Delhi District Court
Vandana Sahni vs Hdfc Ergo General Insurance Co Ltd on 16 January, 2024
CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
IN THE COURT OF VINOD YADAV:
DISTRICT JUDGE (COMMERCIAL COURT)-02:
NORTH-WEST DISTRICT: ROHINI COURTS: NEW DELHI
CNR No.DLNW01-005470-2022
Civil Suit (Comm.) No.477/2022
In the matter of:
1. Smt.Vandana Sahni,
W/o Late Shri Rajesh Sahni
2. Shri Aryaman Sahni,
S/o Late Shri Rajesh Sahni
Both R/o E-4/26, Model Town,
Delhi.
Mobile No.9999745125
E.Mail ID: [email protected]
.....Plaintiff
(Through Shri Navneet Goyal, Advocate)
Versus
HDFC Ergo General Insurance Company Limited,
Pitampura Sales Office, 12th Floor, Pearls Best Heights I,
Unit 1202-1209, Plot No.A-5, Netaji Subhash Place,
New Delhi-110034.
Phone: 011-30483372
E.Mail ID: [email protected]
.....Defendant
(Through Shri R.K Gupta, Advocate)
Date of Institution of Suit : 03.06.2022
Date of transfer to this court : 14.08.2023
Date of hearing final arguments : 16.01.2024
Date of judgment : 16.01.2024
DOD: 16.01.2024 || Page 1 of 32
CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
SUIT FOR RECOVERY OF Rs.8,51,702/- (Rupees Eight Lakhs Fifty One
Thousand Seven Hundred Two Only) Alongwith interest @ 12% per annum
16.01.2024
JUDGMENT
1. (i) Going through life without knowing what is going to happen the next moment sounds frightful. The global coronavirus pandemic gave us all a picture of how vulnerable we are to life-threatening elements in the environment. It also highlighted the importance of health insurance in India, in particular. It is unpleasant to think of a medical emergency befalling on your loved ones. But, life can be cruel and unpredictable regardless of your age. That is precisely why there is importance of health insurance. Health insurance is an important risk mitigating tool. In this era where medical expenses are every day rising and with no much-increasing income it is an inevitable part of one's life. It is also a very important mechanism for funding the health care needs of the people, however, there is flip side of the coin also.
(ii) Imagine that you land up in a hospital on a medical emergency. The medical treatment costs a bomb. Your only solace is your medical health insurance policy, which you have kept alive for years by paying annual premiums, without fail. You file a claim to get the reimbursement of the hospitalization charges, however, to your horror, the insurance company rejects the claim, citing hyper-technical/flimsy grounds. Such "Kafkaesque scenario" is not unheard of in the health insurance sector and the instant case in hand is a perfect example of the same.
DOD: 16.01.2024 || Page 2 of 32CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
2. The facts of the case in brief, as borne out from the record are that plaintiff No.1/Smt.Vandana Sahni and plaintiff No.2/Aryaman Sahni are the wife and son respectively of Late Shri Rajesh Sahni, who during his lifetime in the year 2016 had purchased a mediclaim health insurance policy under the name and style of "Optima Restore Individual Insurance Policy" for himself as well as his family members, i.e the plaintiffs herein from the defendant/HDFC ERGO General Insurance Company Limited.
3. Defendant is stated to be private insurance company offering complete range of general insurance products ranging from motor, health, travel, home and personal accident in the retail space and products like property, marine and liability insurance in the corporate space, having its sales/regular office at Netaji Subhash Place, Pitampura, New Delhi-110034.
4. It is the case of plaintiffs that the first policy by the name "Optima Restore Individual Insurance Policy" (hereinafter referred to as the "mediclaim policy") was issued/provided by the defendant to the plaintiff on 31.03.2016 which was renewed from time to time. The "mediclaim policy" was also renewed for the period 31.03.2020 to 30.03.2021 vide Policy bearing No.1100101/11119/A00378117-04 for which Shri Rajesh Sahni paid a sum of Rs.36,027.29 P as "premium" to the defendant. The "mediclaim policy" aforesaid was further renewed by the defendant for the period 31.03.2021 to 30.03.2022 vide Policy bearing DOD: 16.01.2024 || Page 3 of 32 CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
No.2805 2035 2328 6101 000 after charging a "premium" of Rs.37,828/- from Shri Rajesh Sahni/policy holder.
5. (i) It is averred that Shri Rajesh Sahni was suffering from kidney ailment and was operated for "kidney transplant" at Indraprastha Apollo Hospital, Sarita Vihar, New Delhi, where he remained admitted for the period 17.02.2021 to 26.02.2021. It is further averred that at the time of admission of Shri Rajesh Sahni in said hospital, information about "mediclaim policy" was provided to the hospital authorities, who in turn intimated the defendant and sought permission for his "cashless treatment". The defendant vide its e.mail dated 26.02.2021, sent to Indraprastha Apollo Hospital "declined" the request to provide cashless treatment to the patient/Shri Rajesh Sahni on account of the following reason:
xxxxx "As per the available documents, we have observed that there is a non-disclosure of "Burr hole surgery" which may have an impact on policy and hence cashless approval would not be possible at this juncture"
xxxxx (Note: Burr Holes are small holes that a neurosurgeon makes in the skull. Burr holes are used to help relieve pressure on the brain when fluid, such as blood, builds up and starts to press on brain tissue. A Burr hole procedure/surgery is performed to remove collection of blood (haematoma) just below the lining of the brain known as dura).DOD: 16.01.2024 || Page 4 of 32
CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
(ii) As such, the treatment expenses amounting to Rs.8,51,702/-
(Rupees Eight Lakhs Fifty One Thousand Seven Hundred Two) were borne by the family members of patient/policy holder Rajesh Sahni.
