MSK Jaiswal, President
Opposite parties in CC No.70/2012 on the file of District Consumer Forum, Nalgonda preferred this appeal feeling aggrieved by the orders dated 17.04.2013 directing them to deposit a sum of Rs. 6,00,000/- representing the sum assured under Ex.A1 and A2 with bonus, and a sum of Rs. 5,000/- towards deficiency of services with interest @ 9% per annum from the date of the complaint till realization and a sum of Rs. 2,000/- towards costs, before the Forum. On such deposit, a sum of Rs. 1,00,000/- each is apportioned in favour of the Complainants 1 and 3 and a sum of Rs. 4,00,000/- is apportioned in favour of the Complainant No.2. The sum of Rs. 4,00,000/- apportioned in favour of the Complainant No.2 is ordered to be kept in fixed deposit with State Bank of Hyderabad, Prakasham Bazar branch, Nalgonda till he attains majority and further ordering that the amount representing the deficiency of services and costs shall also be paid to the Complainant No.1.
2. For the sake of convenience, the parties are referred to as arrayed in the complaint.
3. The case of the Complainants, in brief, is that Complainant No.1 is wife, Complainant No.2 is minor son and Complainant No.3 is mother of one Chittipolu Shivaiah, who died on 12.04.2020 due to sun-stroke. During life time of said Chittipolu Shivaiah, at the instance of agents of Opposite parties obtained the policies bearing No.12244372 for an assured sum of Rs. 1,00,000/- under "Smartkid New Unit Linked RP" which commenced on 22.07.2009 and another policy bearing No.12941989 for an assured sum of Rs. 5,00,000/- under "Crisis cover" which commenced on 25.11.2009. The Complainant No.2 was shown as nominee to the first policy while the Complainant No.3 was shown as nominee to the latter. The proponent signed the blank forms at the time of proposal.
4. Upon death of the policy holder, the Complainants lodged the claim which was repudiated by the Opposite parties on the premise that prior to obtaining the policy, the policy holder was treated in Kamineni Hospital, Narkatpally for liver disease on account of alcohol which he suppressed in the proposal. In fact, the policy holder was never treated as such, hence filed the complaint with a prayer to direct the Opposite parties to pay Rs. 6,00,000/- covered by two policies with interest @ 12% per annum from the date of death of the policy holder and to pay compensation of Rs. 20,000/-.
5. Opposite parties filed their written version contending that the deceased policy holder was a chronic alcoholic, as a result of which, his liver was damaged and he was admitted in Kamineni Hospital, Narkatpally on 17.05.2009 with severe damage of liver, which is suppressed in the proposal form and which materially affects the issuance of policies in question. The Investigator appointed by them also filed his report to the effect that the deceased was fully aware of the disease and suppressed the same in the policies. Hence, the repudiation made by them is justified.
6. During the course of enquiry before the District Forum, in order to prove their case, the Complainants got filed the affidavit evidence of Chittipolu Uma as PW1 and the documents Ex.A1 to A4 and on behalf of the Opposite parties, no evidence is let-in but got marked the documents Ex.B1 to B10.
7. The District Forum after considering the material available on record, allowed the complaint, as stated supra, at paragraph No. 1.
8. Aggrieved by the above said orders, the Appellants/Opposite parties preferred the present appeal contending that the forum below failed to consider the evidence brought on record in proper perspective. Its reasoning that there is no nexus to the cause of death and ailment suffered by the deceased is not justified. It failed to give any credence to the Investigation Report Ex.B7 and the fact that the deceased had undergone treatment at Kamineni Hospital, Narkatpally with damage of liver as a result of alcohol consumption. It failed to consider the fact that the deceased policy holder was guilty of suppressio veri and suggestion falsi. Hence, prayed to allow the appeal by setting aside the orders impugned.
9. The point that arises for consideration is whether the impugned order as passed by the District Forum suffers from any error or irregularity or whether it is liable to be set aside, modified or interfered with, in any manner? To what relief ?
10. The Appellants are the Insurance Company which have insured the life of one Shivaiah, who is said to be the husband of the first Respondent, father of the second Respondent, son of the third Respondent and brother of the fourth Respondent (Complainants). The deceased Shivaiah obtained two insurance policies. His life was insured for Rs. 1,00,000/- on 22.07.2009 by paying annual premia of Rs. 5,000/-. On 25.11.2009, the deceased obtained another insurance policy for a sum of Rs. 5,00,000/- by paying a premia of Rs. 2,837/-.
11. Even before the first anniversary of the policy came and a need for the payment of the second premia arose, unfortunately the insured Shivaiah died on 12.04.2010. Before the death and even before the first policy was obtained, the deceased Shivaiah was admitted into Kamineni Hospital at Narketpally on 17.05.2009. Ex.B7 is the hospital admission record and Ex.B9 is the statement given by the brother of the deceased at the time when the insured was being discharged from the Kamineni Hospital on the same day against medical advice. The gist of the two medical records is that the insured was diagnosed with liver damage due to intake of alcohol and the condition was very serious and that at that stage taking the discharge of the insured patient was not advisable, but the attendants of the insured would have taken the discharge on their own responsibility.
