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Life Insurance Corporation of India Vs. Kollu Lalitha - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtAndhra Pradesh High Court
Decided On
Judge
Reported in[1987]62CompCas40(AP)
ActsInsurance Act, 1938 - Sections 45
AppellantLife Insurance Corporation of India
RespondentKollu Lalitha
Appellant AdvocateY. Sivarama Sastry, Adv.
Respondent AdvocateS. Anand Reddy, Adv.
Excerpt:
.....the act, instead of seeking compensation under the workmens compensation act. on facts, held, the material evidence on record, particularly, with regard to the income of the claimant, his age, medical evidence and the evidence relating to pecuniary loss has not been considered by the tribunal in the correct perspective, which has resulted in passing of the impugned award, disproportionate to the pecuniary loss and the loss of future income of the victim. the settled principles governing determination of compensation has been given a go-bye. compensation of rs.4,15,150/- awarded by the tribunal was enhanced to rs.8,20,000/-. - 2. the defence is that late venkateswararao, plaintiff's husband, had undergone treatment for hypertension and shortness of breath under a private medical..........of insurance is mutual, although the occasions for disclosure by the insurers are were since the facts material to the insurance are not, as a general rule, known to the insurers but only to the proposer for insurance.' (vide halbury's laws of england, fourth edition volume 25, para 366). hence it is ruled in lic of india v.. shakuntala bai, : air1975ap68 , already referred that (at page 71): ' if the insurer wants to repudiate a policy on the ground of mis-statement by the insured, he must established to the satisfaction of the court that he acted fairly and honourably to the insured by explaining properly the implication of the declaration to be signed by the insured and the range or amplitude of the question required to be answered.' 12. mere proof of signature on the personal.....
Judgment:

Kodandaramayya, J.

1. The Life Insurance Corporation of India represented by its zonal manager is the appellant in this appeal. The suit is laid by the plaintiff for recovery of Rs.20,000 with interest being the policy amount due on account of the death of her husband who nominated her under the policy. The plaintiff's husband having insured his life for Rs. 20,000 on July 13, 1970, died on May 7, 1971, and when she submitted the claim on October 19, 1977, the Corporation repudiated the contract and denied the claim and hence the plaintiff filed the suit.

2. The defence is that late Venkateswararao, plaintiff's husband, had undergone treatment for hypertension and shortness of breath under a private medical practitioner at Vijayawada and that fact was no disclosed to the Corporation and he intentionally suppressed the said fact and took a policy declaring that his health is good and hence the contract is repudiated and the said claim is not sustainable and the suit is liable to be dismissed.

3. The sole issue for determination is whether the defendant is entitled to redudiate the contract?

4. The plaintiff examined herself in support of her claim and also three witness who generally spoke about the health of the plaintiff's husband and his normal activity. The defendant examined D.W. 1 who is paid to have examined the plaintiff's husband for hypertension and breathlessness. D.W. 2, an assistant of the Life Insurance Corporation of India, was examined to show that the plaintiff's husband died at St. Joseph's hospital, Guntur, after undergoing an operation but he could not secure any material about the details of operation as the records were not available. D.W. 3 is a formal witness who produced the admission register of the hospital at Guntur but no details about the treatment or the nature of operation undergone were available in the records, as it is said that the records were destroyed.

5. The court below on this evidence held that the evidence of D.W. 1 cannot be accepted and exhibit b-2, the prescription , said to have been given by him and the certificate given by him regarding the treatment, exhibit B-4, were found to be corrected and his evidence cannot be accepted. It also found that in view of the lack of evidence on behalf of the Corporation regarding the doctor who examined the deceased and also the agent who procured the policy, the confidential report regarding the health of the deceased must be accepted to be true and there is no evidence to show that the deceased suffered from hypertension and breathlessness and consequently there cannot be any suppression of these facts and accordingly decreed the suit as prayed for and hence the appeal.

6. The defendant's counsel argued in this appeal stating that the reasons assigned by the court below in rejecting the evidence of D.W. 1 are not correct and if the said evidence is accepted, the case is clearly governed by the provisions of section 45 of the Insurance Act 4 of 1938 and the suit claim is unsustainanble as there is a valid repudiation of the contract. He also relied strongly upon the judgment of the Supreme Court in Mithoolal Nayak v. Life Insurance Corporation of India : AIR1962SC814 .

7. So, two questions arise for consideration:

(1) Whether section 45 of the Insurance Act, 4 of 1938 (hereinafter called ' the Act'), applies in this case?