(iii) It is further averred that even after refusal of cashless treatment by the defendant vide E.Mail dated 26.02.2021, it approved another cashless treatment @ Rs.10,400/- for policy holder/Rajesh Sahni for "stent removal" vide Claim No.RC-HS21-12374845 at Indraprastha Apollo Hospital.
6. It is further stated that after discharge from Indraprastha Apollo Hospital, policy holder/Shri Rajesh Sahni went to the office of defendant and filled/submitted "claim form" for an amount of Rs.8,51,702/-, thereby annexing all the treatment papers. However, as the fate would have it, before patient/policy holder/Rajesh Sahni could know the outcome of his claim form, he expired on 08.05.2021 (hereinafter referred to as "deceased"), leaving behind the plaintiffs as his only legal heirs/legal representatives as his parents had already pre-deceased him. Thereafter, the claim submitted by policy holder/deceased Rajesh Sahni was rejected/repudiated by the defendant vide letter dated 08.07.2021 for the reason "medical history of burr hole surgery in the year 1989". Besides repudiating the insurance claim, the defendant vide its aforesaid letter dated 08.07.2021 also cancelled the "mediclaim policy" in question.
7. After the death of deceased, the plaintiffs, who are the only legal heirs of deceased also requested the defendant several times to make DOD: 16.01.2024 || Page 5 of 32 CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
payment of the claimed amount, but in vain. Thereafter, the plaintiffs sent a legal demand notice on 10.01.2022 to the defendant, inter alia calling upon it to make good payment of the claim amount of Rs.8,51,702/-, but that also did not yield any fruitful result for them. The defendant even did not reply to the legal notice aforesaid sent on behalf of plaintiffs.
8. Aggrieved by rejection/repudiation of mediclaim policy by the defendant, the plaintiffs preferred the instant suit against the defendant, inter alia seeking a decree in the sum of Rs.8,51,702/- (Rupees Eight Lakhs Fifty One Thousand Seven Hundred Two Only) alongwith interest @ 12% per annum on the ground that rejection/repudiation of the claim by defendant was totally wrong, illegal and without any basis. It is claimed that defendant company was having due knowledge that deceased policy holder Rajesh Sahni had been suffering from "kidney ailment", more particularly termed as "ACUTE KIDNEY FAILURE WITH TUBULAR NECROSIS" since the year 2017 for which he had been undergoing regular medical treatment and the various medical claims put forth by deceased under the mediclaim policies of previous years had been duly encashed/reimbursed by the defendant company as the deceased had been continuing insurance policy from the defendant since the year 2016. The defendant from time to time had been paying various claims submitted by deceased for treatment of his kidney ailment even before and after the kidney transplant surgery. It is contended that the "burr hole treatment" undertaken taken by deceased in the year 1989, i.e about 32 years ago is no ground for rejection/repudiation of the mediclaim policy by DOD: 16.01.2024 || Page 6 of 32 CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
the defendant, as the said treatment has no impact/co-relation with the "kidney ailment" suffered by him/deceased.
9. (i) After being served in the matter, defendant filed its written statement duly accompanied by Statement of Truth on 06.08.2022, inter alia taking preliminary objection(s) to the effect that suit is liable to be dismissed U/o VII Rule 11 CPC as the same is not accompanied by Statement of Truth in terms of Order IX Rule 3 CPC and as amended under Commercial Courts Act, 2015.
(ii) On merits, the "mediclaim policy" issued by it in the year 2016 in the name of deceased has been duly admitted. It has further been admitted that the said mediclaim policy stood renewed by it from time to time against the deceased paying requisite premium and the same was duly valid during the relevant periods i.e from 31.03.2020 to 30.03.2021 and 31.03.2021 to 30.03.2022.
(iii) As regards the rejection/repudiation of claim and consequent cancellation of mediclaim policy in question vide its letter letter dated 08.07.2021, it is contended that the same was done on account of non- disclosure/concealment of "Burr hole surgery" undertaken by the deceased in the year 1989 as the same was not revealed/reflected in the "Proposal Form" filled by the deceased while taking mediclaim policy in question in the year 2016, which is in violation of the "Section Vi(j)" of the policy terms and conditions vis-à-vis Insurance Act. It is stated that deceased was duty bound to disclose entire information related to all kinds of pre-existing diseases and the treatments undertaken by him prior to DOD: 16.01.2024 || Page 7 of 32 CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
commencement of the mediclaim policy. The insured/deceased by not disclosing the history of "Burr hole surgery" undertaken by him in the year 1989, i.e prior to issuance of mediclaim policy in question had violated the policy document/contract vis-à-vis the core principle of insurance, i.e "principle of Good Faith" and had thus obtained the policy through concealment of material facts amounting to fraud.
10. (i) During the course of pleadings, both the parties filed their respective Affidavit(s) of Admission/Denial of documents. Plaintiff No.1/widow of deceased "denied" the "Proposal Form", a photocopy of which has been filed on record by the defendant. She further denied the policy wording on the ground that the same was never received by plaintiffs.
