Bra nch Ma nag e r, Ba ja j Allia nz L ife Insura nc e Compa ny L td a nd Othe rs v. Da lbir Ka ur

1 Le a ve g ra nte d.

2 T his a ppe a l a rise s fro m the judg me nt a nd o rde r da te d 20 Ma rc h 2020 o f the Na tio na l Co nsume r Dispute s Re dre ssa l Co mmissio n.

3 On 5 Aug ust 2014, a pro po sa l fo r o b ta ining a po lic y o f insura nc e wa s sub mitte d to the a ppe lla nts b y Kulwa nt Sing h. T he pro po sa l fo rm indic a te d the na me o f the mo the r o f the pro po se r, who is the re spo nde nt to the se pro c e e ding s a s the 2020 INSC 583 no mine e. T he pro po sa l fo rm c o nta ine d q ue stio ns pe rta ining to the he a lth a nd me dic a l histo ry o f the pro po se r a nd re q uire d a spe c ific disc lo sure o n whe the r a ny a ilme nt, ho spita liza tio n o r tre a tme nt ha d b e e n unde rg o ne b y the pro po se r. Co lumn 22 re q uire d a de c la ra tio n o f g o o d he a lth. T he pro po se r a nswe re d the q ue rie s in the ne g a tive, indic a ting the re b y tha t he ha d no t unde rg o ne a ny me dic a l tre a tme nt o r ho spita liza tio n a nd wa s no t suffe ring fro m a ny a ilme nt o r dise a se. T he de c la ra tio n unde r Ite m 22(c ) o f the pro po sa l fo rm wa s in re g a rd to whe the r a ny dise a se s o r diso rde rs o f the re spira to ry syste m suc h a s b ut no t limite d to b lo o d in sputum, tub e rc ulo sis, a sthma, infe c te d re spira to ry dise a se o r a ny re spira to ry syste m dise a se inc luding fre q ue nt no se b le e ding, fe ve r a nd dyspno e a we re invo lve d. T his q ue ry wa s a lso re spo nde d to in the ne g a tive. Ac ting o n the b a sis o f the pro po sa l sub mitte d b y the pro po se r, a po lic y o f insura nc e wa s issue d b y the a ppe lla nts o n 12 Aug ust 2014. Unde r the po lic y, the life o f the pro po se r wa s insure d fo r a sum o f Rs. 8.50 la khs pa ya b le o n ma turity with the de a th b e ne fit o f Rs. 17 la khs.

4 On 12 Se pte mb e r 2014, Kulwa nt Sing h die d, fo llo wing whic h a c la im wa s lo dg e d o n the insure r. T he de a th o c c urre d within a pe rio d o f o ne mo nth a nd se ve n da ys fro m the issua nc e o f the po lic y. T he c la im wa s the sub je c t ma tte r o f a n inde pe nde nt inve stig a tio n, during the c o urse o f whic h, the ho spita l tre a tme nt re c o rds a nd me dic a l c e rtific a te issue d b y Ba b a Budha Ji Cha rita b le Ho spita l, Bir Sa hib, Villa g e T ha tha (T a rnta ra n) we re o b ta ine d. T he re c o rds re ve a le d, a c c o rding to the insure r, tha t the de c e a se d ha s b e e n suffe ring fro m He pa titis C. Co pie s o f the inve stig a tio n re po rt da te d 20 De c e mb e r 2014 a nd 9 Ja nua ry 2015 ha ve b e e n pla c e d o n the re c o rd. T he inve stig a tio n re po rts indic a te tha t pro xima te to the de a th, the de c e a se d ha d b e e n suffe ring fro m a sto ma c h a ilme nt a nd fro m vo miting o f b lo o d, a s a re sult o f whic h he ha d b e e n a va iling o f the tre a tme nt a t the a b o ve ho spita l. T he c la im wa s re pudia te d o n 12 Ma y 2015 o n a c c o unt o f the no n-disc lo sure o f ma te ria l fa c ts.

