9911796707
TMI Blog2024 (11) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... licy after the expiry of the time period and if it does, then the burden rests on the insurer to establish materiality of the fact suppressed and the knowledge of the insured about such suppression, so that the repudiation of the claim could be justified by the insurer. Law demands a higher standard of good faith in matters of insurance contracts which is expressed in the legal maxim uberrimae fidei. The plea of utmost good faith has also been taken by the respondent, for contending that the insured-deceased had a duty to disclose the details of the previous policies, as the same was sought in the application form. However, the insured failed in his duty to correctly answer the question about his previous policies. 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 inquirie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the claim by the respondent. The impugned order dated 22.07.2019 passed by the NCDRC in Revision Petition No.1268 of 2019 is set aside. The respondent company is directed to make the payment of the insurance claim under both the policies to the appellant, amounting to Rs. 7,50,000/- and Rs. 9,60,000/-, with interest at the rate of 7% per annum from the date of filing the complaint, till the actual realisation. Appeal allowed. - B. V. NAGARATHNA And AUGUSTINE GEORGE MASIH , JJ. JUDGMENT NAGARATHNA, J. 1. The present civil appeal has been filed by the complainant, who is the daughter of the insured-deceased Sri Siriveri Venkateswarlu, who is also the nominee under the subject life insurance policies of her late father. The appellant is assailing the order dated 22.07.2019 passed by the National Consumer Disputes Redressal Commission, New Delhi (hereinafter referred to as NCDRC ) in Revision Petition No.1268 of 2019. 2. By the impugned order, the NCDRC has allowed the revision petition filed by the respondent-opposite party, thereby setting aside the orders passed by the District Consumer Forum and the State Consumer Forum and sustaining the repudiation of the complainant s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsurance. Thus, the claim was held to be not valid and the liability to pay under the policy was repudiated by the insurer. 3.5. Being aggrieved by the repudiation of the claim, the complainant approached the concerned District Forum by way of a consumer complaint, bearing CC No.8 of 2014. The District Commission at Vijaywada, Krishna District, by order dated 27.08.2014, allowed the consumer complaint, on the ground that no documentary evidence was available to show that the deceasedinsured had taken various insurance policies from various other companies. The Commission found deficiency of services on the part of the opposite party in repudiating the claim filed by the complainant and therefore directed the opposite parties to pay the insurance amount of Rs.7,50,000/- + Rs.9,60,000/- under two policies jointly and severally with interest at the rate of 6% per annum from 31.12.2011, i.e., the date of repudiation of the claim of the complainant, till realisation, along with costs of Rs. 2000/- to the complainant. 3.6. Being aggrieved, the insured/opposite party filed an appeal bearing FA No.94 of 2015 before the concerned State Consumer Forum at Vijaywada. The State Commission obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suppression of information regarding the previous policies allegedly held by the insured-deceased, while taking the life insurance policy from the Opposite Party. 6. Learned counsel for the appellant submitted that the insurance company has not proved that appellant s father had any other insurance policy while taking the insurance policy from the opposite party. Thus, there has been no material suppression of fact in the application form with respect to holding any previous policy by the insured-deceased or his family members. 7. It was further submitted by the appellant that the NCDRC was incorrect in upholding the repudiation of claim in the absence of an iota of documentary evidence on record to support the contention that the insured-deceased had suppressed any fact under Clause 6 of the Proposal Form about the previous policies issued by other insurers. The respondent has merely alleged the fact of multiple insurance policies of the insured-deceased through their affidavit of evidence but had not discharged their burden of proof by leading any documentary evidence to support their allegation. 8. Per Contra, learned counsel for the respondent has supported the judgment of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of an insurance claim is largely governed by Section 45 of the Insurance Act, 1938. Section 45 is a special provision of law, which bars the calling in question of an insurance policy beyond expiry of the stipulated period, except in a few circumstances that have to be proved by the insurer. The relevant part of the said provision, as it stood at the material time, is reproduced as under: 45. Policy not be called in question on ground of misstatement after two years.- No policy of life insurance effected before the commencement of this Act shall after the expiry of two years from the date of commencement of this Act and no policy of life insurance effected after the coming into force of this Act shall after the expiry of two years from the date on which it was effected, be called in question by an insurer on the ground that a statement made in the proposal for insurance or in any report of a medical officer, or referee, or friend of the insured, or in any other document leading to the issue of the policy, was inaccurate or false, unless the insurer shows that such statement was on a material matter or suppressed facts which it was material to disclose and that it was fraudule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are fulfilled. Those conditions are that: (a) such a statement was on a material matter; or (b) the statement suppressed facts which were material to disclose and that (i) they were fraudulently made by the policy holder; and (ii) the policy-holder knew at the time of making it that the statements were false or suppressed facts which were material to disclose. The cumulative effect of Section 45 is to restrict the right of the insurer to repudiate a policy of life insurance after a period of two years of the date on which the policy was effected. Beyond two years, the burden lies on the insurer to establish the inaccuracy or falsity of a statement on a material matter or the suppression of material facts. Moreover, in addition to this requirement, the insurer has to establish that this non-disclosure or, as the case may be, the submission of inaccurate or false information was fraudulently made and that the policy-holder while making it knew of the falsity of the statement or of the suppression of facts which were material to disclose. (emphasis by us) 16. Since the present case deals with a policy and its repudiation before the 2014 amendment to Section 45 of the Insurance Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rter vs. 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 facts upon which the contingent chance is to be computed, lie most commonly in the knowledge of the assured only; the under-writer trusts to his representation, and proceeds upon confidence that he does not keep back any circumstance in his knowledge, to mislead the under-writer 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 under-writer 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 under-writer 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 consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 and 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. 24. 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 vs. Phoenix Assurance Co. Ltd., (1978) 2 Lloyd s Rep. 440. Hence, the test is to be of a prudent insurer while issuing a policy of insurance. 25. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed 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 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. 30. 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 knowle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulnerable 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 to obtain clarity as to the underlying risks in the policy, which are greater than the normal risks. 32. From the aforementioned discussion, it is clear that the principle of utmost good faith puts reciprocal duties of disclosure on both parties to the contract of insurance. These reciprocal duties mandate that both the parties make complete disclosure to each other, so that the parties can take an informed decision and a fair contract of insurance exists between them. No material facts should be suppressed, which may have a bearing on the risk being insured and the decision of the party to undertake that risk. However, not every question can be said to be material fact and the materiality of a fact has to be adjudged as per the rules stated in the aforementioned judgment. 33. Whether the information with regard to previous policies from other insurers is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rance policies. It is pertinent to note that the insured therein had admitted the nondisclosure of the earlier cover for life insurance held by him, but argued that the non-disclosure of such information was not a material fact whose suppression would allow for repudiation of the claim under Section 45. Therefore, the Court ruled in favour of the insurance company and held that such suppression was indeed a material suppression of information, as it had a bearing on the decision of the insurer to enter into the contract of insurance or not. The court thereunder held as follows: 32. In the present case, the insurer had sought information with respect to previous insurance policies obtained by the assured. The duty of full disclosure required that no information of substance or of interest to the insurer be omitted or concealed. Whether or not the insurer would have issued a life insurance cover despite the earlier cover of insurance is a decision which was required to be taken by the insurer after duly considering all relevant facts and circumstances. The disclosure of the earlier cover was material to an assessment of the risk which was being undertaken by the insurer. Prior to und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case, insofar as there is no admission by the appellant herein of any previous policies taken by the insured. In that case, after the admission by the policy holder, the Court was tasked only with the question of whether the fact about previous polices qualified to be a material fact that was suppressed. However, in the present case, in light of Section 45 of the Insurance Act, 1938, the burden rests on the insurer to prove before the Court that the insured had suppressed the information about the previous policies. This burden of proof has to be duly discharged by the insurer in accordance with the law of evidence. 36. In the instant case, NCDRC has extracted from the letter dated 31.12.2011, by which the claim of the appellant was repudiated, and has relied upon the reply filed by respondent company before the District Forum wherein details of as many as fifteen insurance policies taken from various insurers, other than the policy taken from the respondent company, have been given as under : Sl. No. Insurers Policy No. Issue Date RCD Sum assured Date of birth declared 1. Kotak 1839610 11.01.2010 11.01.2010 5,00,000/- 14.7.1960 2. Bharti Axa Life 5003353827 Not known 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve stated would not establish the case of the insurance company. There was no corroboration of the said fact either by producing copies of the aforesaid policies or by examining the officers of the various insurance companies which had issued the policies so as to establish the fact that the said policies had indeed been issued to the insured in order to prove material suppression of the fact of other policies obtained by the insurer in the proposal form. In the absence of any corroboration of