(ii) On the other hand, the defendant duly admitted the "mediclaim policy" in question issued by it in the name of deceased. The defendant further admitted all the correspondences done either with the deceased or the plaintiffs with regard to rejection/repudiation of claim and consequent cancellation of mediclaim policy.
11. Since the bone of contention between the parties in the present matter is a purely legal issue, i.e "whether the defendant was right or wrong in rejecting/repudiating the claim of plaintiffs", so this Court vide its order dated 26.09.2023 made an observation that this matter can be disposed off without framing issues and merely on the arguments of the parties in view of the settled position of law and accordingly the matter was notified for final arguments.
DOD: 16.01.2024 || Page 8 of 32CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
12. I have heard arguments at length advanced at Bar by Shri Navneet Goyal, Advocate, duly assisted by Ms.Sonia Kumari, Advocate, learned counsels for the plaintiff and Shri Rajesh Kumar Gupta, Advocate, learned counsel for the defendant. I have also gone through the respective case laws/judgments cited by learned counsels for both the parties, which I will advert to a little later.
13. As regards the plaint being not accompanied by Statement of Truth, it is noted that the general inclination of a Court is to treat procedural lapses with kindness unless a party disentitles itself to such benevolence by reason of its conduct or by operation of law. Without taking the avowed object of quick resolution of commercial disputes away from the 2015 Act, rules of procedure cannot be given precedence in a manner so as to defeat the substantive rights of the parties unless specifically prohibited by law. I am supported in my aforesaid view by judgment rendered by Hon'ble High Court of Delhi in case reported as, "2019 SCC Online Del 9633" titled as, "Cosco (India) Limited V/s Parmsukh Nirman Pvt. Ltd." (DOD: 31.07.2019), whereby the Hon'ble High Court has been pleased to highlight the obligation of the Court to decide the disputes on merits and not procedural default committed by the parties. To somewhat similar effect is the observation made by Hon'ble High Court of Delhi in case reported as, "CS (Comm.) No.1683/2016", titled as, "Unilin Beheer B.V V/s Balaji Action Buildwell" (DOD:
09.04.2019). The contention raised by learned counsel for the defendant by way of preliminary objection in this regard accordingly stands rejected.DOD: 16.01.2024 || Page 9 of 32
CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
14. Before proceeding further, it would be useful to encapsulate the two principles/aspects of the matter which give rise to the controversy in the present matter. The first is what may be expressed in the legal maxim "uberrimae fidei" or the principle of good faith and the corresponding principle of disclosure of all material facts by the parties to an insurance policy. The second principle is expressed in the "contra proferentem" rule. The Hon'ble Supreme Court of India in case reported as, "Civil Appeal No.8386/2015", titled as, "Manmohan Nanda V/s United India Assurance Company Ltd. & Anr." (DOD:
06.12.2021) has been pleased to discuss the aforesaid principles in detail as under:
xxxxx Uberrimae Fidei:
30. It is observed that insurance contracts are special contracts based on the general principles of full disclosure inasmuch as a person seeking insurance is bound to disclose all material facts relating to the risk involved. Law demands a higher standard of good faith in matters of insurance contracts which is expressed in the legal maxim uberrimae fidei.
31. Mac Gillivray on insurance law 13th Ed. has summ arised the duty of an insured to disclose as under:
"...the assured must disclose to the insurer all facts mat erial to an insurer's appraisal of the risk which are known or deemed to be known by the assured but neither known nor deemed to be known by the insurer. Breach of this duty by the assured entitles DOD: 16.01.2024 || Page 10 of 32 CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
the insurer to avoid the contract of insurance so long as he can show that the non-disclosure induced the making of the contract on the relevant terms."
32. Lord Mansfield in Carter v. Boehm (1766) 3 Burr 1905 has summarised the principles necessitating disclosure by the assured in the following words:
"Insurance is a contract of speculation. The special fac ts upon which the contingent chance is to be computed lie most commonly in the knowledge of the assured only; the underwriter trusts to his representation, and proceeds upon confidence that he does not keep back any circumstance in his knowledge to mislead the underwriter into a belief that the circumstance does not exist. The keeping back such circumstance is a fraud, and therefore the policy is void. Although the suppression should happen through mistake, without any fraudulent intention, yet still the underwriter is deceived and the policy is void; because the risk run is really different from the risk understood and intended to be run at the time of the agreement. The policy would be equally void against the underwriter if he concealed... Good faith forbids either party, by concealing what he privately knows, to draw the other into a bargain from his ignorance of the fact, and his believing the contrary."
The aforesaid principles would apply having regard to the nature of policy under consideration, as what is necessary to be disclosed are "material facts"
which phrase is not definable as such, as the same would depend upon the nature and extent of coverage of risk under a particular type of policy.DOD: 16.01.2024 || Page 11 of 32
CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
In simple terms, it could be understood that any fact which has a bearing on the very foundation of the contr act of insurance and the risk to be covered under the policy would be a "material fact".
33.Under the provisions of Insurance Regulatory and Development Authority (Protection of Policyholders' Interests) Regulations,2002 the explanation to Section 2 (d) defining "proposal form" throws light onwhat is the meaning and content of "material." For an easy reference the definition of "proposal form"
along with the explanation under the aforesaid Regulations has been extracted as under:
"2. Definitions.--In these regulations, unless the context otherwise requires-
(d) "Proposal Form" means a form to be filled in by th e proposer for insurance, for furnishing all material information requi red by the insurer in respect of a risk, in order to enable the insurer to decide whether to accept or decline, to undertake the risk, and in the event of acceptance of the risk, to determine the rates, terms and conditions of a cover to be granted.