12. As already stated, on 12.04.2010, the deceased died, the Insurance Company repudiated the claim on the ground that even before the policies were taken, the insured was suffering with liver damage due to excess consumption of alcohol and since this fact was not disclosed in the proposal form and was suppressed, the insurance company is not liable to pay the amount, more particularly, in view of the fact that the death took place within one year of obtaining the policy.
13. Ex.B1 and B2 are the proposal forms submitted by the insured at the time of taking the insurance policies wherein, the insured declared that he is a non-alcoholic and that he never underwent any treatment, which, according to the insurance company is against the medical record which clearly shows that in May,2009 i.e., two months prior to the proposal, the deceased was taken to the Kamineni Hospital in critical condition in view of the damage to the liver due to excessive consumption of the alcohol.
14. The point that arise for consideration is as to whether the repudiation made by the insurance company is justified or whether they are liable to indemnify the insured?
15. In this case the doctrine of res-ipsi-loquitor aptly applies as noticed from the preceding paragraphs. It is manifest that two months prior to the obtaining Insurance policies, the insured had severe health problem and was taken to Kamineni Institute of Medical Sciences Hospital on 17.05.2009, where the members of the family, particularly, his brother was cautioned about the precarious health condition of the insured, in view of the extensive damage to the liver on account of consumption of alcohol.
16. As is well settled, the fundamental principle is that the insurance is governed by the doctrine of oberrimafide which postulates that there must be complete good faith on the part of the insured. The relationship between the insurer and the insured is recognised as one where mutual obligations of trust and good faith are paramount. In the proposal forms which are referred to above there is a pointed Query no.20 F - as to whether the proposer was addicted to Alcohol, the specific answer was 'No'. Similarly to the question no.23-C which deals with whether the proposer having been treated for any ailment prior to the proposal, the specific answer was 'No'. Both these answers fall to the ground if the same are juxtaposed with the medical record which clearly shows that just two months prior to making the above declaration, the insured was in a critical condition and taken to Kamineni Hospital. The medical record which has been referred to speaks volumes about the factum of the insured suffering with acute liver problem which is the result of consumption of alcohol. The medical record placed on record and as per the statement given by the attendants of the patient/insured that when the insured was taken to the hospital on 17.5.2009 he was diagnosed with liver damage due to intake of alcohol and condition was very serious, the Doctor said that the condition was very serious and he has to be hospitalized, but on their responsibility they are taking away the patient/insured back to their home.
17. This categorical statement from the mouth of the brother of the insured who was acting as attendant who accompanied the insured to the Kamineni hospital on 17.5.2009 leaves no room for doubt that all was not well with the insured and there was a serious threat which was well within the knowledge of the insured and his attendants, suppressing the above material fact, two months there after the insured obtained the policy by stating that he has never been under the treatment for any ailment which is palpably false.
18. Though the above aspects do not need any support of the authorities suffice it to place on record, the observations of the Supreme Court in a recent decision reported in 2019 (6) SCC page 175 wherein in Paragraphs 28,29,30 and 31 law on the subject has been succinctly laid down as under:
"28. Materiality of a fact also depends on the surrounding circumstances and the nature of information sought by the insurer. It covers a failure to disclose vital information which the insurer requires in order to determine firstly, whether or not to assume the risk of insurance, and secondly, if it does accept the risk, upon what terms it should do so. The insurer is better equipped to determine the limits of risk taking as it deals with the exercise of assessments on a day-to-day basis. In a contract of insurance, any fact which would influence the mind of a prudent insurer in deciding whether to accept or not accept the risk is a material fact. If the proposer has knowledge of such fact, she or he is obliged to disclose it particularly while answering questions in the proposal form. An inaccurate answer will entitle the insurer to repudiate because there is a presumption that information sought in the proposal is material for the purpose of entering into a contract of insurance.
29. 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, where Lord Mansfield held thus: (ER p.1164)
"Insurance is a contract upon speculation. The special facts, upon which the contingent chance is to be computed, lie most commonly in the knowledge of the insured only; the underwriter trusts to his representation, and proceeds upon confidence that he does not keep back any circumstance in his knowledge, to mislead the underwriter into a belief that the circumstance does not exist, and to induce him to estimate the risque, as if it did not exist."
30. 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 declare 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.
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/>31. 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 "there is a clear presumption that anti information sought for in the proposal form is material for the purpose of entering into a contract of insurance". Each representation or statement may be material to the risk. The insurance company may still offer insurance protection on altered terms." 19. In view of the foregoing discussion and voluminous documentary evidence placed on record leaves no doubt that it is a clear case where the insured obtained two insurance policies by suppressing material fact about the existence of ailment which ultimately proved fatal within two months after the policies were obtained. 20. The District Forum failed to take into consideration the above facts of the case and granted the relief which cannot be countenanced. Therefore, we are unable to uphold the observations of the District Forum which are liable to be set aside. The point is accordingly answered. 21. In the result, appeal is allowed and the impugned order of the District Forum in C.C.No. 70/2012 dated 17.4.2013 is set aside. In the circumstances of the case, there shall be no order as to costs.