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TMI Blog2024 (11) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... all be referred to as complainant and opposite party. 3.2. Late Sri Siriveri Venkateswarlu, father of the complainant, obtained two insurance policies from the opposite party - one on 05.05.2009, for a sum of Rs. 4,50,000/-, and the other on 22.03.2010, for a sum of Rs. 4,80,000/-. Under the said two policies, in the event of death by accident, twice the sum assured was payable by the insurer. In the application form of the policy, the insured had been asked about the details of his existing life insurance policies with any other insurer, and the insured had answered the same in the negative. The complainant, being the daughter of the policy holder Late Sri Siriveri Venkateswarlu, was nominated to receive the proceeds under both the policies. 3.3. On 28.02.2011, the policy holder unfortunately lost his life in a train accident, leaving behind the complainant alone as his legal heir as well as nominee for death benefits. Immediately thereafter, the complainant approached the opposite party and informed about the death of her father and they advised the complainant to submit a claim form along with necessary documents which she did. However, by letter dated 31.12.2011, the complain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be produced were neither original nor certified nor authenticated. However, even assuming that there were existing policies, still the non-disclosure of pre-existing policies does not amount to suppression of material facts. Reliance for the same was placed on some previous judgments of the NCDRC. Hence, the claim could not have been said to be vitiated by fraud. The opposite parties were not right in repudiating the claim. The State Commission therefore, by its order dated 11.12.2018, dismissed the appeal of the opposite party and upheld the order of the District Commission. 3.7. The opposite party thereafter approached the NCDRC through Revision Petition No.1268 of 2019, challenging the order passed by the State Commission in FA No.94 of 2015. The NCDRC, vide impugned judgment, agreed with the opposite party that the deceased-insured had withheld the information in respect of several insurance policies which he had taken from other insurers. The NCDRC observed that on the one hand, the opposite party had duly stated the details of the other policies in their affidavit, but on the other, the complainant, even in her affidavit filed by way of evidence, did not claim that the pol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he subject policies by them. These policies were not disclosed in the proposal forms and had the respondent been aware about these other insurance policies with other insurance companies and the existing risk cover at the time of assessment of risk under the subject policies, they would have certainly not issued the subject policies to the insureddeceased. Thus, the insured-deceased has suppressed the material fact and the claim has been rightly repudiated on this ground alone. 9. Learned counsel for the respondent further submitted that the policy of life insurance is based upon the principle of "uberrimae fidei", i.e., utmost good faith. When a specific fact 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 the best of his knowledge. In the present case as well, the insured-deceased was under the obligation to make complete and honest disclosure of all the facts and materials at the time of filling of the proposal form. The failure to do so shows the mala fide intention on the part of the insureddeceased and renders the policy invalid, void ab-initio, inoperative and une ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed facts which it was material to disclose: Provided that nothing in this section shall prevent the insurer from calling for proof of age at any time if he is entitled to do so, and no policy shall be deemed to be called in question merely because the terms of the policy are adjusted on subsequent proof that the age of the life insured was incorrectly stated in the proposal." 14. A three-judge bench of this court in Mithoolal Nayak vs. Life Insurance Corporation of India, AIR 1962 SC 814, explained the scope of the operating part of Section 45 as under: "7....It would be noticed that the operating part of S. 45 states in effect (so far as is relevant for our purpose) that no policy of life insurance effected after the coming into force of the 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; the second part of the section is in the nature of a proviso which creates an exception. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd interpretation of Section 45, the insurer cannot question the policy 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. 17. In the present case, the onus was on the insurer to show that the insured had fraudulently given false information and the said information was related to a material fact. The second aspect of the controversy would be dealt with first. 18. For a better appreciation of the controversy, it would be important to analyse the maxim of uberrimae fidei that governs the insurance contracts. It may also be observed that insurance contracts are special contracts based on the general principles of full disclosure inasmuch as a person seeking insurance is bound to disclose all material facts relating to the risk involved. 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-dece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... phrase is not definable as such, as the same would depend upon the nature and extent of coverage of risk under a particular type of policy. In simple terms, it could be understood that any fact which has a bearing on the very foundation of the contract of insurance and the risk to be covered under the policy would be a "material fact". 21. Under the provisions of Insurance Regulatory and Development Authority (Protection of Policyholders' Interests) Regulations, 2002 the explanation to Section 2 (d) defining "proposal form" throws light on what is the meaning and content of "material." For an easy reference the definition of "proposal form" along with the explanation under the aforesaid Regulations has been extracted as under: "2. Definitions.