TaxTMI 
TaxTMI 
2024 (11) TMI 1
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....follows: 3.1. For the sake of convenience, the parties shall 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 ....
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....orum to prove the allegation of suppression. The documents attempted to 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, ev....
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....n fifteen other insurance policies worth Rs.71,27,702/- prior to the issuance of the 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....
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.... that the policyholder knew at the time of making it that the statement was false or that it suppressed 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 ....
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....n 45 of the Insurance Act, the pre-amendment time period of two years would be applicable to the case. As per the aforesaid language and 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 ....
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....g the contrary." The aforesaid principles would apply having regard to the nature of policy under consideration, as what is necessary to be disclosed are "material facts" which 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 o....
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....ither 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 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 inf....
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.... 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 knowledge is being 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 ....
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....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 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....
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....r 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 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 undert....
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....ny 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 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. Bi....
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....her 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 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 Ass....
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....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 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....
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....hat 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 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....
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.... 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 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 ....
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.... 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 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 s....
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....e 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 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 p....