(2) Whether the repudiation of the contract by the Corporation is valid on the ground of suppression of material facts?

Section 45 of the Act is in the following terms :

' Policy not to be called in question on the ground of mis-statement after tow years. - No policy of life insurance effected before the commencement of this Act shall after the expiry of the 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 of 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 policyholder and that the policyholder knew at the time of making it that the statement was false or that it superseded facts which it was material to disclose:'

8. A perusal of the section makes it clear that it applies only to life insurance. It places certain restrictions on the common law right of the insurer not repudiate the policy. If the repudiation is before the expiry of two years from the date on which the policy was effected, this provision has no application but the insurer can repudiate the same under general law of contract with special reference to the law of insurance. This view was taken by Chinnappa Reddy J., presiding over this court, in LIC of India v. Shakuntala Bai, : AIR1975AP68 , and in fact the Supreme Court in Mithoolal Nayak v. LIC of India : AIR1962SC814 . proceeded to examine the applicability of the section holding that (at page 184 of 32 Comp Cas) : ' Obviously, therefore, two years had expired from the date on which the policy was effected. We are clearly of the opinion that section 45 of the Insurance Act applies in the present case....' and also observed (at page 184 of 32 Comp Cas) : 'As we think that section 45 of the Insurance Act applies in the present cause, we are relived of the task of examining the legal position that would follow as a result of inaccurate statements made by the insured in the proposal form or in the personal statement, etc., in a case where section 45 does not apply and where the averments made in the proposal form and in the personal statement are made the basis of the contract.' This view of the applicability of the section after the expiry of two years' period is also accepted by other courts in LIC of India v. Janaki Ammal : AIR1968Mad324 , Daulat Ram v. Bharat Insurance Co. [1974] 44 Comp Cas 190 (Delhi); AIR 1974 Delhi 180 and Rama Krishna Swain v. Fulamani Kamila, : AIR1975Ori166 . It is no doubt true that this provision can be invoked after the expiry of two years irrespective of the fact whether the insured died or was alive. It may be noted that an exception is made in the case of statement made in respect of age under the proviso.

9. Two material differences that follow, in cases where the section is inapplicable when the repudiation is made within two years , are ;

(1) The court has to examine the violation of the terms of the contract and see whether they are conditions which are generally called under the law of insurance as warranties or stipulations. The violation of warranties alone entitles the insures to repudiate the liability. In the case of breach of stipulations, the right is confined to damages.

(2) The insurer can repudiate the contract for failure to disclose material facts or when there is misrepresentation, however innocent or honest that might be, whereas the section restricts that right to a fraudulent and deliberate suppression of material facts. Thus, we see that the insurer enjoys a wider range of ground in repudiating the contract within the period of two years.

10. Further, under the second part of section 45 , the burdens is on the insurer to prove the requirement laid down therein. But, under the general law, the insurer must produce evidence to show non-disclosure unless there is prime facie evidence of concealment. In such a case, the burden is on the insured to prove the disclosure. (vide Glicksman v. lancashire and General Assurance Co.. Ltd [1925] 2 KB 593 (CA).I hold that section 45 of the Act has no application and I must examine the repudiation of the contract under the general law of insurance.

11. Treating the contract of insurance as one of uberrima fides, that is to say, contract of utmost good faith, the courts have laid down sufficient guidelines to protect innocent policy holders so that the insurer cannot repudiate the contract on flimsy and untenable grounds. The duty to disclose material facts in contract of insurance in mutual, and hence it was laid down by courts that 'The duty to disclose material facts in a contract of insurance is mutual, although the occasions for disclosure by the insurers are were since the facts material to the insurance are not, as a general rule, known to the insurers but only to the proposer for insurance.' (Vide Halbury's laws of England, fourth edition volume 25, para 366). Hence it is ruled in LIC of India v.. Shakuntala Bai, : AIR1975AP68 , already referred that (at page 71): ' If the insurer wants to repudiate a policy on the ground of mis-statement by the insured, he must established to the satisfaction of the court that he acted fairly and honourably to the insured by explaining properly the implication of the declaration to be signed by the insured and the range or amplitude of the question required to be answered.'

12. mere proof of signature on the personal statement attached to the proposal for insurance is not sufficient to prove that the policy- holder is apprised with all the terms and has duly answered them in making the representation and the courts have held that 'The mere signature of an insured person who does not understand English, no the forms of question with the binding declaration In English, is not enough to prove his knowledge of what the was signing and to bind him literally and irrevocably to such a contract without the examination as a witness of the person who interpreted the questions to him and recorded the answers'. (vide kulla Ammal v. Oriental Government Security Life Assurance Company Ltd. [1954] 24 Comp Cas (Ins) 74,87; [1954] 1 MLJ 32.