- In these regulations, unless the context otherwise requiresx x x (d) "Proposal Form" means a form to be filled in by the proposer for insurance, for furnishing all material information required by the insurer in respect of a risk, in order to enable the insurer to decide whether to accept or decline, to undertake the risk, and in the event of acceptance of the risk, to determine the rates, terms and conditions of a cover to be grant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 inquiries would have no effect on a prudent insurer. 26. Whether a fact is material will depend on the circumstances, as proved by evidence, of the particular case. It is for the court to rule as a matter of law, whether, a particular fact is capable of being material and to give directions as to the test to be applied. Rules of universal application are not therefore to be expected, but the propositions set out in the following paragraphs are well established : (a) Any fact is material which leads to the inference, in the circumstances of the particular case, that the subject matter of insurance is not an ordinary risk, but is exceptionally liable to be affected by the peril insured against. This is referred to as the "physical hazard". (b) Any fact is material which leads to the inference that the particular proposer is a person, or one of a class of persons, whose proposal for insurance ought to be subjected at all or accepted at a normal rate. This is usually referred to as the "moral hazard". (c) The materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imparted. However, provided these canons are observed, accuracy in all matters of substance will suffice and misstatements or omissions in trifling and insubstantial respects will be ignored. (b) Carelessness is no excuse, unless the error is so obvious that no one could be regarded as misled. If the proposer puts 'no' when he means 'yes' it will not avail him to say it was a slip of the pen; the answer is plainly the reverse of the truth. (c) An answer which is literally accurate, so far as it extends, will not suffice if it is misleading by reason of what is not stated. It may be quite accurate for the proposer to state that he has made a claim previously on an insurance company, but the answer is untrue if in fact he has made more than one. (d) Where the space for an answer is left blank, leaving the question un-answered, the reasonable inference may be that there is nothing to enter as an answer. If in fact there is something to enter as an answer, the insurers are misled in that their reasonable inference is belied. It will then be a matter of construction whether this is a mere non-disclosure, the proposer having made no positive statement at all, or whether in subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other insurers is a material fact or not has already been dealt with by this Court in the judgment of Rekhaben. The facts of the said case were that the insured therein had taken a policy of life insurance from Max New York Life Insurance Co. Ltd. on 10.07.2009 for a sum of Rs. 11 lakhs. Barely two months thereafter, on 16.09.2009, the insured submitted a proposal for a life insurance term plan policy of Reliance Life Insurance Co Ltd for an insurance cover of Rs. 10 lakhs. One of the questions that the proposer was required to answer in the proposal form was whether he was currently insured or had previously applied for life insurance cover, critical illness cover or accident benefit cover. This query was answered in the negative. In substance, the information regarding life insurance policy earlier taken had to be mentioned. The query was answered as "NA" or "not applicable" response. The appellant company therein issued a policy of life insurance to the spouse of the respondent on 22.09.2009. The respondent spouse died on 08.02.2010. A claim for payment of Rs.10 lakhs was submitted. On coming to know that the spouse of the respondent therein had been insured with another private ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the insurer. Prior to undertaking the risk, this information could potentially allow the insurer to question as to why the insured had in such a short span of time obtained two different life insurance policies. Such a fact is sufficient to put the insurer to enquiry. 33. The learned counsel appearing on behalf of the insurer submitted that where a warranty has been furnished by the proposer in terms of a declaration in the proposal form, the requirement of the information being material should not be insisted upon and the insurer would be at liberty to avoid its liability irrespective of whether the information which is sought is material or otherwise. For the purposes of the present case, it is sufficient for this Court to hold in the present facts that the information which was sought by the insurer was indeed material to its decision as to whether or not to undertake a risk. The proposer was aware of the fact, while making a declaration, that if any statements were untrue or inaccurate or if any matter material to the proposal was not disclosed, the insurer may cancel the contract and forfeit the premium. MacGillivray on Insurance Law formulates the principle thus: "...In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0,000/- 14.7.1960 2. Bharti Axa Life 5003353827 Not known 28.3.2009 7,50,000/- 12.9.1960 3. Aviva ASP2610613 Not known 09.6.2009 10,00,000/- 12.7.1960 4. Reliance Life Insurance 13231705 Not known 17.12.2008 2,00,000/- 6.7.1959 5. Reliance Life Insurance 13741094 Not known 11.2.2009 5,00,000/- 14.7.1960 6. HDFC Standard Life 13061074 Not known 29.8.2009 4,80,000/- NA 7. HDFC Standard Life 12695703 Not known 21.3.2009 4,80,000/- NA 8. Max New York Life 809471329 Not known 27.1.2009 5,75,289/- 14.7.1960 9. Max New York Life 388825572 Not known 30.9.2009 4,24,711/- 14.7.1960 10. Birla 2489174 Not known 28.1.2009 1,33,461/- 14.7.1960 11. Birla 2490595 Not known 28.1.2009 2,60,241/- 14.7.1960 12. Birla 3121574 Not known 3.8.2009 5,00,000/- 14.7.1960 13. Birla 3956699 Not known 17.3.2010 3,24,000/- 14.7.1960 14. IDBI Not given Not known 20.4.2010 5,00,000/- 14.7.1960 15. IDBI Not given Not known 28.04..... 