Dr. S.M. Kantikar, Presiding Member
1. The brief facts of the case are that in the month of March, 2014 the complainant’s husband Mr. Gagan Sethi (hereinafter referred to as ‘insured’) obtained a home loan from ICICI Bank at Gurgaon (OP-2) for a sum of Rs. 1,18,00,000/-. He also, for the purpose of insuring the loan amount, opted for “Loan Protect-FP Mortgage Policy” from the ICICI Prudential Life Insurance Co. Ltd (OP-1). On the basis of available relevant medical records, the OP-1 confirmed the eligibility of the insured to get the insurance cover and he handed over to the agent of OP-1, the blank application form signed on 31.03.2014. The yearly premium was fixed to Rs. 76464/-.
In the month of June 2014, the insured suffered very high grade fever and the Platelet count reduced drastically. He took treatment and hospitalized for few days in different places. In the month of December 2014 the insured got admitted to Medanta Medicity for abdominal distension - Ascites. After examination and investigation, he was advised to undergo liver transplant. However, prior to liver transplant during the treatment, his health suddenly deteriorated, suffered cardiac arrest and the insured died on 11.12.2014. For the settlement of insurance claim, the deceased wife Smt. Vinita Sethi - the complainant submitted the relevant documents to the insurance co. (OP-1). The insurance co. repudiated the claim vide letter dated 02.07.2015 on the ground of non-disclosure of medical history of the insured. Being aggrieved by the illegal repudiation of insurance claim, the complainant filed a consumer complaint before this commission and prayed for sum assured of Rs. 1,18,00,000/- and the compensation from the insurance co.
2. The OPs filed their respective written versions and denied any deficiency on their part. The insurance co. contended that the deceased insured provided incorrect information and suppressed material fact about his health. The insured was hospitalized from 06.10.2011 to 12.10.2011 for the complaints of upper Gastro Intestinal (GI) bleed. He was diagnosed as Grade III Esophageal Varices, Multiple Gastric Ulcers and Chronic Liver Disease (CLD). He was chronic smoker and alcoholic for long time. On 15.10.2013 he took some treatment. He was hospitalized on 19.10.2013 with a diagnosis of CLD and Gastropathy – due to possible ethanol with dyslipidemia with obesity. The life assured was required to disclose correct facts, but he falsely filled the proposal forms.
3. Both the sides filed their respective affidavits of evidence. The OP-1 filed the relevant documents like repudiation letter, the proposal form and medical record of the deceased.
4. We have heard the arguments from both the sides and perused material on record.
5. The learned counsel for complainant Ms. Swati Gupta submitted that, the blank proposal form was signed by the insured, and later on an insurance co. agent filled it. The deceased showed to the agent about his all medical reports (since 2011), but intentionally the agent did not fill it. The counsel submitted that the cause of death of insured was not related with the reasons stated in the repudiation letter.
6. Perusal of the repudiation letter dated 02.07.2015 and medical records revealed that, the insured expired due to Decompensated Chronic Liver Disease with Massive Intracranial Hemorrhage. The insured took treatment in Max Super Specialty Hospital, New Delhi (6.10.2011 to 12.10.2011) for Upper GI bleed, esophageal varices, and CLD. Again underwent check-up and medical tests at Max Hospital, Gurgaon on 19.10.2013. The history clearly recorded that he smokes 8-10 /day. He was diagnosed as CLD with Gastropathy, dyslipidemia and Obesity. He was advised for life style changes and stop drinking alcohol. The USG done at Mahajan Imaging Centre reported as Hepatic Parenchymal Disease. Thus, we are of considered view that the insured was suffering from CLD. He concealed his treatment and illness in the proposal form.
7. We further note from June 2014 to end of November 2014 for recurring ailments the insured took treatment in various hospitals in Mumbai, viz. Niron Hospital,Guru Nanak Hospital, Jewel Hospital. He got admitted in Medanta Hospital on 02.12.2014 till 11.12.2014 and treated under Hepatology Dept for CLD, given anti-hepatic treatment and IV antibiotics nutritional support etc. He was on the liver transplant workup. He suddenly developed polyuria and hypo-natremia. On 11.12.2014, he developed cardiac arrest and was shifted to ICU, resuscitation was done as per ACLS protocol but unfortunately, the patient could not be revived and was declared dead on 11.12.2014. The cause of death in death summery mentioned as decompensated chronic liver disease with massive intracranial haemorrhage. In our view, it was the clear case of concealment of previous health ailments by the insured while submitting the proposal form; thus the repudiation by OP-1 is justified.
8. The disclosure of a previous medical condition of the proposer is necessary to enable the insurer to assess the human life value of the proposer before the issuance of a policy. The consequence of non-disclosure is that the insurer is unable to assess the real risk. The Hon’ble Supreme Court in Satwant Kaur Sandhu Vs. New India Assurance Company Ltd. (2009) 8 SCC 316 held that 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 statement may be material to the risk. The insurance company may still offer insurance protection on altered terms. A contract of insurance involves utmost good faith. The Court has held that:
“... Thus, it needs little emphasis that when an information on a specific aspect is asked for in the proposal form, an assured is under a solemn obligation to make a true and full disclosure of the information on the subject which is within his knowledge. It is not for the proposer to determine whether the information sought for is material for the purpose of the policy or not. Of course, obligation to disclose extends only to facts which are known to the applicant and not to what he ought to have known. The obligation to disclose necessarily depends upon the knowledge one possesses. His opinion of the materiality of that knowledge is of no moment.”
9. In the recent judgment in the case Reliance Life Insurance v. Rekhaben Nareshbai Rathod II (2019) CPJ 53 (SC) Hon’ble Supreme Court elaborately discussed about the insurance contract, the proposal form, and material disclosure etc.
15. The fundamental principle is that insurance is governed by the doctrine of uberrima fidei. This postulates that there must be complete good faith on the part of the insured. This principle has been formulated in MacGillivray on Insurance Law [12th Edition, Sweet and Maxwell (2012)] succinctly, thus: ?
[Subject to certain qualifications considered below], the assured must disclose to the insurer all facts material to an insurer’s appraisal of the risk which are known or deemed to be known by the assured but neither known or deemed to be known by the insurer. Breach of this duty by the assured entitles 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”
The relationship between an insurer and the insured is recognized as one where mutual obligations of trust and good faith are paramount.
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 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 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.
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 statement may be material to the risk. The insurance company may still offer insurance protection on altered terms.
10. On the consequence of appending signatures to the proposal form, the Hon’ble Supreme Court in the same judgment further observed as:
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 ba
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sis of the statements contained in the proposal form. …………..” In the instant case the deceased insured signed blank proposal form, it is not an acceptable ground. The insured having signed the proposal form, he was bound by the information contained therein. The insured was not an illiterate person, he being an employee of Rajasthan State Road Transport Corporation. Therefore, he was not likely to sign a blank proposal form. We relied on the case of Newshole Brothers v. Road Transport and General Insurance Co. Ltd. (1929) 2 K.B. 356, where the insurance company’s agent, who had no authority to fill in proposal forms, wrote down wrong answers on a proposal form even though the proposer had given him the correct answers. The proposer nonetheless signed the inaccurately completed form. It was decided in that case that the agent, in filling in the proposal form, was merely the proposer’s scribe; that the knowledge of the true facts by the agent could not be imputed to the insurance company; and that therefore the company was entitled to avoid the policy. 11. For the reasons stated above we find the deceased insured while filling the proposal form concealed the material facts about his health condition. The OP-1 insurance co. rightly repudiated the insurance claim. 12. The complaint is dismissed.