Case: Satwant Kaur Sandhu Vs. New India Assurance Company Ltd

the purpose of a mediclaim policy and its non-disclosure was tantamount to suppression of material facts enabling the Insurance Company to repudiate its liability under the policy? 17. The term "material fact" is not defined in the Act and, therefore, it has been understood and explained by the Courts in general terms to mean as any fact which would influence the judgment of a prudent insurer in fixing the premium or determining whether he would like to accept the risk. Any fact which goes to the root of the Contract of Insurance and has a bearing on the risk involved would be "material". 18. As stated in Pollock and Mullas Indian Contract and Specific Relief Acts `any fact the knowledge or ignorance of which would materially influence an insurer in making the contract or in estimating the degree and character of risks in fixing the rate of premium is a material fact. 19. In this regard, it would be apposite to make a reference to Regulation 2(1)(d) of the Insurance Regulatory and Development Authority (Protection of Policyholders Interests) Regulations, 2002, which explains the meaning of term "material". The Regulation reads thus: "2. Definitions.--In these regulations, unless the context otherwise requires,--(a) xxx xxx xxx(b) xxx xxx xxx(c) xxx xxx xxx(d) "Proposal Form" means a form to be filled in by the proposer for insurance, for furnishing all material information required by the insurer in respect of a risk, in order to enable the insurer to decide whether to accept or decline, to undertake the risk, and in the event of acceptance of the risk, to determine the rates, terms and conditions of a cover to be granted.Explanation: "Material" for the purpose of these regulations shall mean and include all important, essential and relevant information in the context of underwriting the risk to be covered by the insurer." Thus, the Regulation also defines the word "material" to mean and include all "important", "essential" and "relevant" information in the context of guiding the insurer to decide whether to undertake the risk or not. 20. The upshot of the entire discussion is that in a Contract of Insurance, any fact which would influence the mind of a prudent insurer in deciding whether to accept or not to accept the risk is a "material fact". If the proposer has knowledge of such fact, he is obliged to disclose it particularly while answering questions in the proposal form. Needless to emphasise that any inaccurate answer will entitle the insurer to repudiate his liability because there is clear presumption that any information sought for in the proposal form is material for the purpose of entering into a Contract of Insurance. 21. Bearing in mind the aforestated legal position, we may advert to the facts in hand. As noted earlier, the proposal form contained the following two questions: "10. Details of illness/would : Sound Health which may require treatment in near future11. Details of Treatment/surgical : Nil operation in the last two months Details of Treatment Duration of TreatmentFrom.....to......Doctor / HospitalIf fully recovered, attached certificateFor attending Doctor/Surgeon" 22. Answers given by the proposer to the two questions were "Sound Health" and "Nil" respectively. It would be beyond anybodys comprehension that the insured was not aware of the state of his health and the fact that he was suffering from Diabetes as also chronic Renal failure, more so when he was stated to be on regular haemodialysis. There can hardly be any scope for doubt that the information required in the afore-extracted questions was on material facts and answers given to those questions were definitely factors which would have influenced and guided the respondent - Insurance Company to enter into the Contract of Mediclaim Insurance with the insured. It is also pertinent to note that in the claim form the appellant had stated that the deceased was suffering from Chronic Renal Failure and Diabetic Nephropathy from 1st June, 1990, i.e. within three weeks of taking the policy. Judged from any angle, we have no hesitation in coming to the conclusion that the statement made by the insured in the proposal form as to the state of his health was palpably untrue to his knowledge. There was clear suppression of material facts in regard to the health of the insured and, therefore, the respondent - insurer was fully justified in repudiating the insurance contract. We do not find any substance in the contention of learned counsel for the appellant that reliance could not be placed on the certificate obtained by the respondent from the hospital, where the insured was treated. Apart from the fact that at no stage the appellant had pleaded that the insured was not treated at Vijaya Health Centre at Chennai, where he ultimately died. It is more than clear from the said certificate that information about the medical history of the deceased must have been supplied by his family members at the time of admission in the hospital, a normal practice in any hospital. Significantly, even the declaration in the proposal form by the proposer authorises the insurer to seek information from any hospital he had attended or may attend concerning any decease or illness which may affect his health.23. Before parting with the case, we may also deal with the submission of learned counsel for the appellant that the order of the National Commission is flawed because it has declined to interfere on a wrong premise that both the Fora below had arrived at "concurrent findings", which was not so. It is true that there is an apparent error in the order of the National Commission, inasmuch as the State Commission had, in fact, disagreed with the view taken by the District Forum but having regard to the fact that on our independent examination of the material on record, the claim by the appellant has been found to be fraudulent, we are of the opinion that no useful purpose would be served by remitting the matter to the National Commission for fresh adjudication on merits.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]20. The upshot of the entire discussion is that in a Contract of Insurance, any fact which would influence the mind of a prudent insurer in deciding whether to accept or not to accept the risk is a "material fact". If the proposer has knowledge of such fact, he is obliged to disclose it particularly while answering questions in the proposal form. Needless to emphasise that any inaccurate answer will entitle the insurer to repudiate his liability because there is clear presumption that any information sought for in the proposal form is material for the purpose of entering into a Contract of Insurance.Answers given by the proposer to the two questions were "Sound Health" and "Nil" respectively. It would be beyond anybodys comprehension that the insured was not aware of the state of his health and the fact that he was suffering from Diabetes as also chronic Renal failure, more so when he was stated to be on regular haemodialysis. There can hardly be any scope for doubt that the information required in thequestions was on material facts and answers given to those questions were definitely factors which would have influenced and guided the respondentInsurance Company to enter into the Contract of Mediclaim Insurance with the insured. It is also pertinent to note that in the claim form the appellant had stated that the deceased was suffering from Chronic Renal Failure and Diabetic Nephropathy from 1st June, 1990, i.e. within three weeks of taking the policy. Judged from any angle, we have no hesitation in coming to the conclusion that the statement made by the insured in the proposal form as to the state of his health was palpably untrue to his knowledge. There was clear suppression of material facts in regard to the health of the insured and, therefore, the respondentinsurer was fully justified in repudiating the insurance contract. We do not find any substance in the contention of learned counsel for the appellant that reliance could not be placed on the certificate obtained by the respondent from the hospital, where the insured was treated. Apart from the fact that at no stage the appellant had pleaded that the insured was not treated at Vijaya Health Centre at Chennai, where he ultimately died. It is more than clear from the said certificate that information about the medical history of the deceased must have been supplied by his family members at the time of admission in the hospital, a normal practice in any hospital. Significantly, even the declaration in the proposal form by the proposer authorises the insurer to seek information from any hospital he had attended or may attend concerning any decease or illness which may affect his health.23. Before parting with the case, we may also deal with the submission of learned counsel for the appellant that the order of the National Commission is flawed because it has declined to interfere on a wrong premise that both the Fora below had arrived at "concurrent findings", which was not so. It is true that there is an apparent error in the order of the National Commission, inasmuch as the State Commission had, in fact, disagreed with the view taken by the District Forum but having regard to the fact that on our independent examination of the material on record, the claim by the appellant has been found to be fraudulent, we are of the opinion that no useful purpose would be served by remitting the matter to the National Commission for fresh adjudication on merits.