Explanation: "Material" for the purpose of these regul ations shall mean and include all important, essential and relevant information in the context of underwriting the risk to be covered by the insurer." Thus, the Regulation also defines the word "material" to mean and include all "important", "essential" and "relevant" information in the context of guiding the insurer in deciding whether to undertake the risk or not.
34. Just as the insured has a duty to disclose all mater DOD: 16.01.2024 || Page 12 of 32 CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
ial facts, the insurer must also inform the insured about the terms and conditions of the policy that is going to be issued to him and must strictly conform to the statements in the proposal form or pro spectus, or those made through his agents.
Thus, the principle of utmost good faith imposes meaningful reciprocal duties owed by the insured to t he insurer and vice versa. This inherent duty of disclosure was a common law duty of good faith originally founded in equity but has later been statutorily recognised as noted above. It is also open t o the parties entering into a contract to extend the duty or restrict it by the terms of the contract.
35. The duty of the insured to observe utmost good faith is enforced by requiring him to respond to a proposal form which is so framed to seek all relevant information to be incorporated in the policy an d to make it the basis of a contract.
The contractual duty so imposed is that any suppression or falsity in the statements in the proposal form would result in a breach of duty of good faith and would render the policy voidable and consequently repudiate it at the instance of the insurer.
36. In relation to the duty of disclosure on the insured, any fact which would influence the judgment of a prudent insurer and not a particular insurer is a material fact. The test is, whether, the circumstances in question would influence the prudent insurer and not whether it might influence him vide Reynolds v. Phoenix 22 Assurance Co. Ltd. (1978) 2 Lloyd's Rep. 440. Hence t he test is to be of a prudent insurer while issuing a policy of insurance.
DOD: 16.01.2024 || Page 13 of 32CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
37. The basic test hinges on whether the mind of a prudent insurer would be affected, either in deciding whether to take the risk at all or in fixing the premium, by knowledge of a particular fact if it had been disclosed. Therefore, the fact must be one affecting the risk. If it has no bearing on the risk it need not be disclosed and if it would do no more than cause insurers to make inquiries delaying issue of the insurance, it is not material if the result of the inquiries would have no effect on a prudent insurer.
38. Whether a fact is material will depend on the circu mstances, as proved by evidence, of the particular case. It is for the court to rule as a matter of law, whether, a particular fact is capable of being material and to give directions as to the test to be applied. Rules of universal application are not therefore to be expected, but the propositions set out in the following paragraphs are well established :
(a)Any fact is material which leads to the inference, in t he circumstances of the particular case , that the subject matter of insurance is not an ordinary risk, but is exceptionally liable to be affected by the peril insured against. This is referred to as the 'physical hazard".
(b)Any fact is material which leads to the inference that the particular proposer is a person , or one of a class of persons, whose proposal for insurance ought to be subjected at all or accepted at a normal rate. This is usually referred to as the 'moral hazard'.
The materiality of a particular fact is DOD: 16.01.2024 || Page 14 of 32 CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
determined by the circumstances of each case and is a question of fact.
39. If a fact , although material , is one which the proposer did not and could not in the particular circumstances have been expected to know, or if its materiality would not have been apparent to a reasonable man, his failure to disclose it is not a breac h of his duty.
40. Full disclosure must be made of all relevant facts and matters that have occurred up to the time at which there is a concluded contract. It follows from this principle that the materiality of a particular fact is determined by the circumstances exist ing at the time when it ought to have been disclosed, and not by the events which may subsequently transpire. The duty to make full disclosure continues to apply throughout negotiations for the contract but it comes to an end when the contract is concluded; therefore, material facts which come to the proposer's knowledge subsequently need not be disclosed.
41.Thus, a proposer is under a duty to disclose to the in surer all material facts as are within his knowledge. The proposer is presumed to know all the facts and circumstances concerning the proposed insurance. Whilst the proposer can only disclose what is known to him, the proposer's duty of disclosure is not confined to his actual knowledge, it also extends to those material facts which, in the ordinary course of business , he ought to know. However, the assured is not under a duty to disclose facts which he did not know and which he could not reasonably be expected to DOD: 16.01.2024 || Page 15 of 32 CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
know at the material time. The second aspect of the duty of good faith arises in relation to representations made during the course of negotiations, and for this purpose all statements in relation to material facts made by the proposer during the course of negotiations for the contract constitute representations and must be made in good faith.
42. The basic rules to be observed in making a proposal for insurance may be summarized as follows:
(a)A fair and reasonable construction must be put upon the language of the question which is asked, and the answer given will be similarly construed. This involves close attention to the language used in either case, as the question may be so framed that an unqualified answer amounts to an assertion by the proposer that he has knowledge of the facts and that the knowledge is being imparted. However, provided these canons are observed, accuracy in all matters of substance will suffice and misstatements or omissions in trifling and insubstantial respects will be ignored.
(b) Carelessness is no excuse, unless the error is so obvious that no one could be regarded as misled. If the proposer puts 'no' when he means 'yes' it will not avail him to say it was a slip of the pen; the answer is plainly the reverse of the truth.
