S.C. Parija, J.
1. The action of the Life Insurance Corporation of India (for short 'LLC.') in repudiating all its liabilities under Policy Nos. 583852302, 583851466 and 583707315, on the ground that the deceased insured had withheld material information regarding his health at the time of effecting the insurance policies with L.I.C., is under challenge by the legal heirs of the insured in the present writ petition.
2. The brief facts of the case as narrated in the writ petition is that the insured Pramod Kumar Behera was working in Deulabera Colliery under Mahanadi Coalfields Ltd. and during his service period, he had taken six insurance policies bearing Nos. 581483762, 581487043, 581488222, 583707315, 583851466 and 583852302. The insured Pramod Kumar Behera died on 18.6.2004 due to heart failure. After the death of the insured, the wife (petitioner No. 1) made claims in respect of the aforesaid policies. The LIC, while settling the claim and releasing the assured amount in respect of the first three insurance policies, rejected the claim in respect of Policy Nos. 583707315, 583851466 and 583852302, on the ground that the insured had withheld material information regarding his health at the time of effecting the insurance policies with the LIC. In the letter of repudiation dated 30.3.2005 (Annexure-7), the LIC intimated the wife of the insured that they have proof to show that the insured had been suffering from certain diseases on several dates before his death, as per the medical book maintained by the employer, which fact had been suppressed by the insured at the time of completing the proposal. Accordingly, the LIC repudiated the claims of the petitioners in respect of the said three policies on the ground that the insured had made deliberate mis-statement and withheld material information regarding his health at the time of effecting the assurance with the LIC.
3. Learned Counsel for the petitioners submits that as the insured died on 18.6.2004 due to heart failure, which had no nexus with the minor ailments of casual nature like back pain, which the insured had complained of in the year 1999, much prior to his taking of the said three insurance policies, as has been reflected in his medical book maintained by the employer, the non-disclosure of such fact cannot be a ground for rejecting the claims. It is further submitted that basing on the medical book and the leave records of the insured, maintained by the employer Deulabera Colliery, the LIC could not have repudiated the claims of the petitioners, when there is no material on record to establish that the insured had wailfully suppressed material facts having a bearing on his health, which was directly or indirectly the cause of his ultimate death.
4. Learned Counsel appearing for the LIC, with reference to the counter affidavit filed, submits that the Policy No. 583707315 was for a sum assured of Rs. 1,00,000/-, in which deceased Pramod Kumar Behera was the proposer of the life assured of Saurav Behera {petitioner No. 2). Policy Nos. 583851466 and 583852302 were for sums assured of Rs. 50,000/- and Rs. 1,00,000/- respectively, for the life assured of deceased Pramod Kumar Behera. All the three insurance policies were under the monthly salary saving scheme, which have been repudiated on account of the insured withholding material information regarding his health, while submitting the proposal form at the time of effecting the assurance with the LIC. In this regard, it is submitted that the insured had given false statements to the questionnaire contained in the propose form, which was with regard to the personal medical history of the proposed insured. To the questions in Sl. No. 11(a) to 11(h) of the proposal form, the insured had answered in the negative as 'No' and in Sl. No. 11(i), the insured had answered as 'Good'. It is submitted that after the death of the insured on 18.6.2004, as the claim was an early death claim, an enquiry was conducted by the LIC for settlement of the claims made by the petitioners. On enquiry, it came to the knowledge of the LIC that the insured had suffered illness on various occasions, as per the medical book maintained by the employer and as such the insured was not in a good health condition, at the time of effecting the insurance policies.
5. Accordingly, learned Counsel for the LIC submitted that as the medical book maintained by the employer revealed that the insured had suffered from ailments on various occasions and had availed sick leave, as per the certificate given by the employer (Annexure-A series), the same amounted to deliberate mis-statement and withholding of material information from the LIC regarding his health, at the time of effecting the insurance policies. Therefore, in terms of the policy contract and the declarations contained in the proposal for assurance, the LIC repudiated the claims of the petitioners, as provided under Section 45 of the Insurance Act.
6. On a perusal of the impugned letter of repudiation dated 30.3.2005 (Annexure-7), it is seen that the LIC has repudiated the claims of the petitioners in respect of the Policy Nos. 58385230, 583851466 and 583707315 on the ground that the insured had withheld material information regarding his health at the time of effecting the assurance with the LIC. The relevant portion of the said letter of repudiation is extracted below:
We may, however, state that all these answers were false as we hold indisputable proof to show that before he proposed for the above policy he suffered from diseases as per the medical book on several dates before his death. Such suffering was suppressed at the time of completing the proposal.
It is therefore evident that she had made deliberate misstatement and with-held material information from us regarding her health at the time of effecting the assurance and hence in terms of the Policy Contract and the Declarations contained in the forms of Proposal for Assurance, we hereby repudiate the claim and accordingly we are not liable for any payment under the above policy and all moneys that have been paid in consequence thereof cannot be paid.
7. Section 45 of the Insurance Act reads as under:
Policy not to be called in question on ground of mis-statement after two years. No policy of life insurance effected before the commencement of this Act shall, after the expiry of 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 on 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 policy-holder and that the policyholder knew at the time of making it that the statement was false or that it suppressed facts which it was material to disclose.
