JUSTICE J.M. MALIK

1.      Counsel  for  the  parties  present.  This is a case of suppression of ‘disease’, by the husband of the complainant/ respondent while furnishing the proposal form, at the time of obtaining insurance from LIC of India, petitioner/OP.   To some extent,  we  agree  with  the order of the State Commission.  Para 7 of its judgment reads,  as under :-

“7.  Undisputedly, the assured had suffered from pleural effusion between 06.06.2000 and 04.09.2000 and took treatment in APSRTC Hospital at Tarnaka, Hyderabad, evidenced under Case Sheet, Ex.B-8.  The Statement, Ex.B-6, issued by APSRTC shows that subsequently he never suffered from pleural effusion.  He was attending to his work as a driver.  Except for a few days, when he suffered  from dysentery, asthma and diarrhea, he did not apply leave nor joined in the hospital.  The assured when taken these policies, was examined by the panel doctor of the insurance company.  He certified that the health of the deceased and on that the insurance company issued policies.  We may also state herein that none of the columns in the proposal form mentioned information pertaining to the assured suffering from pleural effusion.  Since the assured was completely treated for pleural effusion, obviously, when he submitted his proposal forms under Ex.B-1 and B-2, he did not state the said fact.  Equally, the Medical Officer who has examined the assured, did not mention that he had earlier suffered from pleural effusion or that there was any remnants of the ailment.  Only after satisfying his health condition, the policies under Exs. B-3 and B-4 were issued. Since the assured had survived for a period of four years after the so called ailment, it cannot be said he suppressed this ailment when he had taken these policies.  Assuming that he suppressed the fact that he underwent treatment for pleural effusion, death having been caused due to cardio arrest, it cannot be said that there was any nexus between the pleural effusion and heart attack”.

2.      But  the  reasoning  given  by  the State  Commission  is not legally  tenable.  It  is the bounden duty of the insured to explain the facts truthfully  while he is filling up the proposal form.  Such like matters are not  to  be decided  on the basis of  the certificates  issued by the panel doctors.   They are not aware of proposer’s past history.  The  deceased  husband of  the complainant  did  not disclose this fact,  while filling up the proposal form.  The mere fact that  he  was  alright  and  a long  period  had elapsed since the above said  ‘disease’  had  occurred, has no bearing on this case.

3.      The finding  given by the State Commission that there was no nexus between  pleural  effusion  and  heart  attack are  irrelevant conclusions.  Had he  informed  the truth before  the LIC of  India, they would have either rejected his proposal form or would have asked him to pay more premium.

4.      This  view finds fortified by the judgment of the Hon’ble Supreme Court in case titled Satwant Kaur Sandhu Vs. New India Assurance Co. Ltd., reported in IV (2009) CPJ 8 (SC),  wherein, it was held as under :-

“12.. ……… Nonetheless, it is a contract of insurance falling in the category of contract ‘uberrimae fidei’, meaning, ‘a contract of utmost good faith, on the part of the assured’.  Thus, it needs little emphasis that when an information on a specific aspect 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 his knowledge. It is not for the proposer to determine whether the information sought for is material for the purpose of the policy or not.  Of course, obligation to disclose extends only to facts which are known to the applicant and not to what he ought to have known.  The obligation to disclose necessarily depends upon the knowledge one possesses. His opinion of the materiality of that knowledge is of no moment. (See: Joel Vs. Law Union & Crown Ins. Co. [1908] 2 K.B. 863).

13. In United India Insurance Co. Ltd. Vs. M.K.J. Corporation, III (1996) CPJ 8 (SC)=(1996) 6 SCC 428, this Court has observed that it is a fundamental principle of insurance law that utmost faith must be observed by the contracting parties. Good faith prohibits either party from non-disclosure of the facts

which the party privately knows, to draw the other into a bargain, from his ignorance of that fact and his believing the contrary.  (Also see: Modern Insulators Ltd. Vs. Oriental Insurance Co. Ltd., II (2000) SLT 323 = I (2000) CPJ 1 (SC) = (2000) 2 SCC 734).

17.  The  term “material fact”  is  not defined  in the Act and, therefore, it has been understood and explained by the courts in general terms to  mean as any fact which would influence the judgment of a prudent insurer in fixing the premium or determining whether he would like to accept the risk.  Any fact which goes to the root of the Contract of Insurance and has a bearing on the risk involved would be “material”.

18.  As stated in Pollock and Mulla’s Indian Contract  and Specific Relief Acts, any fact the knowledge or ignorance of which would materially influence an insurer in making the contract or in estimating the degree and character of risks in fixing the rate of premium is a material fact”.  

5.      Counsel  for the petitioner has also placed reliance on the judgment  of  this Commission, headed by Hon’ble Mr. Justice K.S. Gupta, in the case No. RP No. 1935 of 1995, titled  LIC  of  India Vs. Krishan Chander  Sharma, decided on 23.01.2006, wherein, it was held, as under :-

“… Ultimate cause of death of the deceased  has no relevance whatsoever to the disclosing of information regarding health as required by aforementioned clauses (a), (b), (d) and (i) of clause 11 of the proposal form.  Obviously, the answers given by the deceased – who was suffering from ‘asthma’ and ‘allergic bronchitis’, etc., to these questions, were false to her knowledge  and petitioner – insurance company was, thus, justified in repudiating the claim by the said letter dated 30.03.1995.  Orders passed by fora below being legally erroneous, deserve to be set aside”.

6.      In  the  result,  we  hereby  accept the revision petition, set aside  the  orders passed by  the fora below and dismiss the complaint.