(c) An answer which is literally accurate, so far as it extends, will not suffice if it is misleading by reason of what is not stated.
It may be quite accurate for the proposer to state that he has made a claim previously on an insurance DOD: 16.01.2024 || Page 16 of 32 CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
company, but the answer is untrue if in fact he has made more than one.
(d) Where the space for an answer is left blank, leaving the question unanswered, the reasonable inference may be that there is nothing to enter as an answer. If in fact there is something to enter as an answer, the insurers are misled in that their reasonable inference is belied.
It will then be a matter of construction whether this is a mere nondisclosure, the proposer having made no positive statement at all, or whether in substance he is to be regarded as having asserted that there is in fact nothing to state.
(e)Where an answer is unsatisfactory, as being on the face of it incomplete or inconsistent the insurers may, as reasonable men, be regarded as put on inquiry, so that if they issue a policy without any further enquiry they are assumed to have waived any further information. However, having regard to the inference mentioned in head (4) above, the mere leaving of a blank space will not normally be regarded as sufficient to put the insurers on inquiry.
(f)A proposer may find it convenient to bracket together two or more questions and give a composite answer. There is no objection to his doing so, provided the insurers are given adequate and accurate information on all points covered by the questions.
(g)Any answer given, however accurate and honest at the time it was written down, must be corrected if, up to the time of acceptance of the proposal, any event or circumstance supervenes to make it inaccurate or misleading.
[Source : Halsbury's Laws of England,Fourth Edition , Para 375, Vol.25 : Insurance] DOD: 16.01.2024 || Page 17 of 32 CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
43.Sometimes the standard of duty of disclosure impose d on the insured could make the insured vulnerable as the statements in the proposal form could be held against the insured. Conversely, certain clauses in the policy of insurance could be interpreted in light of the contra proferentem rule as against the insurer. In order to seek specific information from the insured, the proposal form must have specific questions so as obtain clarity as to the underlying risks in the policy, which are greater than the normal risks.
Contra Proferentem Rule
44. The Contra Proferentem Rule has an ancient genesis. When words are to be construed, resulting in two alternative interpretations then, the interpretation which is against the person using or drafting the words or expressions which have given rise to the difficulty in construction, applies. This Rule is often invoked while interpreting standard form contracts. Such contracts heavily comprise of forms with printed terms which are invariably used for the same kind of contracts. Also, such contracts are harshly worded against individuals and not read and understood most often, resulting in grave legal implications. When such standard form contracts ordinarily contain exception clauses, they are invariably construed contra proferentem rule against the person who has drafted the same.
45. Some of the judgments which have considered the contra proferentem rule are referred to as under:
a) In General Assurance Society Ltd., v.
Chandmull Jain AIR 1966 SC 1644, it DOD: 16.01.2024 || Page 18 of 32 CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
was held that where there is an ambiguity in the contract of insurance or doubt, it has to be construed contra proferentem against the Insurance Company.
b) In Delhi Development Authority v. Durga Chand Kaushish AIR 1973 SC 2609, it was observed:
"In construing a document one must have regard, not to the presumed intention of the parties, but to the meaning of the words they have used. If two interpretations of the document are possible, the one which would give effect and meaning to all its parts should be adopted and for the purpose, the words creating uncertainty in the document can be ignored."
c) Further, in Central Bank of India v.
Hartford Fire Insurance Co. Ltd.
AIR 1965 SC 1288, it was held:
"What is called the contra proferentem rule should be applied and as the policy was in a standard form contract prepared by the insurer alone, it should be interpreted in a way that would be favourable to the assured."
d) In Md. Kamgarh Shah v. Jagdish Chandra AIR 1960 SC 953, it was observed that where there is an ambiguity it is the duty of the court to look at all the parts of the document to ascertain what was really intended by the parties. But even here the rule has to be borne in mind that the document being the grantor's document it has to be interpreted strictly against him and in favour of the grantee.
DOD: 16.01.2024 || Page 19 of 32CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
e) In United India Insurance Co. Ltd. v.
Orient Treasures (P) (2016) 3 SCC 49 this Court quoted Halsbury's laws of England (5th Ed. Vol. 60, Para 105) on the Contra Proferentem rule as under :
"Contra proferentem rule.Where there is ambiguity in the policy the court will apply the contra proferentem rule. Where a policy is produced by the insurers, it is their business to see that precision and clarity are attained and, if they fail to do so, the ambiguity will be resolved by adopting the construction favourable to the insured.
Similarly, as regards language which emanates from the insured, such as the language used in answer to questions in the proposal or in a slip, a construction favourable to the insurers will prevail if the insured has created any ambiguity. This rule, however, only becomes operative where the words are truly ambiguous; it is a Rule for resolving ambiguity and it cannot be invoked with a view to creating a doubt. Therefore, where the words used are free from ambiguity in the sense that, fairly and reasonably construed, they admit of only one meaning, the Rule has no application."
1f) Learned counsel for the appellant have relied upon Sushilaben Indravadan Gandhi and Ors. v. The New India Assurance Co. Ltd. and Ors.