13. Another rule firmly laid down is that the knowledge of the agent can be imputed to the principal. The rules governing the imputation of the agent's knowledge to the insurers are inherent in the general principles of the law of agency (vide halsburys Laws of England, volume 25, fourth edition para 392). Accordingly, it is ruled in LIC of India v. Bhogadi Chandrvthmm : AIR1971AP41 , that there is a duty or obligation on the insured person to make a true and compel disclosure of material facts; butt such disclosure does not extend to matters not within the knowledge of the proposer for insurance. The confidential reports submitted by the medical examiners of Corporation will have to be accepted as true, as ordinarily the presumption is that they submitted the reports only after a thorough and careful examination of the proposers 'in accordance with the questionnaire, unless it shown by the Corporation that either the medical examiner who submitted the report, made a false record or that the proposer made a fraudulent suppression of the material facts being aware of the illness from which he was suffering .' Though in that case section 45 was invoked, this rule is of general application. As the insurer wants to repudiate the contract under section 19 of the Contract Act when he repudiates before the expiry of the two-year period. It is necessary to look to section 19 of the Contract Act which is in the following terms:

' When consent to an agreement is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.

A party to a contract, whose consent was caused by fraud or misrepresentation, may, if he thinks fit insist that contract shall be performed, and that he shall be put in the position in which he would have been if the representations made had been true.

Exception - if such consent was caused by insrepresentation or by silence, fraudulent within the meaning of section 17, the contract, nevertheless, is not voidable, if the party whose consent was so caused had the means of discovering the truth with ordinary diligence.

Explanation - A fraud or misrepresentation which did not cause the consent to a contract of the party on whom such fraud was practiced, or to whom such misrepresentation was made, does not render a contract voidable.'

14. It is seen as per the exception if the insurer whose consent was so caused had the means of discovering the truth with ordinary diligence, the contract would be binding despite the fraud committed by the insured and the section cannot be invoked as by virtue of the operation of exception to section 19, the contract cannot be avoided by the defendant.

15. on the above legal position, if we look to the facts of the case, it is clear that the doctor, P. V. Subbarao, who examined the deceased- insured, was not examined and the person, S. jagannadham, who procured the proposal, was also to examined. no reasons were assigned why they were not examined. In fact it is admitted that the deceased worked under Jagannadham who must be knowing fully his condition of health. The confidential report, exhibit B-11, clearly shows that the insured was healthy and the presumption attached to this confidential report is not rebutted. Unless the Corporation shows that the medical practitioner who examined the inured and their agent also defrauded them or that they were won over by the plaintiff, the presumption that the statement in the confidential report is true stands unrebutted. In the light of this when we look to the evidence of D W. 1, it does not induce much confidence. I have no hesitation in accepting the finding of the trial court that exhibits B-2 and B-4 are corrected and there are overwritings and the evidence of D. W. 1 is not corroborated by other evidence. Inherently, the evidence also suffers from several improbabilities. The witness could not state the name of the medical practitioner whom he suggested to be consulted by the deceased when he found that in spite of his treatment, no improvement was found. He could not also give the necessary details of the medicines and other particulars of the medicines administered by him. If we exclude the evidence of D.W.1, there is no evidence to show that the statement of the insured was false and inaccurate on material that the statement of the insured was false and inaccurate on material particulars. In fact, the insured mentioned about his complaint of hydrocele though the confidential report does not mention that. It is clear that he was found healthy on the date of examination. Further the alleged suppression of facts in of hypertension and breathlessness. Now, the evidence discloses that he dies after under going an operation. There is no clear evidence about the nature of operation but it is difficult to conceive of an operation for hypertension. In the absence of any clear data that the insured was suffering from hypertension and breathlessness, it cannot be held that he suppressed these facts and hence the contract cannot be said to have been vitiated by misrepresentation or fraud. Hence I hold that the insurer failed to place before the court necessary evidence of concealment. Thus, I am clearly of the opinion that the necessary foundation for repudiating the contract is not laid in defence of the Corporation and the evidence is quite inadequate to hold that the insured is guilty of misrepresentation of material facts while procuring the policy, and further the presumption that the confidential report is true stood unrebutted.

16. In view of the above, the appeal fails and the same is dismissed with costs.


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