5,00,000/- 14.7.1960 Total 71,27,702/- Total: Seventy-one lac twenty-seven thousand seven hundred and two only 37. A mere perusal of the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the respondent company were not true. 39. Next, we also find that the declaration form asked the following queries which were accordingly answered in the negative. The queries are extracted as under: "6.1 Details of applications submitted to & existing life insurance policies with future Generali and with any insurer. (In case of housewife, major student or minor life to be Assured please give details of husbands and parents insurance also) 6.2 Whether any proposal for life cover or critical illness Rider or Accident and Disability Benefit Rider, application for revival of any Policy has been made to any life insurer, declined/postponed/dropped/accepted or revived at modified rates" On a reading of Query 6.1, what was sought was details of applications submitted to and existing life insurance policies with Future Generali (respondent company) and with any (other) insurer. Further details sought were in case of housewife, major student or minor life to be assured and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sary 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 construed, resulting in two alternative interpretations then, the interpretation which is against the person using or drafting the words or expressions which have given rise to the difficulty in construction, applies. This rule is often invoked while interpreting standard form contracts. Such contracts heavily comprise of forms with printed terms which are invariably used for the same kind of contracts. Also, such contracts are harshly worded against individuals and not read and understood most often, resulting in grave legal implications. When such standard form contracts ordinarily contain exception clauses, they are invariably construed contra proferentem rule against the person who has drafted the same. 46. Some of the judgments which have considered the contra proferentem rule are referred to as under: 46.1. In General Assurance Society Ltd. v. Chandumull Jain, AIR 1966 SC 1644, it was held that where there is an ambiguity in the contract of insur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hey 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 insurance contract must be construed, in case of ambiguity, contra proferentem against the insurer. In the said case reliance was placed on Export Credit Guarantee Corpn. (India) Ltd. v. Garg Sons International, (2014) 1 SCC 686, wherein this Court held as under : "39. ... 11. The insured cannot claim anything more than what is covered by the insurance policy. "The terms of the contract have to be construed strictly, without altering the nature of the contract as the same may affect the interests of the parties adversely." The clauses of an insurance policy have to be read as they are. Consequently, the terms of the insurance policy, that fix the responsibility of the Insurance Company must also be read strictly. The contract must be read as a whole and every attempt should be made to harmonise the terms thereof, keeping in mind that the rule of contra proferentem does not apply in case of commercial contract, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 proof as enunciated in Sections 101 and 102 of the Evidence Act, 1872, i.e., in the context of the burden of adducing evidence: (i) when a rebuttable presumption of law exists in favour of a party, the onus is on the other side to rebut it; (ii) when any fact is especially within the knowledge of any person, the burden of proving it is on him (Section 106). In some cases, the burden of proof is cast by statute on particular parties (Sections 103 and 105). 43. There is an essential distinction between burden of proof and onus of proof; burden of proof lies upon a person who has to prove the fact and which never shifts but onus of proof shifts. Such a shifting of onus is a continuous process in the evaluation of evidence. For instance, in a suit for possession based on the title, once the plaintiff has been able to create a high degree of probability so as to shift the onus on the defendant, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 that the insured had taken multiple insurance policies from different companies and had suppressed the same. The District Forum had therefore concluded that there was no documentary evidence to show that the deceased-life insured had taken various insurance policies except an averment and on that basis the repudiation was held to be wrong. Before the State Commission, the respondent had provided a tabulation of the 15 different policies taken by the insured-deceased, amounting to Rs.71,27,702/-. The same has been extracted above. However, the said tabulation was not supported by any other documentary evidence, like the policy documents of these other policies, or pleadings in courts, or such other corroborative evidence. The respondent sought to mark a bunch of documents before the State Commission, which related to the policy papers of the insured with another insurer, i.e., Kotak Life Insu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th 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 has to be duly proved as per the Evidence Act, 1872 and the burden to prove a fact rests upon the person asserting such a fact. Without adequate evidence to prove the fact of previous policies, it was incorrect to expect the appellant to deal with the said fact herself in the complaint or the evidence affidavit, since as per the appellant, there did not exist any previous policy and thus, the onus couldn't have been put on the appellant to prove what was non-existent according to the appellant. 51. The respondents, vide their counter affidavit before this court, have sought to produce some documents to substantiate their claim of other existing insurance policies of the insureddeceased, but the same cannot be permitted to be exhibited at this stage, that too, in an appeal filed by the complainant who is the beneficiary under the policies in question. Any documentary evidence sought to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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