(2021) 7 SCC 151, wherein it was observed that any exemption of liability clause in an insurance contract must be construed, in case of ambiguity, contra proferentem against the insurer. In the said case reliance was placed on Export Credit Guarantee Society v. Garg Sons International (2014) 1 SCC 686 wherein this court held as under:
DOD: 16.01.2024 || Page 20 of 32CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
"The insured cannot claim anything more than what is covered by the insurance policy. "The terms of the contract have to be construed strictly, without altering the nature of the contract as the same may affect the interests of the parties adversely." The clauses of an insurance policy have to be read as they are. Consequently, the terms of the insurance policy, that fix the responsibility of the insurance company must also be read strictly. The contract must be read as a whole and every attempt should be made to harmonise the terms thereof, keeping in mind that the Rule of contra proferentem does not apply in case of commercial contract, for the reason that a Clause in a commercial contract is bilateral and has mutually been agreed upon."
46.Delving on the facts ofthe case and on consideration of IMT5 and IMT-16 of the comprehensive private car (B) policy with regard to the limitation of liability clause, it was observed that the contra proferentem rule applies in case of real ambiguity and if on a reading of the whole policy the meaning of the clauses of a contract are clear there is no room for the application of the doctrine. On the facts of the said case, the appeal was allowed by holding that the insurance company was liable to pay the entire amount claimed. The said case arose from an appeal against the order of the High Court of Gujarat wherein the Court had directed that the liability of the insurer shall be limited to a sum of Rs. 25,000/ and the remaining claim amount shall be payable by the employer (hospital) of the deceased. Ambiguity arising with regard to the interpretation of the term 'employee' as appearing in the limitation of liability clause in the insurance contract was construed contra proferentem against the insurance DOD: 16.01.2024 || Page 21 of 32 CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
company by holding that the deceased was not an employee of the hospital and that therefore, the entire liability would lie upon the insurer. This Court, therefore, required the insurer therein to pay the entire claim amount to the wife of the deceased.
47.MacGillivray on Insurance Law (9th Ed., Sweet and Maxwell London, 1997 at p. 280) deals with the rule of Contra Proferentem as under :
"The contra proferentem Rule of construction arises only where there is a wording employed by those drafting the Clause which leaves the court unable to decide by ordinary principles of interpretation which of two meanings is the right one. 'One must not use the Rule to create the ambiguity one must find the ambiguity first.' The words should receive their ordinary and natural meaning unless that is displaced by a real ambiguity either appearing on the face of the policy or, possibly, by extrinsic evidence of surrounding circumstances."
48. Colinvaux's Law of Insurance (6th Ed., 1990 at p. 42) has elucidated on the said rule in the following words:
"Quite apart from contradictory clauses in policies, ambiguities are common in them and it is often very uncertain what the parties to them mean. In such cases the Rule is that the policy, being drafted in language chosen by the insurers, must be taken most strongly against them. It is construed contra proferentem, against those who offer it. In a doubtful case the turn of the scale ought to be given against the speaker, because he has not clearly and fully expressed himself.DOD: 16.01.2024 || Page 22 of 32
CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
Nothing is easier than for the insurers to express themselves in plain terms. The assured cannot put his own meaning upon a policy, but, where it is ambiguous, it is to be construed in the sense in which he might reasonably have understood it. If the insurers wish to escape liability under given circumstances, they must use words admitting of no possible doubt."
49. The aforesaid principles could be applied to the present case having regard to the nature of the policy in question i.e. a mediclaim policy, the specific queries in the proposal form and the answers thereto given by the appellant in the context of the general and specific clauses therein.
xxxxx
15. (i) If the aforesaid principles are applied to the facts of the present case, then we find that the act of repudiation of the claim by the defendant came after the plaintiffs submitted all the relevant documents. One of the documents which was submitted was the report dated 02.03.2021, issued under the signatures of Dr.(Prof.) Sandeep Guleria of Indraprastha Apollo Hospital, who was dealing with the kidney replacement operation of patient/deceased Rajesh Sahni, wherein he categorically stated/certified as under, to quote:
xxxxx Mr.Rajesh Sahni underwent a burr hole surgery in 1989. This is not related to his renal failure and is not the cause of his current renal failure.
xxxxx DOD: 16.01.2024 || Page 23 of 32 CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
(ii) This Court has already discussed in preceding paragraph No.5 that Burr Holes are small holes that a neurosurgeon makes in the skull.
Burr holes are used to help relieve pressure on the brain when fluid, such as blood, builds up and starts to press on brain tissue. A Burr hole procedure/surgery is performed to remove collection of blood (haematoma) just below the lining of the brain known as dura.
16. The two important issues which are before this Court for consideration in this case which go to the root of the matter are:
(i) Whether there was non-disclosure/concealment on the part of policy holder/deceased about the "Burr hole surgery"
undertaken by him in the year 1989, while filling the "Proposal Form" for taking mediclaim policy for the first time in the year 2016? If so, its effect.
(ii) Whether the "Burr hole surgery" undertaken by the deceased in the year 1989 has any co-relation to the kidney ailment suffered by deceased in the year 2021? If so, its effect.
