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IN THE HIGH COURT OF JUDICATURE AT CALCUTTA
DEBANGSU BASAK, J.
Life Insurance Corporation of India & Another – Petitioners
Versus
The Insurance Ombudsman & Others – Respondents
W.P. No. 2299 (W) of 2016
Decided On : 22-03-2017
Insurance Ombudsman - Insurance Company's Challenge to Award - Insurance Act, 1938, Section 45 - P.C. Chacko & Anr. v. Chairman, Life Insurance Corporation of India & Ors., 2008 Volume 1 Supreme Court Cases page 321 - Satwant Kaur Sandhu v. New India Assurance Company Limited, 2009 Volume 8 Supreme Court Cases page 316 - W.P. No. 21044 of 2005 (Birla Sun Life Insurance Company Limited v. The Insurance Ombudsman & Anr.) - All India Reporter 2013 Punjab & Haryana page 30 (Oriental Insurance Company Ltd. v. Rajnish Gupta) - Circular dated March 31, 2016 issued by the Insurance Regulatory and Development Authority of India
Fact of the Case:
The insurance company challenges an award of the Insurance Ombudsman, alleging the insured suppressed material facts while applying for life insurance policies. The insured had taken 9 policies, and the insurance company repudiated 5 policies due to alleged non-disclosure of previous policies and lack of medical tests.
Finding of the Court:
The court found that the insurance company's challenge to the award was not maintainable, as per the Redressal of Public Grievances Rules, 1998. The court also held that the insured did not suppress material facts, as the information was available to the insurer. The court directed the insurance company to settle the death claim in favor of the nominee of the deceased.
Issues: (1) Can an insurance company challenge an award by the Insurance Ombudsman? (2) Is a writ petition maintainable by an insurance company against an award by the Insurance Ombudsman? (3) Whether the insurance policies were vitiated due to breach of principles of uberrima fides? (4) Relief entitlement of the parties.
Ratio Decidendi: The court held that the insurance company cannot challenge the award of the Insurance Ombudsman as per the Redressal of Public Grievances Rules, 1998. It also found that the insured did not suppress material facts, as the information was available to the insurer.
Final Decision: The court ruled against the insurance company's challenge to the award and directed the insurance company to settle the death claim in favor of the nominee of the deceased.
Certainly. Based on the provided legal document, here are the key points:
An insurance company cannot challenge an award issued by the Insurance Ombudsman under the Redressal of Public Grievances Rules, 1998. Such awards are final and binding, and the Rules do not provide for an appeal or challenge by the insurer (!) .
The duty of disclosure of material facts by the insured is not breached when the information is available to the insurer, even if not explicitly disclosed by the insured in the proposal form. The insurer is deemed to have knowledge of such material facts if they are accessible through its agents or records (!) (!) (!) .
The concept of "material facts" is broadly understood to include any information that would influence an insurer’s decision to accept or reject a risk or to determine the premium. The failure to disclose such facts, especially when they are known or available to the insurer, can lead to repudiation of the insurance contract (!) (!) .
The legal requirement for the insured to fill out proposal forms truthfully and completely is emphasized. Non-disclosure of existing policies or relevant information, when such information is accessible to the insurer, may not be considered suppression or misconduct if the insurer is deemed to already possess that information (!) (!) .
The Rules of 1998 and the associated circulars of the regulatory authority strongly advocate for insurers to honor the awards of the Insurance Ombudsman within specified timeframes, and they do not recognize a challenge to such awards by the insurer as permissible under the rules (!) (!) (!) (!) .
The court’s decision underscores that the insurer’s challenge to the Ombudsman’s award is not maintainable, and the insurer is directed to settle the claim in favor of the nominee, emphasizing the importance of adhering to the dispute resolution mechanism established under the Rules of 1998 (!) (!) (!) .
The case highlights that the insurer’s failure to act in good faith or to disclose material facts, especially when such facts are known or accessible, can invalidate the repudiation of policies and lead to the insurer being directed to settle claims promptly (!) (!) .
Please let me know if you need a more detailed analysis or specific legal advice related to this case.
1. An insurance company assails an award of the Insurance Ombudsman passed on October 23, 2015.
2. Learned Senior Advocate for the petitioners contends that, the insured is guilty of suppressing material facts while applying for life insurance policies. He refers to the nine policies of the insured. He submits that, material portions of the five policies were not filled up with appropriate facts. The insured not having acted in utmost good faith at the time of applying for the policies, the insurance company is within its rights to repudiate the contract of insurance. In support of such contention he relies upon Section 45 of the Insurance Act, 1938 and 2008 Volume 1 Supreme Court Cases page 321 (P.C. Chacko & Anr. v. Chairman, Life Insurance Corporation of India & Ors.) as well as 2009 Volume 8 Supreme Court Cases page 316 (Satwant Kaur Sandhu v. New India Assurance Company Limited).
3. Referring to the point of maintainability of a writ petition by an insurance company against an order passed by the Insurance Ombudsman, learned Senior Advocate for the petitioners relies upon an unreported decision of the Andhra Pradesh High Court rendered in W.P. No. 21044 of 2005 (Birla Sun Life Insurance Company Limited v. The Insurance Ombudsman & Anr.) and All India Reporter 2013 Punjab & Haryana page 30 (Oriental Insurance Company Ltd. v. Rajnish Gupta). Learned Senior Advocate for the petitioners relies upon a Circular dated March 31, 2016 issued by the Insurance Regulatory and Development Authority of India and submits that, IRDA permits filing of legal proceedings to challenge orders passed by the Insurance Ombudsman.
4. Learned Senior Advocate appearing for the respondent nos. 2 and 3 questions the maintainability of the writ petition on the ground that, an insurance company cannot be a person aggrieved to file a writ petition challenging an award of the Insurance Ombudsman. He submits that, the Insurance Ombudsman is appointed under the provisions of the Redressal of Public Grievances Rules, 1998. Such Rules have been framed by the Central Government in exercise of powers under Section 114(1) of the Insurance Act, 1938. He refers to the various provisions of the Rules of 1998 and submits that, at all stages the Rules contemplate an opportunity to be given to the insured to challenge a decision or an award of the Insurance Ombudsman. The Rules are silent with regard to the right of the insurance company to challenge a decision or an award of the Ombudsman. Therefore, the intention of the Central Government is that the insurance company should not prefer any appeal against an award passed by the Insurance Ombudsman. He relies upon a Circular dated November 23, 2010 issued by the Executive Director in this regard. He submits that, an insurance company cannot claim violation of its rights by a decision rendered by an Insurance Ombudsman. An Insurance Ombudsman is appointed at the instance of an insurance company. An insurance company, therefore, cannot complain that, its rights stands infringed by the decision or award by the Insurance Ombudsman. He relies upon Section 45 of the Act of 1938 and submits that, a period in excess of three years had elapsed from the date of insurance till the date of the complaint. Assuming that there are mis-statements, the insurance company is no longer entitled to question such fact due to the provisions of Section 45 of the Insurance Act, 1938. Moreover, he submits that, neither the respondent nos. 2 and 3 nor the insured were guilty of making any mis-statement in the facts of the present case. The details sought for in the application form by the insurance company were available to the insurance company as noted in the impugned award. The applications were written by the agent of the insurance company as noted in the impugned award.
5. Therefore, the impugned award is correct.
6. The following issues arise for consideration in this writ petition:-
(1) Can an insurance company be a person aggrieved
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