Punjab-Haryana High Court

Sushma Sareen vs Insurance Ombudsman And Ors on 4 August, 2023

                                                                 Neutral Citation No:=2023:PHHC:101017




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        IN THE HIGH COURT OF PUNJAB AND HARYANA
                     AT CHANDIGARH
203
                                          *****

CWP No. 1743 of 2018 (O & M) Date of Decision : 4.8.2023

Sushma Sareen ..... Petitioner versus Insurance Ombudsman and others ..... Respondents

CORAM: HON'BLE MR. JUSTICE TRIBHUVAN DAHIYA

Present: Mr. Vijay K. Jindal, Senior Advocate with Mr. Jagdeep Singh Rana, Advocate, for the petitioner

None for respondent no.1

Mr. Akash Mehta, Advocate, for respondents no.2 and 3

---

TRIBHUVAN DAHIYA J. (ORAL):

This petition has been filed seeking a writ of certiorari for

quashing the order dated 12.4.2017 (Annexure P-4) passed by the

Insurance Ombudsman regarding claim submitted by the

petitioner/insured's wife towards Policy No.15512190 (commencement

date 12.10.2012, and conveyed on 17.10.2012) and Policy No.16464208

(commencement date 3.12.2013, issued on 26.12.2013, and conveyed on

27.12.2013). the claims were repudiated by the respondents/Insurance

company on account of suppression of relevant information at the time of

taking the life insurance policies. Further, the petitioner is seeking a writ

of mandamus directing the respondents to pay the insurance amount in

terms of the aforesaid policies with interest at the rate of 18% per annum

from the due date, i.e., death of the petitioner's husband, till realisation.

2. Facts of the case in brief are, the petitioner's husband filled-up

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the proposal forms (Annexures R-2/1 and R-2/3 respectively), and the

aforementioned two insurance policies (Annexures R-2/2 and R-2/4) were

issued to him on 17.10.2012 and 27.12.2013 respectively. The

insured/petitioner's husband died on 3.8.2015. The petitioner approached

the Insurance company by submitting a 'death claim form' dated

24.8.2015 alongwith requisite documents, including the Doctor's

Certificate as also the discharge summary (Annexure R-2/5). The claim

was, however, repudiated by the Insurance company on the ground of

concealment of relevant information. The Doctor's Certificate submitted

alongwith the 'death claim form' revealed that the deceased was a chronic

patient of diabetes and hypertension (hereinafter referred to as 'the

chronic disease') for the last fifteen years. This shows, at the time of

taking the insurance policies he was suffering from pre-existing illness,

which was not disclosed to the Insurance company.

3. The repudiated claims were approved by the Claimants Review

Committee of the Insurance company. The petitioner was, thereafter,

asked to approach the Insurance Ombudsman/respondent no.1. Death

claims in respect of the two policies were submitted before the

Ombudsman on 24.3.2016 (Annexures P-6 and P-7). The same were,

however, rejected by respondent no.1 vide order dated 12.4.2017

(Annexure P-4), accepting the ground of repudiation of the claims by the

Insurance company.

4. Learned Senior counsel for the petitioner contends that the

death claim was wrongly rejected by the respondents, since there was no

material concealment of any fact by the deceased at the time of taking the

insurance policies. He contends, the fact that deceased was suffering from

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diabetes and hypertension was not to his knowledge at the time of taking

the policies, the same, accordingly, could not have been disclosed by him.

He further contends that even otherwise, this is not a material fact which

was required to be disclosed at the time of taking the policies. He has

relied upon the judgment of this Court passed in Vidya v. Life Insurance

Corporation of India and another, 2004 (3) RCR (Civil) 793. He contends

that mere inaccuracy of statement at the time of taking the insurance

policies cannot be a ground for repudiating the claim after two years.

Section 45 of the Insurance Act, 1938 (for short 'the Act'), prevents the

respondents from doing so. He has further referred to a judgment of the

Supreme Court passed in Manmohan Nanda v. United India Assurance

Company Limited and another, 2022 (4) SCC 582, to contend that as the

deceased/insured himself was not aware of the stated ailment, the claims

could not have been rejected by the respondents.

5. Learned counsel for the Insurance company, on the contrary,

contends that there is a clear violation of terms of the insurance policies

by the deceased. He concealed vital information at the time of taking the

policy that he was a chronic patient of diabetes mellitus and hypertension

(DM and HTN). Therefore, the contract of insurance between the parties

was void being in violation of the standard terms and conditions of the

policy, and the claim was rightly repudiated by the Insurance company.

Had this vital information about chronic disease of the deceased disclosed

at the time of taking the policy, the Insurance company would have taken

an informed decision as to the nature of the policies that were required to

be issued to the deceased, as also the higher premium that he might have

been required to pay for the same. Since material facts have been

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fraudulently suppressed at the time of taking the policy, Section 45 of the

Act will be applicable that entitles the Insurance company to repudiate the

claims in such an eventuality. He has relied upon a judgment of the

Supreme Court in Branch Manager, Bajaj Allianz Life Insurance

Company Limited and others v. Dalbir Kaur, 2021 (13) SCC 553, to

contend that non-disclosure of material information is a valid ground for

repudiating the insurance claim.

6. Learned counsel for the parties have been heard, and case file

has been perused.