5 T he re spo nde nt institute d a c o nsume r c o mpla int b e fo re the Distric t Co nsume r Dispute s Re dre ssa l Fo rum. T he Distric t Fo rum a llo we d the c o mpla int a nd dire c te d the a ppe lla nts to pa y the full de a th c la im to g e the r with inte re st. T he first a ppe a l wa s re je c te d b y the Sta te Co nsume r Dispute s Re dre ssa l Co mmissio n (he re ina fte r re fe rre d to a s “SCDRC”) a nd the re visio n b e fo re the Na tio na l Co nsume r Dispute s Re dre ssa l Co mmissio n (he re ina fte r re fe rre d to a s “NCDRC”) ha s a lso b e e n dismisse d. T he NCDRC ha s re lie d o n the de c isio n o f this Co urt in Sulbha Prakash Mo te gao nkar & Ors vs L ife Insuranc e Co rpo ratio n o f lndia[1]. Ac c o rding to the NCDRC, a dise a se ha s to b e disting uishe d fro m a me re illne ss. It he ld tha t the de a th ha d o c c urre d due to na tura l c a use s a nd the re wa s no re a so na b le ne xus b e twe e n the c a use o f de a th a nd no n-disc lo sure o f dise a se. Co nse q ue ntly, while a ffirming the judg me nt o f the SCDRC, the NCDRC impo se d c o sts o f Rs. 2 la khs o n the a ppe lla nts, o f whic h, a n a mo unt o f Rs. 1 la kh wa s to b e pa id to the c o mpla ina nt a nd Rs. 1 la kh wa s to b e de po site d with the Co nsume r Le g a l Aid Ac c o unt o f the Distric t Fo rum.

6 Mr Amo l Chita le, le a rne d c o unse l a ppe a ring o n b e ha lf o f the a ppe lla nts sta te s tha t the judg me nt o f the c o nsume r fo ra in the pre se nt c a se a re c o ntra ry to the la w whic h ha s b e e n la id do wn b y this Co urt in L ife Insura nc e Corpora tion of India vs Asha Goe l[2], P.C. Cha c ko vs Cha irma n, L ife Insura nc e Corpora tion of India 3 a nd Sa twa nt Kaur Sa ndhu vs Ne w India Assura nc e Compa ny L imite d[4]. Le a rne d c o unse l sub mitte d tha t a po lic y o f insura nc e is g o ve rne d b y the

1 Civil Appe a l No 8245/ 2015 de c ide d o n 5.10.2015 princ iple s o f utmo st g o o d fa ith. In the pre se nt c a se, the inve stig a tio n re po rts re ve a le d tha t pro xima te to the da te o f de a th, the de c e a se d ha d b e e n ho spita lize d in July 2014 with a c o mpla int o f ha ving vo mite d b lo o d a nd a no ndisc lo sure o f the ma te ria l fa c ts wo uld justify the re pudia tio n o f the c la im b y the insure r. It wa s urg e d tha t the pro po se r wa s duty b o und to ma ke a full disc lo sure in re spo nse to the q ue rie s in the pro po sa l fo rum, whic h he fa ile d to do. T he suppre ssio n o f ma te ria l fa c ts b y the insure d e ntitle s the a ppe lla nts to re pudia te the po lic y unde r Se c tio n 45 o f the Insura nc e Ac t 1938. Se c tio n 45 stipula te s tha t a n insure r is re stric te d fro m c a lling into q ue stio n a life insura nc e po lic y a fte r a n e xpiry o f two ye a rs fro m the da te o n whic h it wa s e ffe c te d o n the g ro und tha t a fa lse o r ina c c ura te sta te me nt ha s b e e n ma de in the (i) pro po sa l; (ii) re po rt o f a me dic a l o ffic e r, re fe re e o r a frie nd o f the insure d; o r (iii) in a ny o the r do c ume nt le a ding to the issue o f po lic y. On the e xpiry o f two ye a rs, the b urde n o f pro o f shifts to the insure r who ha s to e sta b lish tha t the fa lse o r ina c c ura te sta te me nt wa s a ma te ria l ma tte r o r re la te d to ma te ria l fa c ts. In the pre se nt c a se, the c la im in q ue stio n wa s re pudia te d within two ye a rs fro m the c o mme nc e me nt o f the po lic y.

7 No tic e wa s issue d b y this Co urt o n 21 Se pte mb e r 2020, in pursua nc e o f whic h the re spo nde nt ha s e nte re d a ppe a ra nc e thro ug h Mr. Anike t Ja in, le a rne d c o unse l.

8 Mr Ja in ha s suppo rte d the re a so ning o f the NCDRC, urg ing tha t the de a th in the pre se nt c a se o c c urre d due to na tura l c a use a nd the re wa s no ne xus b e twe e n the c a use o f de a th a nd the a lle g e d no n-disc lo sure.

