VASANTHA Vs. LIC OF INDIA

JUDGEMENT

(1.) The complainant's case is as follows: the husband of the complainant Ramalingam had taken a policy for Rs.1,00,000/- on 28.6.1987 under policy No.740182892. The complainant is the nominee under the said policy. The insured Ramalingam died on 19.4.1997. At the time of the death of the complainant's husband, the policy was in force. There is another policy in Policy No.061033166 for Rs.25,000/- in favour of the said Ramalingam. On 2.7.1997, the complainant sent an application claiming the maturity amount due under the Policy No.740182892 and 061033166. The 4th opposite party ordered payment of the matured amount due under the Policy No.061033166 but declined to order the amount due on the policy No.740182892. The 4th opposite party also sent a discharge form mentioning the low amount instead of the full amount. The complainant approached his agent and requested him to claim the matured amount due under the policy. On 18.12.1997, the complainant received a letter from the 3rd opposite party stating that the revival of the policy was declared as void as it was revived by giving false information. The policy was revived on 22.4.1996 on the strength of certificate issued by the doctor of the opposite party after following all the norms. At the time of revival Ramalingam had disclosed true and correct information to the LIC. Even if he had made any untrue statement and given wrong information, it was the duty of the officer to verify the records before accepting the policy. Once verified and accepted, it cannot be revoked or set aside. The complainant feels that the opposite party has been dealing in a biased manner. The attitude of the opposite parties causing much mental pain and suffering. The opposite parties are under legal obligation to honour the policy and they are not expected to commit any breach of duty but they have caused deficiency in service and committed breach of duty. Therefore, the opposite party Nos.1 to 4 are jointly and severally liable to pay the matured estimated amount of Rs.1,80,000/- and compensation of Rs.1,00,000/- and damages.

(2.) The opposite parties filed version contending as follows: the complaint is not maintainable. The complaint relates to Policy No.740182892. The complaint is unsustainable in law. The Honourable Commission is not competent to deal with the matter of this nature as per the ruling of the National Commission. The insurer had on 18.12.1997 sent a detailed communication to the complainant declaring the revival of the policy made on 22.4.1996 as null and void and entertained the claim for paid-up value secured under the policy on the date of its lapse on the ground that the revival of the policy was obtained by fraudulent means and making incorrect statements regarding the state of health and concealing material information thereof at the time of revival of the policy. The claim of the complainant was considered on all aspects and decision was taken in good faith and by applying their mind. The National Commission has held that if insured or nominee or legal heir is not satisfied with the decision of the insurer, they have to seek redressal by resorting to arbitration. The complainant's husband at the time of reviving the policy gave wrong answers as to his state of health and also concealed the fact of illness suffered by him. Therefore, it means wilful and fraudulent suppression of fact. Hence, the ruling of the National Commission and reported in 1997 (1) CPR 40, would squarely apply. Therefore, the complaint is not maintainable. The sum insured was Rs.1,00,000/-. It would be payable to the life assured on the stipulated date of maturity had the assured been alive or to assignees or nominees. The date of commencement of the policy was 28.6.1987 and the policy matured on 28.6.2011. The complainant is the nominee of the said policy. A death intimation was received on 15.5.1997 from the complainant informing that Ramalingam died of heart attack. The said intimation not only referred to Policy No.740182892 but also the Policy No.061033166. The Policy No.061033166 was settled as early as on 31.5.1997 by disbursing the amount to the nominee since the premiums thereunder were paid continuously without any default for more than 3 years since its commencement. The claim was considered as a non-early one. The insurer upon being satisfied with the nature of the claim and after seeking that it was not vitiated by any fraudulent suppression of material fact admitted the claim. But the position regarding Policy No.740182892 is different. The complainant was compelled to consider the claim as an early one. There was no prompt payment of premiums and the assured allowed the policy to lapse with effect from 28.9.1992. However, on a request made by the life assured for revival of the said policy on submission of proof on continued insurability besides payment of all arrears of premium together with interest thereon. The policy was revived on 22.4.1996. The policy had run for 11 months since its revival on the death of the assured. Hence, the claim was considered as an early claim and investigation was caused to be made. It was found that the insurer had suffered from paralysis for which he took treatment at Dr. Jeyasekaran's hospital from 24.9.1994 to 9.10.1994 and the same was not disclosed in his personal statement submitted at the time of revival of the policy. On the other hand, he gave untrue answers to the relevant question and made a declaration that the statements and answers are true and complete in every particular. It is, therefore, patent that the life assured had made incorrect statement and withheld vital information from the opposite party regarding his state of health at the time of reviving the lapsed policy. The revival, therefore, operates as a new contract and the rights and liabilities of the parties according to the ordinary principles do not begin until the new contract has started to run. The life assured even though had a knowledge of his ailments and the treatment thereof he had as an in-patient, nevertheless answered in the negative to the questions and had thus acted in mala fide manner while reviving the policy and it has been obviously with ulterior motive as the insurance contracts are founded upon utmost good faith. If one party fails to observe this utmost good faith, the other party has no other option but to avoid the contract. Hence, it was properly and rightly rejected. The revival was obtained from fraudulent means. A discharge form for Rs.54,475/- was, therefore, sent to the complainant on 14.10.1997 to effect the payment. The said action is fully in order in view of the fact that the policy prior to its lapse had acquired only such paid-up value. A communication was sent to the complainant on 18.12.1997 stating that the claim will be entertained only for paidup value as the revival was null and void. It is not true to say that the revival was made on the strength of the certificate issued by the medical examiner of the opposite party. The medical certificate is only an ancillary document which is nothing but an extract containing the replies furnished by the life assured to specific questions put by the medical examiner. The medical examination is only general in nature and no clinical examination is done and it would reveal only patent illness and not latent illness. It is not true to say that the revival was made only after following all the norms, rules and regulations. The contract of insurance being one entered into on "uberrima fides" on the basis of good faith. There ought not to be any suppression of material information. The facts on record would clearly reveal that the assured has mis-stated the facts in the personal statement and as a consequence the opposite parties invoked the provisions in Condition No.5. The entire averments in para 6 of the complaint are at variance with the facts of the case. There is a legal obligation cast upon the party proposing the insurance to communicate not only every fact which he thinks material but also facts which is immaterial in the eyes of the insured. Being a public sector organization catering to the insurance needs of the crores of citizens, without the verification of records, etc. , it is not feasible and not warranted in the peculiar nature of insurance business. It cannot be stated that once verified and accepted, it cannot be revoked or set aside. It is only the life assured would have the knowledge of health and habits. The insurer decides only upon what is disclosed in the DGH. Further, the facts of health not disclosed, it is always open to the insurer to declare the revival as null and void if any of the statements in the DGH are found to be untrue. As the trustees of millions of policy holders, the opposite parties have the bounden duty to ensure that equity among policy holders is maintained. It also becomes necessary to ensure that no false claim is made. The action of the opposite party is fair and it cannot be termed as a biased one. There is no deficiency on the part of the opposite parties. Mental agony alleged to have been suffered by the complainant is fictitious. There is no cause of action and the opposite party, therefore, submits that the complaint be dismissed with cost.

(3.) The lower Forum by its order dated 1.9.1999 dismissed the complaint.