recorded in the declaration form by the agent and the declaration form had also been verified by the Doctor of the Corporation.
8. On the plea of the appellant regarding observance of utmost good faith by the contacting parties, Honble Supreme Court in case of M/s Modern Insulators Ltd Vs Oriental Insurance Co. Ltd.- I (2000) CPJ 1 (SC) has held that it is fundamental principal of insurance law that utmost good faith must be observed by the contacting parties and good faith forbids either parties from non-disclosure of the facts which the parties know. The assured has a duty to disclose and similarly it is the duty of the Insurance company and its agent to disclose all material facts in their knowledge since obligation of good faith applies to both equally.
9. Applying the ratio of the above said decisions in the present case it can be safely concluded that the assured person cannot be held liable for non-disclosure of the previous policies as mentioned in Schedule A while taking the policies as mentioned in Schedule B especially when there is not even an iota of evidence to suggest that there was malafide intention on the part of the assured person to do so. There is no material on record to prove the fact that assured person was not keeping good health at the time of taking insurance policies in large number but paying huge sums of insurance premium. We are, therefore, of the considered view that applying the exclusion clause to repudiate claim of the respondent in this case was unjustified, because simply saying that had the appellant/corporation known the fact of previous policies they would not have issued subsequent insurance policies in this case.
10. Since it is admitted fact that the policies in question were issued by Mori Gate Branch of the Appellant-Company and these were obtained through the same agent and same Development Officer .therefore, the appellant cannot take the plea that they had no knowledge of the previous policies or that the assured person was guilty of concealment of existence of previous policies. Concealment can be of a fact which could not be in the knowledge of the appellant.
11. In the present case, the officials of the insurance company were well-aware of the earlier policy being held by the assured person when the subsequent policies were issued. We fully agree with the Ld. District Forum, as held in the case of Bhagani Bai VS LIC AIR 1984 SC 125, referred to in the impugned order that the insurer cannot repudiate the liability by showing some in accuracy or falsity of statement nor can it avoid the liability for immaterial misrepresentation or for material mis-representation which had no bearing on the risk. Similarly mere non-disclosure of some immaterial facts would not pre se give right to rescission . In other words, a misrepresentation would not IPO- facto and be a ground available to the aggrieved party to avoid the contract unless it is found that consent of opposite party was secured by practicing some deception. Thus on every misrepresentation or concealment of a fact, a contract cannot be avoided merely on trival and inconsequential misstatement or non-disclosure.
12. Considering the facts as are borne on the record we fail to find any infirmity in the impugned order and reason to interfere in the findings recorded by the Ld. District Forum in this case. Order is very well written reasoned and self speaking. The appeal being meritless is dismissed with cost of Rs. 5000/- to be deposited in State Consumer welfare Fund.
13. FDR, if any , deposited by the appellant be released after completing due formalities.
14. Copy of order be provided to the parties free of cost and one copy be sent to the concerned District Forum and thereafter file be consigned to record room.
(Justice B.A. Zaidi) President (M.L. Sahni) Member sk