1. This writ petition is filed by the petitioner Insurance Company, challenging Ext.P11 award passed by the Insurance Ombudsman, Kochi in Complaint No.KOC-G- 044-1415-0003, directing the petitioner to pay an amount of Rs. 1,00,000/- towards ex-gratia to the 1st respondent claimant, though the Ombudsman found that there was material suppression of facts, and therefore, the contract entered into by and between the petitioner and the 1st respondent is null and void. Brief Material facts for the disposal of the writ petition are as follows:
2. The 1st respondent had taken a Basic Floater Star Health Medi-claim Policy from the petitioner. The coverage of the policy was from 22.10.2012 to 21.10.2013 for an amount of Rs. 3,00,000/-. Petitioner issued the policy to the 1st respondent based on Ext.P2 proposal submitted by the 1st respondent. The declaration contained in the proposal form clearly stipulated that, in case it is found that the statements or answers given by the insured are found incorrect or false, the company would be absolved from any liability. Therefore, the acceptance of the proposal is purely on the basis of the information submitted by the customer, after the company deems that the risks can be covered. It is also pointed out that, if the health condition is not satisfactory or enumerate high risk, the company will not issue a policy, and if the person is submitting incorrect information to mislead the insurer to issue a policy, the same is treated as fraud.
3. The 1st respondent raised a claim for medical benefit of Rs. 2,11,608/-, which was repudiated by the company as per Ext.P6 order. Thereupon, 1st respondent has preferred a representation before the Grievance Cell of the petitioner company, which was also dismissed as per Ext.P8 order. It was thus accordingly 1st respondent approached the Insurance Ombudsman and secured the order for ex-gratia payment of Rs. 1,00,000/-.
4. I have heard learned counsel for the petitioner and the learned counsel appearing for the 1st respondent, and perused the pleadings and the documents on record.
5. The case put forth by the 1st respondent is that, in January, 2013, he had suffered heart pain and was admitted to two hospitals, i.e., Upasana Hospital and for further investigations in NIMS Hospital. The admission was intimated to the petitioner company, according to the 1st respondent, the insurer has assured that the claim would be sanctioned soon. However, vide letter dated 29.08.2013, it was informed that the claim was repudiated.
6. The paramount contention advanced by the petitioner company before the Ombudsman was that the policy was issued based on the declarations given in the duly signed proposal form, subject to certain terms and conditions executed by and between the parties. The complainant was admitted to NIMS Hospital for treatment of IHD, T2DM, HTN from 29.01.2013 to 31.01.2013. The pre-authorization request received from the hospital on 29.01.2013, clearly revealed in the medical history column that 1st respondent was suffering from DM since one year. Since there was preexisting illness, the cashless benefit was denied. After treatment, the bills were submitted, which was repudiated. The discharge summary further reveals that the 1st respondent is a known case of T2DM and on treatment for Dyslipidemia. The risk factors recorded by the treating doctor include, T2DM, Dyslipidemia, Smoking etc. As part of the claims processing protocol, the company arranged investigation and collected records from the hospitals. The records from NIMS Hospital revealed that the 1st respondent was suffering from DM since 8 years. The records from Upasana Hospital revealed that 1st respondent was suffering from T2DM for last 8 years and HTN since 5 years. Therefore, according to the petitioner, these facts having not disclosed in the proposal form, amounts to material suppression of facts, and the contract entered into by and between the parties is ab initio void.
7. On the other hand, learned counsel appearing for the 1st respondent submitted that, there is no interference required in the order passed by the Ombudsman, since the Ombudsman is vested with ample powers under Rule 18 of the Redressal of Public Grievances Rules, 1998, to make ex-gratia payment, and if the Ombudsman deems fit, he may award an ex-gratia payment.
8. However, learned counsel appearing for the petitioner submitted that, the Ombudsman having found that there was material suppression of facts and the contract was found to be null and void, the Ombudsman was not entitled to order ex-gratia payment of Rs. 1,00,000/-. That apart, it is pointed out that, no reasons are assigned by the Ombudsman in order to award the ex-gratia payment. Therefore, the discretion exercised by the Ombudsman itself is baseless.
