NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION, NEW DELHI
Dr. S.M. Kantikar, Presiding Member
HDFC Standard Life Insurance Ltd. – Appellant
versus
Poonam Bishnoi and Ors. – Respondents
First Appeal No.998 of 2019
(Against the Order dated 01/05/2019 in Complaint No.10/2015 of the State Commission Uttaranchal)
Decided on 14.6.2021

IMPORTANT POINTS
(1) Policy was obtained by concealment of material fact; hence, insurance contract became void ab initio in terms of the declaration signed by the insured, not a valid contract.
(2) Finding of material misrepresentation or concealment in insurance has a significant effect upon both the insured and the insurer in the event of a dispute.

Headnote:

Consumer Protection Act, 1986 – Section 19 (Consumer Protection Act, 2019 – Section 24) – Appeal - Against Order dt. 01.05.2019 of the State Commission - Respondent No. 1 alive & 2 deceased sanctioned loan of Rs. 2,52,27,902/- against property by Respondent No. 3 – Insured (Respondent no. 2) admitted to Max Hospital, Dehradun on 25.07.2014 & he expired on 28.07.2014 during treatment - Appellant repudiated the insurance claim of Rs.99,90,249/- based on suppression of material fact that the insured was suffering from Chronic Liver Disease - Cirrhosis (CLD) since 16.01.2013 – Consumer complaint filed by Respondent No. 1 & 2 before the State Commission – Though pre-existing disease was not disclosed by insured in the proposal form yet State Commission directed Appellant to pay insured amt. of Rs.99,90,249/- to Respondent No. 3 within one month; Respondent No. 3 to credit the said amount to the loan account of the deceased life insured - Policy was obtained by concealment of material facts; hence, insurance contract became void ab initio in terms of the declaration signed by the insured - Not a valid contract - Deceased had obtained other insurance policies also which were not disclosed in the proposal form - Life assured suppressed his previous health condition, Appellant ought to have declined insurance claim for car loan of Rs.5,00,000/-, but was settled by Appellant – Appellant shall not recover the same - Finding of material misrepresentation or concealment in insurance has a significant effect upon both the insured and the insurer in the event of a dispute - Clear presumption that any information sought for in the proposal form is material for the purpose of entering into a contract of insurance - Appellant investigated the matter and found that insured had made false statement about his health in proposal form insurance claim of Rs.99,90,249/-.

Held: Respondent No. 3 filed an insurance claim to Appellant for all the policies, but the Appellant paid the sum of Rs.5,00,000/- as insured under the car loan policy. The outstanding loan amount of Rs.4,13,809.05/- was credited in the loan account of Respondent No. 3 on 29.09.2014 and the balance amount of Rs.86,190/- was paid to Smt. Ritika Bishnoi (nominee). However, the Appellant through letter dated 08.01.2015, repudiated the insurance claim of Rs.99,90,249/- based on suppression of material fact that the insured was suffering from Chronic Liver Disease - Cirrhosis (CLD) since 16.01.2013.

Being aggrieved by the failure of Appellant to pay Rs.99,90,249/- to Respondent No. 3 and Respondent No. 3 to credit the said amount in the loan account of the insured, the Respondent No. 1 & 2 filed the Consumer Complainant No. 10/2015 before the State Commission.

The Appellant in its written version submitted that the deceased insured concealed material information about his health and answered as “NO” for questions 1, 2 and 8 in the proposal form. Upon investigation conducted by the Appellant through an investigation agency named Saaransh Service Agency, it was found that the insured was suffering from chronic liver disease (CLD). The fact of pre-existing disease was not disclosed by the insured in the proposal form. The medical reports and death summary submitted by the father of the insured showed that the insured was admitted in the hospital on 25.07.2014. He was diagnosed and treated for CLD with cellulitis RT lower limb with osteomyelitis tibia with septic shock and MODS. His death was due to bradycardia followed by cardiac arrest. The nominee of the deceased policy holder had also accepted the full and final settlement made by the Appellant as per the terms of the policy contract. Respondent No. 1 & 2 only has no locus standi to file the consumer complaint against the Respondent No. 3. was bound to or In the written statement filed by Respondent No. 3, it was submitted that as there was no deficiency in service on their part, therefore they are entitled to recover the entire loan amount from the nominee.

The State Commission after hearing both the parties allowed the complaint and directed the Appellant to pay within one month the insured amount of Rs.99,90,249/- to Respondent No. 3 and Respondent No. 3 to credit the said amount to the loan account No. 510210 of the deceased life insured late Amar Singh Bishnoi.

It is pertinent to note that the Appellant initially paid Rs. 5,00,000/- the sum assured against the personal car loan, out of that Rs.4,13,809.05/- to Respondent No. 3 and the balance amount of Rs.86,190/- was paid to Smt. Ritika Bishnoi (nominee and wife of deceased). The insurance claim with respect to of Rs.99,90,249/- the Appellant investigated the matter through one private agency- Saaransh Investigation agency and the investigator filed the report on 14.12.2014 along with the medical records issued by Max Super Specialty Hospital. The Discharge Summary clearly mentioned as known case of liver cirrhosis and treated one year back. During investigation it was also discovered that the deceased had obtained other insurance policies also which were not disclosed in the proposal form. The finding of a material misrepresentation or concealment in insurance has a significant effect upon both the insured and the insurer in the event of a dispute. The fact it would influence the decision of a prudent insurer in deciding as to whether or not to accept a risk is a material fact. As this Court held in Satwant Kaur (supra) ‘there is a clear presumption that any information sought for in the proposal form is material for the purpose of entering into a contract of insurance’. Each representation or statement may be material to the risk. The insurance company may still offer insurance protection on altered terms.”

16. It is pertinent to note that in the proposal form if the life assured has suppressed his previous health condition, the Appellant ought to have declined the insurance claim for the car loan of Rs.5,00,000/-, but it was settled by the Appellant. No explanation is forthcoming for the said settlement. Now the Appellant shall not recover the same. However, with respect to the insurance claim of Rs.99,90,249, the Appellant investigated the matter and found that the insured had made false statement about his health in the proposal form.

(Paras 4, 5, 6, 7, 13, 15(31) & 16)

Result: Appeal allowed; complaint dismissed.