9 A c o ntra c t o f insura nc e is o ne o f utmo st g o o d fa ith. A pro po se r who se e ks to o b ta in a po lic y o f life insura nc e is duty b o und to disc lo se a ll ma te ria l fa c ts b e a ring upo n the issue a s to whe the r the insure r wo uld c o nside r it a ppro pria te to a ssume the risk whic h is pro po se d. It is with this princ iple in vie w tha t the pro po sa l fo rm re q uire s a spe c ific disc lo sure o f pre -e xisting a ilme nts, so a s to e na b le the insure r to a rrive a t a c o nside re d de c isio n b a se d o n the a c tua ria l risk. In the pre se nt c a se, a s we ha ve indic a te d, the pro po se r fa ile d to disc lo se the vo miting o f b lo o d whic h ha d ta ke n pla c e b a re ly a mo nth prio r to the issua nc e o f the po lic y o f insura nc e a nd o f the ho spita liza tio n whic h ha d b e e n o c c a sio ne d a s a c o nse q ue nc e. T he inve stig a tio n b y the insure r indic a te d tha t the a ssure d wa s suffe ring fro m a pre -e xisting a ilme nt, c o nse q ue nt upo n a lc o ho l a b use a nd tha t the fa c ts whic h we re in the kno wle dg e o f the pro po se r ha d no t b e e n disc lo se d. T his b ring s the g ro und fo r re pudia tio n sq ua re ly within the princ iple s whic h ha ve b e e n fo rmula te d b y this Co urt in the de c isio ns to whic h a re fe re nc e ha s b e e n ma de e a rlie r. In L ife Insuranc e Co rpo ratio n o f India vs Asha Goe l, this Co urt he ld: “12…T he c o ntra c ts o f insura nc e inc luding the c o ntra c t o f life a ssura nc e a re c o ntra c ts ub e rrima fide s a nd e ve ry fa c t o f ma te ria l (sic ma te ria l fa c t) must b e disc lo se d, o the rwise, the re is g o o d g ro und fo r re sc issio n o f the c o ntra c t. T he duty to disc lo se ma te ria l fa c ts c o ntinue s rig ht up to the c o nc lusio n o f the c o ntra c t a nd a lso implie s a ny ma te ria l a lte ra tio n in the c ha ra c te r o f risk whic h ma y ta ke pla c e b e twe e n the pro po sa l a nd its a c c e pta nc e. If the re is a ny missta te me nts o r suppre ssio n o f ma te ria l fa c ts, the po lic y c a n b e c a lle d into q ue stio n. Fo r de te rmina tio n o f the q ue stio n whe the r the re ha s b e e n suppre ssio n o f a ny ma te ria l fa c ts it ma y b e ne c e ssa ry to a lso e xa mine whe the r the suppre ssio n re la te s to a fa c t whic h is in the e xc lusive kno wle dg e o f the pe rso n inte nding to ta ke the po lic y a nd it c o uld no t b e a sc e rta ine d b y re a so na b le e nq uiry b y a prude nt pe rso n.”

10 T his ha s b e e n re ite ra te d in the judg me nts in P C Cha c ko vs Cha irma n, L ife Insura nc e Corpora tion of India a nd Sa twa nt Ka ur Sa ndhu vs Ne w India Assura nc e Compa ny L imite d. In Satwa nt Kaur Sa ndhu vs Ne w India Assura nc e Compa ny L td., a t the time o f o b ta ining the Me dic la im po lic y, the insure d suffe re d fro m c hro nic dia b e te s a nd re na l fa ilure, b ut fa ile d to disc lo se the de ta ils o f the se illne sse s in the po lic y pro po sa l fo rm. Upho lding the re pudia tio n o f lia b ility b y the insura nc e c o mpa ny, this Co urt he ld: “25. T he upsho t o f the e ntire disc ussio n is tha t in a c o ntra c t o f insura nc e, a ny fa c t whic h wo uld influe nc e the mind o f a prude nt insure r in de c iding whe the r to a c c e pt o r no t to a c c e pt the risk is a “ma te ria l fa c t”. If the pro po se r ha s kno wle dg e o f suc h fa c t, he is o b lig e d to disc lo se it pa rtic ula rly while a nswe ring q ue stio ns in the pro po sa l fo rm. Ne e dle ss to e mpha sise tha t a ny ina c c ura te a nswe r will e ntitle the insure r to re pudia te his lia b ility b e c a use the re is c le a r pre sumptio n tha t a ny info rma tio n so ug ht fo r in the pro po sa l fo rm is ma te ria l fo r the purpo se o f e nte ring into a c o ntra c t o f insura nc e.”