17. Now, coming to the first issue. The Insurance Regulatory and Development Authority of India, by a notification dated 16 October 2002 issued the Insurance Regulatory and Development Authority (Protection of Policyholders' Interests) Regulations 2002. The expression "proposal form" is defined in Regulation 2(d) thus:
DOD: 16.01.2024 || Page 24 of 32CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
xxxxx 2(d) "Proposal form" means 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 or decline, to undertake the risk, and in the event of acceptance of the risk, to determine the rates, terms and conditions of a 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.
xxxxx
18. The learned counsel for the defendant made a strong pitch that the claim of the plaintiffs was repudiated as the deceased/policy holder did not disclose about "Burr hole surgery" undertaken by him in the year 1989, which is in violation of Section Vi (j) of the policy terms and conditions. I have gone through the copy of "Proposal Form" (running into seven pages) which has been placed on record by the defendant company itself. I could not lay my hands on any such alleged Section Vi(J) in the entire "Proposal Form"/Policy. Be that as it may, in the "Proposal Form" under the Heading No.6: Medical And Life Style Information, there is "Section B: Have any of the persons proposed to be insured" and under said Section B with sub-clause xvii, which reads as under:
xxxxx xvii: Undertaken any surgery or a surgery been advised in the last 10 years or is a surgery still pending?
xxxxx DOD: 16.01.2024 || Page 25 of 32 CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
The marking word herein above is "10 years". The deceased filled the "Proposal Form" provided by the defendant for having the mediclaim policy in question on 25.02.2016 and ten years back from 2016, which is year 2006, admittedly the deceased had not undergone any "Burr hole surgery" in the year 2006. It is pertinent to mention here that the defendant company had asked/put all the questionnaires in Section B of Heading No.6 in "Yes/No format", with the claimant/insured having only option either to put a tick mark on Yes Box or a tick mark against the No Box. The claimant/deceased rightly ticked the "No Box" against sub- clause xvii, re-produced hereinabove, as he admittedly did not undergo any surgery in the year 2006, i.e in the last ten years while he was filling the "Proposal Form" in the year 2016. There was no option/column in the "Proposal Form" whereby the policy holder/deceased could mention that he had undergone "Burr hole surgery" in the year 1989 as everything was asked by the defendant in Yes/No format by putting tick marks against the requisite columns.
19. Therefore, in the absence of clarity of information about the medical condition in the proposal form itself, the claim cannot be repudiated. This issue was considered by the Hon'ble Supreme Court in the latest judgment reported as, "Civil Appeal No.6178/2023", titled as, "M/s Mehta Jewellers V/s National Insurance Company Limited"
(DOO: 26.09.2023), wherein a jeweller had an insurance policy against the theft of jewellery, which he had kept in "steel almirah/safe". A burglary took place in the shop of said jeweller wherein the said steel DOD: 16.01.2024 || Page 26 of 32 CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
almirah/safe in which several gold ornaments were lying was broken open. The claim was raised with the concerned insurance company by the jeweller, which was repudiated on the ground that "almirah/safe" was not of standard make. The Hon'ble Supreme Court considered the matter and held as under:
xxxxx
3. We may note that the policy itself does not define the word "locked safe" nor does it define what should be the standard make of the "locked safe".
The expression used in the policy are "locked safe of standard make". In the absence of any "standard make" described by the respondent - Insurance Company in the policy, and in the absence of any description of a "locked safe" by the respondent - Insurance Company, we are of the opinion that the appellant could not have been fastened with the liability of placing the jewellery in a particular safe, which can be treated as a "locked safe" for meeting the requirements of the respondent-Insurance Company. The definition of the term "locked safe", itself being as ambiguous as it is, the claim of the appellant could not have been repudiated on that count.
xxxxx
20. Even if we keep the technicalities aside, it is a matter of record that on earlier occasions also, defendant had duly approved "cashless treatment" to the deceased/policy holder for his "kidney ailment" not once but twice. In this regard, reference could be had to the following two documents, duly admitted by the defendant:
DOD: 16.01.2024 || Page 27 of 32CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
(i) Cashless Enhancement Letter dated 12.10.2020, issued by the defendant under Claim No.RC-HS20-11370791, addressed to Balaji Medical & Diagnostic Research Centre, I.P Extension, New Delhi, thereby authorizing cashless treatment worth Rs.1,93,332/- to the deceased for "CKD, AFI - Chronic Kidney Disease, Acute Febrile Illness"
(photocopy thereof available at Page Nos.150 & 151 of the paperbook) and;
(ii) Settlement letter dated 25.01.2021, issued by the defendant under Claim No.CCN RC-HS20-11994996, addressed to Balaji Medical & Diagnostic Research Centre, New Delhi, thereby authorizing cashless treatment/settled amount worth Rs.2,91,501.05/- to the deceased for "Acute Kidney Failure with Tubular Necrosis" (photocopy thereof available at Page Nos.152 & 153 of the paperbook).
21. From the aforesaid two documents, it is crystal clear that the defendant was very well aware even prior to rejection/repudiation of the claim in question of the plaintiffs that deceased/policy holder had been suffering from "kidney ailment". At the time of according approval for the aforesaid two cashless payments, the defendant never raised the alleged defence of "Burr hole surgery" undertaken by the deceased in the year 1989. It is further apparent from the record that even after rejection of claim in question, the defendant sanctioned a cashless treatment worth Rs.10,400/- for the "Stent Removal" of deceased from Indraprastha Apollo Hospital vide Claim No.RC-HS21-12374845.
DOD: 16.01.2024 || Page 28 of 32CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
22. In view of the above, this Court has no hesitation in holding that there was no concealment on the part of policy holder/deceased about the "Burr hole surgery" undertaken by him in the year 1989, while filling the "Proposal Form" for taking mediclaim policy for the first time in the year 2016, as there was no reason or occasion for him to have informed/disclosed about the same to defendant because the "Proposal Form" only asked/enquired about the surgeries undertaken/advised in the last 10 years. This issue is decided accordingly in favour of plaintiffs and against the defendant.