the aforesaid details by letting in proper evidence, the mere mentioning of the half baked details in the affidavit would not amount to proof of the said fact. The NCDRC has thus failed to take note of the fact that the aforesaid details have not been supported by other corroborative evidence. The mere mentioning of certain details in an affidavit of evidence is not proof of the facts unless that is supported either by other documentary and/or oral evidence. iii) Further, the NCDRC was also not right in finding fault with the complainant not mentioning in her affidavit the evidence that the insured had taken policies from other insurance companies and that the details given in the version of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of any policy of the insured which had either been declined/postponed/dropped/accepted or revived at modified rates. Therefore, the answer in the negative given to Query 6.2 cannot be held as against the appellant herein. In the circumstances, the NCDRC could not have concluded that when the answer NO was written to Query 6.2, there was any suppression of material fact. 40. Insofar as the Query 6.1 is concerned, it is noted that the same is not clear and it is not known in what context the details of the insured were sought with regard to any existing life insurance policy. On a reading of Query 6.1 holistically, it is also not clear regarding the nature of information that was sought by the respondent insurance company as discussed above. The answer given by the insured to the Query 6.1 was thus in the negative. In this backdrop, can it be said that there was a suppression of material fact by the insured in the proposal form. In this context, it is necessary to place reliance on the contra proferentem rule. This Court in the case of Manmohan Nanda, discussed the rule of contra proferentem as under: 45. The contra proferentem rule has an ancient genesis. When words are to be const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l. 60, Para 105) on the contra proferentem rule as under: 37. 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. 46.6. The learned counsel for the appellant have relied upon Sushilaben Indravadan Gandhi v. New India Assurance Co. Ltd., (2021) 7 SCC 151, wherein it was observed that any exemption of liability clause in an ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prove an affirmative than a negative. In other words, the burden of proving a fact always lies upon the person who asserts the same. Until such burden is discharged, the other party is not required to be called upon to prove his case. The court has to examine as to whether the person upon whom burden lies has been able to discharge his burden. Further, things which are admitted need not be proved. Whether the burden of proof has been discharged by a party to the lis or not would depend upon the facts and circumstances of the case. The party on whom the burden lies has to stand on his own and he cannot take advantage of the weakness or omissions of the opposite party. Thus, the burden of proving a claim or defence is on the party who asserts it. 42. Section 102 of the Evidence Act, 1872 provides a test regarding on whom the burden of proof would lie, namely, that the burden lies on the person who would fail if no evidence were given on either side. Whenever the law places a burden of proof upon a party, a presumption operates against it. Hence, burden of proof and presumptions have to be considered together. There are however exceptions to the general rule as to the burden of pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is incumbent on each party to discharge the burden of proof, which rests upon him. In the context of insurance contracts, the burden is on the insurer to prove the allegation of non-disclosure of a material fact and that the non-disclosure was fraudulent. Thus, the burden of proving the fact, which excludes the liability of the insurer to pay compensation, lies on the insurer alone and no one else. 46. Section 106 of the Evidence Act, 1872 states that when any fact is especially within the knowledge of any person, the burden of proving that fact is upon him. This Section applies only to parties to the suit or proceeding. It cannot apply when the fact is such as to be capable of being known also by persons other than the parties. (Source: Sarkar, Law of Evidence, 20th Edition, Volume-2, LexisNexis) 47. In light of the aforesaid discussion on burden of proof, it has to be analysed if the respondent in the present case has adequately discharged his burden of proof about the fact of suppression of previous life insurance policies of the insured. 48. The respondent insurance company has produced no documentary evidence whatsoever before the District Forum to prove its allegation tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cies, then it was incumbent on them to prove this fact by leading necessary evidence. The onus cannot be shifted on the appellant to deal with issues that have merely been alleged by the respondents, without producing any evidence to support that allegation. The respondents have merely provided a tabulation of information about the other policies held by the insured-deceased. The said tabulation also has missing information with respect to policy numbers and issuing dates and bears different dates of births. Further, this information hasn t been supported with any other documents to prove the averment in accordance with law. No officer of any other insurance company was examined to corroborate the table of policies said to have been taken by the deceased policy holder, father of the appellant herein. Moreover, the table produced is incomplete and contradictory as far as the date of birth of the insured is concerned. Therefore, in our view, the NCDRC could not have relied upon the said tabulation and put the onus on the appellant to deal with that issue in her complaint and thereby considered the said averment as proved or proceeded to prove the stance of the opposite party. A fact ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