7. It is apt to reproduce Section 45 of the Act herein for

convenience of reference:

45. Policy not to be called in question on ground of mis- statement 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 fraudulently made by the policy-holder and that the policy-holder 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.

8. As per facts apparent on record, the petitioner's husband/

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insured took the aforementioned policies of life insurance on 13.10.2012

and 3.12.2013. Premium for the same was duly paid till his unfortunate

death on 3.8.2015. This led to filing of the death claim by the petitioner,

being the deceased's nominee, on 24.8.2015. Death certificate of the

insured, dated 4.8.2015, was also attached along with the claim, certifying

the date of death as 3.8.2015. In the claim form, cause of death was

mentioned as 'natural'. Details of medical consultation were also attached

with the form, i.e., a certificate of the Doctor, who treated the insured

from 8.5.2015 to 14.5.2015. He diagnosed the illness as pre-existing/co-

existing/chronic Diabetes Mellitus (DM) /Hypertension (HTN), apart

from other illnesses, for which the patient/insured was treated.

9. Evidently, the Doctor's Certificate only establishes that the

insured was treated by him for the stated illness from 8.5.2015 to

14.5.2015, the date of discharge. The discharge summary, dated

14.5.2015, enclosed with the Doctor's Certificate also mentioned the

same diagnosis, and the conservative management of his during

admission in the hospital. The Certificate does not, in any manner,

indicate that there was any connection between the cause of death and the

chronic illnesses diagnosed, i.e., diabetes mellitus and hypertension. Nor

could it have done so, since the insured died after more than two and a

half months of his discharge from the hospital. The fact remains that he

died a natural death on 3.8.2015, as claimed by the petitioner in the 'death

claim form' submitted to the Insurance company. The medical reports

attached with the form do not, in any manner, indicate any other cause of

death. It is also not disputed by learned counsel representing the Insurance

company that no investigation was carried out by the company to

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ascertain the insured's cause of death, or the fact that the stated chronic

disease had any connection to it. In this factual background, the chronic

disease of diabetes mellitus and hypertension cannot be said to have any

bearing on the cause of death, as there is no evidence to that effect on

record. Repudiation of death claim by the Insurance company on the

ground of non-disclosure of the said chronic disease by the insured at the

time of taking the policies cannot, therefore, be accepted as valid.

10. The mandate of Section 45 of the Act is that no policy can be

called in question by the Insurance company on the ground of mis-

statement after two years from the date on which it came into effect,

except when a fact which was material to disclose was suppressed by the

insured, and it was fraudulently done. And the insured knew at the time of

making the statement that it was false or it suppressed fact which was

material to disclose. In the instant case, the fact of the insured suffering

from diabetes mellitus and hypertension, said to have been suppressed by

him at the time of taking the policies, cannot be termed a material fact

since no relation between the said disease and the cause of death could be

established on record. A fact to be material has to be one which has a

direct bearing on the cause of death. Mere proximity to the case of death

or any incidental relation to it, would not suffice. Besides, no element of

fraud on the part of insured has either been pleaded or established even

prima facie on the record. It is, therefore, apparent that suppression of the

said chronic disease was taken as a ruse to reject the insurance claim

which is patently illegal and in violation of provisions of Section 45 of the

Act.

11. It has been held in Manmohan Nanda case (supra) also that

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materiality of a fact is determined by circumstances of each case as

proved by evidence. Para 39 to 39.3. of the judgment are reproduced

hereinafter:

39. 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:

39.1. 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'.

39.2. 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'. 39.3. The materiality of a particular fact is determined by the circumstances of each case and is a question of fact.

12. Further, the Insurance company's own case is that disclosure of

the said chronic disease by the insured at the time of taking the policy

would have enabled the Company to suitably increase the amount of

premium. It is not their case that the disease disentitles the insured from

taking the policy altogether. This makes the repudiation of claim

unwarranted and groundless. In similar factual background, the Supreme

Court in Sulbha Prakash Motegaonkar v. LIC, (2021) 13 SCC 561, has

held, in case the alleged concealment was not of a nature that would

disentitle the deceased from getting insured, the repudiation would be

unjustified. Relevant paragraph of the judgment reads as under:

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6. We are of the opinion that the National Commission was in error in denying to the appellants the insurance claim and accepting the repudiation of the claim by the respondent. The death of the insured due to ischaemic heart disease and myocardial infarction had nothing to do with his lumbar spondylitis with PID with sciatica. In our considered opinion, since the alleged concealment was not of such a nature as would disentitle the deceased from getting his life insured, the repudiation of the claim was incorrect and not justified.

13. The judgment relied upon by learned counsel for the respondent

in Dalbir Kaur (supra) has no application to the facts and circumstances

of this case. In that matter, the Insurance policy was issued on 12.8.2014

and the insured died on 12.9.2014. The claim was subjected to

independent investigation which revealed that the insured/diseased was

suffering from a pre-existing disease consequent upon alcohol abuse and

had vomiting of blood only a month prior to taking the policy, which was

not disclosed despite specific queries; rather, the insured stated that he

had not undergone any treatment and was not suffering from any disease

or dis-order. The claim was repudiated with two years of commencement

of policy. In the instant case, there is no evidence of any such pre-existing

disease, nor any independent investigation with regard to the stated