11 Re c e ntly, this Co urt in Re lia nc e L ife Insura nc e Co. L td. vs Re khabe n Na re shbha i Ra thod[5], ha s se t a side the judg e me nt o f the NCDRC, whe re b y the NCDRC ha d he ld tha t the fa ilure o f the insure d to disc lo se a pre vio us insura nc e po lic y a s re q uire d unde r the po lic y pro po sa l fo rm wo uld no t influe nc e the de c isio n o f a prude nt insure r to issue the po lic y in q ue stio n a nd the re fo re the insure r wa s dise ntitle d fro m re pudia ting its lia b ility. T his Co urt, while a llo wing the re pudia tio n o f the insura nc e c la im, he ld: “30. It is sta nda rd pra c tic e fo r the insure r to se t o ut in the a pplic a tio n a se rie s o f spe c ific q ue stio ns re g a rding the a pplic a nt's he a lth histo ry a nd o the r ma tte rs re le va nt to insura b ility. T he o b je c t o f the pro po sa l fo rm is to g a the r info rma tio n a b o ut a po te ntia l c lie nt, a llo wing the insure r to g e t a ll info rma tio n whic h is ma te ria l to the insure r to kno w in o rde r to a sse ss the risk a nd fix the pre mium fo r e a c h po te ntia l c lie nt. Pro po sa l fo rms a re a sig nific a nt pa rt o f the disc lo sure pro c e d ure a nd wa rra nt a c c ura c y o f sta te me nts. Utmo st c a re must b e e xe rc ise d in filling the pro po sa l fo rm. In a pro po sa l fo rm the a pplic a nt de c la re s tha t she / he wa rra nts truth. T he c o ntra c tua l duty so impo se d is suc h tha t a ny suppre ssio n, untruth o r ina c c ura c y in the sta te me nt in the pro po sa l fo rm will b e c o nside re d a s a b re a c h o f the duty o f g o o d fa ith a nd will re nde r the po lic y vo ida b le b y the insure r. T he syste m o f a de q ua te disc lo sure he lps b uye rs a nd se lle rs o f insura nc e po lic ie s to me e t a t a c o mmo n po int a nd na rro w do wn the g a p o f info rma tio n a symme trie s. T his a llo ws the pa rtie s to se rve the ir inte re sts b e tte r a nd unde rsta nd the true e xte nt o f the c o ntra c tua l a g re e me nt.

31. T he finding o f a ma te ria l misre pre se nta tio n o r c o nc e a lme nt in insura nc e ha s a sig nific a nt e ffe c t upo n b o th the insure d a nd the insure r in the e ve nt o f a disp ute. T he fa c t it wo uld influe nc e the de c isio n o f a prude nt insure r in de c iding a s to whe the r o r no t to a c c e pt a risk is a ma te ria l fa c t. As this Co urt he ld in Sa twa nt Ka ur (supra ) "the re is a c le a r pre sumptio n tha t a ny info rma tio n so ug ht fo r in the pro po sa l fo rm is ma te ria l fo r the purpo se o f e nte ring into a c o ntra c t o f insura nc e ". Ea c h re pre se nta tio n o r sta te me nt ma y b e ma te ria l to the risk. T he insura nc e c o mp a ny ma y still o ffe r insura nc e pro te c tio n o n a lte re d te rms.”

12 T he de c isio n o f this Co urt in Sulbha Pra ka sh Mote ga onka r vs L ife Insura nc e Corporation of lndia, whic h ha s b e e n re lie d upo n b y the NCDRC, is c le a rly disting uisha b le. In tha t c a se, the a ssure d suffe re d a myo c a rdia l infa rc tio n a nd suc c umb e d to it. T he c la im wa s re pudia te d b y the insura nc e c o mpa ny o n the g ro und tha t the re wa s a suppre ssio n o f a pre -e xisting lumb a r spo ndilitis. It wa s in this b a c kg ro und tha t this Co urt he ld tha t the a lle g e d c o nc e a lme nt wa s o f suc h a na ture tha t wo uld no t dis-e ntitle the de c e a se d fro m g e tting his life insure d. In o the r wo rds, the pre -e xisting a ilme nt wa s c le a rly unre la te d to the c a use o f de a th. T his Co urt ha d a lso o b se rve d in its de c isio n tha t the a ilme nt c o nc e a le d b y the de c e a se d wa s no t a life -thre a te ning dise a se. T his de c isio n must, the re fo re, b e disting uishe d fro m the fa c tua l po sitio n a s it ha s e me rg e d b e fo re this Co urt.

13 T he me dic a l re c o rds whic h ha ve b e e n o b ta ine d during the c o urse o f the inve stig a tio n c le a rly indic a te tha t the de c e a se d wa s suffe ring fro m a se rio us pre e xisting me dic a l c o nditio n whic h wa s no t disc lo se d to the insure r. In fa c t, the de c e a se d wa s ho spita lize d to unde rg o tre a tme nt fo r suc h c o nditio n in pro ximity to the da te o f his de a th, whic h wa s a lso no t disc lo se d in spite o f the spe c ific q ue rie s re la ting to a ny a ilme nt, ho spita liza tio n o r tre a tme nt unde rg o ne b y the pro po se r in Co lumn 22 o f the po lic y pro po sa l fo rm. We a re, the re fo re, o f the vie w tha t the judg me nt o f the NCDRC in the pre se nt c a se do e s no t la y do wn the c o rre c t princ iple o f la w a nd wo uld ha ve to b e se t a side. We o rde r a c c o rding ly.