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Mandatory Duty of the proposer to disclose pre-existing ailments to the Insurer- Supreme Court

In the case of Branch Manager, Bajaj Allianz Life Insurance Company Ltd and Others v. Dalbir Kaur, (Civil Appeal No. 3397 of 2020),  the Supreme Court had held that a proposer who seeks to obtain a policy of life insurance is duty-bound to disclose all material facts bearing upon the issue as to whether the insurer would consider it appropriate to assume the risk which is proposed.

The facts of this case initiate from the judgment of the order dated from dated 20 March 2020 of the National Consumer Disputes Redressal Commission.

On 5 August 2014, the appellants Kulwant Singh had submitted a proposal for obtaining a policy of insurance. The proposal form indicated the name of the mother of the proposer, who is the respondent to these proceedings as the nominee. The proposal form contained questions pertaining to the health and medical history of the proposer and required a specific disclosure on whether any ailment, hospitalization, or treatment had been undergone by the proposer Column 22 required a declaration of good health. However, the proposer answered the queries in the negative, indicating that he had not undergone any medical treatment or hospitalization and was not suffering from any ailment or disease. The declaration under Item 22(c) of the proposal form was in regard to whether any diseases or disorders of the respiratory system such as but not  limited to blood in sputum, tuberculosis, asthma, infected respiratory disease or any respiratory system disease including frequent nose bleeding, fever and dyspnoea were involved. This query was also responded to in the negative. Thus based on the information given by them policy insurance was issued by the appellants on 12 August 2014. Thus under the policy, the life of the proposer was insured for a sum of Rs. 8.50 lakhs payable on maturity with the death benefit of Rs. 17 lakhs.   On 12 September 2014, Kulwant Singh died within a period of one month and seven days from the issuance of the policy, following which a claim was lodged on the insurer.

 The respondent instituted a consumer complaint before the District Consumer  Disputes Redressal Forum. The District Forum allowed the complaint and directed the appellants to pay the full death claim together with interest. The first appeal was rejected by the State Consumer Disputes Redressal Commission (hereinafter referred to as “SCDRC”) and the revision before the National Consumer Disputes Redressal Commission (hereinafter referred to as “NCDRC”) has also been dismissed. The NCDRC has relied on the decision of this Court in Sulbha Prakash  Motegaonkar & Ors vs Life Insurance Corporation of India (Civil Appeal No 8245/2015 decided on 5.10.2015). Thus consequently, while affirming the judgment of the SCDRC, the NCDRC imposed costs of Rs. 2 lakhs on the appellants, of which, an amount of Rs. 1 lakh was to be paid to the complainant and Rs. 1 lakh was to be deposited with the Consumer Legal Aid Account of the District Forum.

The judges in this case had held that “The decision of this Court in Sulbha Prakash Motegaonkar vs Life Insurance  Corporation of lndia, which has been relied upon by the NCDRC, is clearly distinguishable. In that case, the assured suffered a myocardial infarction and succumbed to it.  The claim was repudiated by the insurance company on the ground that there was a suppression of a pre-existing lumbar spondilitis. It was in this background that this Court held that the alleged concealment was of such a nature that would not dis-entitle the deceased from getting his life insured. In other words, the pre-existing ailment was clearly unrelated to the cause of death. This Court had also observed in its decision that the ailment concealed by the deceased was not a life-threatening disease. This decision must,  therefore, be distinguished from the factual position as it has emerged before this Court.”

The medical records which have been obtained during the course of the investigation clearly indicate that the deceased was suffering from a serious pre existing medical condition which was not disclosed to the insurer. In fact, the deceased was hospitalized to undergo treatment for such condition in proximity to the date of his death, which was also not disclosed in spite of the specific queries relating to any ailment, hospitalization or treatment undergone by the proposer in Column 22 of the policy proposal form. We are, therefore, of the view that the judgment of the NCDRC in the present case does not lay down the correct principle of law and would have to be set aside. We order accordingly. “

Thus the court had finally held that “However, Mr. Amol Chitale, learned counsel appearing on behalf of the appellants has informed the Court that during the pendency of the proceedings, the entire claim was paid over to the respondent, save and except for the amount of costs. Having regard to the age of the respondent,  who is seventy years old and the death of the assured on whom she was likely to be dependent, we are of the view that it would be appropriate for this Court to utilize its jurisdiction under Article 142 of the Constitution, by directing that no recoveries of the amount which has been paid shall be made from the respondent. However, while doing so, we expressly hold that the impugned judgment of the NCDRC does not lay down the correct position in law and shall accordingly stand set aside. The appeal is accordingly disposed of. In the circumstances of the case, there shall be no order as to costs. Pending applications, if any, stand disposed of. “

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