9. Learned counsel in that regard has invited my attention to the judgment of the apex court in 'GMG Engineering Industries v. ISSA Green Power Solution' [2015 (3) KLT SN 10 (C.No.13) SC]. So also, a Division Bench judgment of this Court in 'Omana Mathai v. Joseph Easo' [2014 (1) KLT 689] is pressed into service. Culling out the principles laid down in the aforesaid judgments, it is clear that the discretion is to be exercised by any authority like any other judicial discretion with vigilance and circumspection, and the discretion is not to be exercised in any arbitrary, vague or fanciful manner. In the Division Bench judgment referred to above, it is held that the judicial act has to be expressed by stating the reasons which would be discernible from the judgment by a Court of appeal if a party were to carry an appeal against the judgment. Therefore, according to learned counsel for the petitioner, none of the basic principles of law that should have been followed by the Insurance Ombudsman, a quasi-judicial functionary, were undertaken in the matter of exercising the discretion.
10. Having evaluated the rival submissions made across the Bar, and the legal and factual situations, it is clear that, there was material suppression which was found so by the Ombudsman, in the matter of submitting the proposal. That finding rendered by the Ombudsman is not assailed by the 1st respondent. Therefore, the sole question to be considered is, whether the ex-gratia payment of Rs. 1,00,000/- ordered by the Ombudsman can be sustained under law. As is contended by learned counsel for the petitioner, there is no reason at all assigned by the Ombudsman for granting the ex-gratia payment. True, power is vested to grant ex-gratia payment, under Rule 18, but when amounts are awarded under that head, it should be supported by reason. Here, in the case on hand, Ombudsman has not stated, how, why, and under what circumstances the discretion was exercised. When a power of discretion is conferred upon a statutory authority or a judicial forum, that should be exercised with care, caution and circumspection, and in a judicious manner. If only reasons are assigned by the authority, an appellate or judicial forum will be in a position to evaluate the manner in which the power was exercised in order to arrive at a just conclusion. However, in the case on hand, Ombudsman basically found that, the contract of policy issued is ab initio void, consequent to the illegal conduct on the part of the 1st respondent not disclosing the true and material facts, which forms the foundation for issuance of the policy. Above all, on a reading of Rule 18, it is explicit that only if it deems fit, the ex-gratia may be awarded, which thus means, the authority was duty bound to explain the circumstances leading to the fitness of things enabling it do so. Having not done so, the substratum with respect to exercise of the discretionary power vanishes. In that view of the matter, the award of ex-gratia payment of Rs. 1,00,000/- cannot be sustained under law. Normally, the said issue ought to have been remanded for de-novo consideration, but several years have elapsed and the issue can be sorted out here itself, verifying the pleadings and available records.
11. In my considered view, since there was power vested with the Ombudsman under Rule 18 of the Rules specified above, the maximum that the Ombudsman could have done is, it ought to have directed the Insurance company to return the premium paid by the 1st respondent amounting to Rs. 11,340/-, since normally, the proposal forms are given by the Insurance Agents and the entries therein ar
Please Login To View The Full Judgment!
e also filled up by them. Thereafter, before entering the contract on the basis of the information given by the party in the proposal form, a medical check up would be conducted, and it is thereafter alone, the policy is issued by the Insurance company. Therefore, if any pre-existing condition was found in the normal medical check up, the policy would not have been issued by the company. Since the policy is issued after obtaining the proposal form and the medical check up, I am of the considered opinion that, the Insurance company is liable to return the premium paid as specified above to the 1st respondent. Therefore, the writ petition is allowed to that extent, and Ext.P11 award is modified granting ex-gratia of Rs. 11,340/- and accordingly, the petitioner Insurance company is directed to pay the said amount of Rs. 11,340/- to the 1st respondent as ex-gratia, within a month from the date of receipt of a copy of this judgment.