23. Now, coming to the next important issue, i.e whether the "Burr hole surgery" undertaken by the deceased in the year 1989 has any co-relation to the kidney ailment suffered by deceased in the year 2021. Admittedly "Burr hole surgery" is in relation to "brain", while the policy holder/deceased was diagnosed with "renal allograft recipient on triple immunosuppression" which in simple language means "kidney transplantation" for which he remained lying admitted in Indraprastha Hospital w.e.f 17.02.2021 to 26.02.2021. Even to a person of ordinary prudence, there appears to be no co-relation between the said two ailments as the former is concerned with brain while the latter one is related to kidney ailment. Be that as it may, the answer to this question lies in the report/letter dated 02.03.2021, issued under the signatures of Dr.(Prof.) Sandeep Guleria of Indraprastha Apollo Hospital (available at page No.41 of the paper book), who was dealing with the kidney replacement operation of patient/deceased Rajesh Sahni, wherein he categorically DOD: 16.01.2024 || Page 29 of 32 CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
stated/certified as under, to quote:
xxxxx Mr.Rajesh Sahni underwent a burr hole surgery in 1989. This is not related to his renal failure and is not the cause of his current renal failure.
xxxxx Admittedly, the said report/letter was in the knowledge of defendant as a copy thereof was sent by the plaintiffs to the defendant while raising the claim in question.
24. Somewhat similar issue also arose for consideration before the Hon'ble Supreme Court of India in case reported as, "Civil Appeal Nos.2769-2770/2023", titled as, "Om Prakash Ahuja V/s Reliance General Insurance Company Limited" (DOD: 04.07.2023), wherein the wife of appellant/Om Prakash Ahuja had died of "ovarian cancer", but she had not disclosed about "rheumatic heart disease" in the proposal form which she was suffering from at that time. The insurance company repudiated the claim on the ground of concealment of "rheumatic heart disease" by the wife of appellant. In the said case, the Hon'ble Supreme Court has been pleased to observe as under:
xxxxx
26. ........From this, it is established that even the Insurance Company accepted the fact that the non-
mentioning of the disease from which the deceased wife of the appellant suffered at the time of purchasing the policy was not material, as the death was caused from a different disease altogether. Both had no relation with each other.
xxxxx (underlining which is mine emphasized) DOD: 16.01.2024 || Page 30 of 32 CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
25. On the other hand, learned counsel for the defendant in support of his contentions raised in the written statement has placed reliance upon the following two judgments:
(i) Case reported as, "Civil Appeal No.2776/2002", titled as, "Satwant Kaur Sandhu V/s New India Assurance Company Limited" (DOD: 10.07.2009); and
(ii) Case reported as, "Civil Appeal No.4261/2019", titled as, "Reliance Life Insurance Co. Ltd. & Anr. V/s Rekhaben Nareshbhai Rathod" (DOD: 24.04.2019).
26. (i) I have gone through both the aforesaid judgments. The judgment of Satwant Kaur Sandhu (supra) has already been considered by the Hon'ble Supreme Court in case of Manmohan Nanda (supra) and the same was not found applicable in the facts and circumstances of the said case. Similarly, the judgment of Satwant Kaur Sandhu (supra) of the Hon'ble Supreme Court is also not applicable in the facts and circumstances of the case in hand.
(ii) As regards the judgment of Rekhaben Nareshbhai Rathod (supra), it is noted that the said judgment pertains to the claim under the policy of life insurance while the instant case is concerned with the claim of health insurance policy. As such, even the aforesaid judgment is not applicable to the facts and circumstances of the case in hand and accordingly is of no help to the defendant whatsoever.
DOD: 16.01.2024 || Page 31 of 32CS (Comm) No.477/2022: Smt.Vandana Sahni & Anr. V/s HDFC Ergo General Insurance Co. Ltd.
27. As discussed aforesaid, I have no hesitation in holding that the defendant has miserably failed in proving any relation whatsoever with regard to "Burr hole surgery" undertaken by the policy holder/deceased in the year 1989 and the kidney ailment suffered by him for which he underwent kidney transplantation at Indraprastha Apollo Hospital in the year 2021. The issue is decided accordingly in favour of plaintiffs and against the defendant. Consequently, it is hereby held that the rejection/ repudiation of mediclaim policy by the defendant vide its letter dated 08.07.2021 was totally wrong and without any legal basis.
28. (i) In view of the above, a decree in the sum of Rs.8,51,702/- (Rupees Eight Lakhs Fifty One Thousand Seven Hundred Two Only) alongwith interest @ 12% per annum w.e.f 08.07.2021 (i.e the date of repudiation of claim by the defendant) till realization thereof is passed in favour of plaintiffs and against the defendant.
(ii) Plaintiffs are also held entitled to costs and counsel's fee which is quantified as Rs.22,000/.
29. Decree Sheet be drawn accordingly.
30. File be consigned to Record Room after completion of necessary formalities.
Dictated & Announced in the (Vinod Yadav)
open Court on 16.01.2024 District Judge (Commercial Court)-02
North-West/Rohini Courts
DOD: 16.01.2024 || Page 32 of 32