XXX XXX XXX XXX
8. Section 45 postulates repudiation of such policy within a period of two years. By reason of the aforementioned provision, a period of limitation of two years had, thus, been specified and on the expiry thereof the policy was not capable of being called in question, inter alia on the ground that certain facts have been suppressed which were material to disclose or that it was fraudulently been made by the policy holder or that the policy holder knew at the time of making it that the statement was false. Statute, therefore, itself provides for the limitation for valid repudiation of an insurance policy. It takes into account the social security aspect of the matter.
The Supreme Court in the case of Mithoolal Nayak v. Life Insurance Corporation of India : AIR 1962 SC 814, while interpreting the ambit and scope of Section 45 held that there are three conditions for application of the second part of Section 45 of the Insurance Act, which are:
(a) the statement must be on a material matter or must suppress facts which it was material to disclose;
b. the suppression must be fraudulently made by the policyholder; and
c. the policy-holder must have known at the time of making the statement that it was false or that it suppressed facts which it was material to disclose.
9. In the case of Rohini Nandan Goswami v. Ocean Accident and Guarantee Corporation Ltd. : AIR 1960 Calcutta 696, while considering the duty of a insured to disclose material facts and the right of the insurer to avoid the insurance policy in case of such non-disclosure, the Hon'ble Court observed that where to a claim under the policy of insurance, concealment of material fact is alleged by the insurer as entitling him to avoid the policy, the Court has to consider what is a material fact. Whether a particular fact is material depends upon the circumstances of a particular case. Evidence of materiality is not always necessary. Materiality of a particular fact may be obvious from its very nature. The test to determine materiality is whether the fact has any bearing on the risk undertaken by the insurer. If the fact has any bearing on the risk, it is a material fact, if not, it is immaterial.
10. While interpreting a contract of life insurance, a Division Bench of Punjab High Court in the case of Lakshmi Insurance Co. Ltd. v. Bibi Padma Wati : AIR 1961 Punjab 253, observed as under:
The contract of life insurance being one of utmost good faith and the probable expectancy or duration of the life of policyholder being an important element in it, the controlling factor in the construction of terms 'sickness, ailment or injury' in the application by insured for revival of his lapsed insurance policy must necessarily be the intent of the parties without attaching to any one of these terms any technical or theoretical meaning. Whatever the term 'ailment', or 'sickness' may mean in the medical sense, or in accordance with their dictionary meaning, they cannot embrace merely transitory and temporary illness in its accepted sense, as they are not material to the risk insured. These terms refer to disorders of substantially serious nature affecting general health and do not include passing indispositions which do not affect the applicant's general health. No embargo, therefore, can be placed on the insured, in not declaring occasional physical disturbances of a trivial character. These terms are to be restricted to such illness which impair the constitution of the insured or interrupt the performance of vital functions, xxx xxx xxx.
11. Considering the effect of Section 45 of the Insurance Act and whether the policy holder had made an inaccurate or false statement on a material matter or suppressed facts which it was material to disclose and it was fraudulently made by the policy holder and the policy holder knew at the time of making it that the statement was false or that it suppressed facts which was material to disclose, the Division Bench of Madras High Court in the case of Life Insurance Corporation of India v. Janaki Ammal : AIR 1968 Madras 324, proceeded to observe as under:
Thus, there is ample authority for the proposition that, an insurer could avoid a contract of insurance after the expiry of period of two years mentioned in the first part of Section 45 of the Insurance Act only on the ground of suppression of illness, which affects the expectation of life of the insured and not mere temporary or trivial illness and that unless the disease he was suffering from is clearly established and it is also established that disease would have a material bearing on the insurability of the policy holder, the policy cannot be invalidated. We are, therefore, clear that in the circumstances of this case, the mere fact that the deceased had been taking medicines and injections without proof of anything more would not be sufficient to invalidate the policy.
12. In the case of Life Insurance Corporation of India and Ors. v. Smt. Asha Goel and Anr. : AIR 2001 SC 549, the Supreme Court observed as follows:
In course of time the Corporation has grown in size and at present it is one of the largest public sector financial undertakings. The public in general and crores of policy-holders in particulars look forward to prompt and efficient service from the Corporation. Therefore the authorities in-charge of Management of the affairs of the Corporation should bear in mind that its credibility and reputation depend on its prompt and efficient service. Therefore, the approach of the Corporation in the matter of repudiation of a policy admittedly issued by it should be one of extreme care and caution. It should not be dealt with any mechanical and routine manner.
13. In the case of P.J. Chacko and Anr. v. Chairman, Life Insurance Corporation of India and Ors. : AIR 2008 S.C. 424, the Supreme Court has held that a deliberate wrong answer in the proposal form which has a great bearing on the contract of insurance, if discovered, may lead to the policy being vitiated in law and therefore the proposal can be repudiated if a fraudulent act has been discovered. In the said case, the deceased insured while submitting the proposal form had not disclosed that he had undergone an operation for Adenoma Thyroid. Subsequently, the deceased insured died of Polyneuritis. The Hon'ble Court, in the facts of the case, came to hold that since the insured had undergone an operation for Adenoma Thyroid, which was a major operation, which fact he did not disclose prior to obtaining the insurance policy and died within six months from the date of taking the policy, the LIC is entitled to repudiate all liability under the policy.
14. A Division Bench of this Court in Kuni Lata Sahoo v. Senior Divisional Manager, LIC and Anr. WP (C) No. 3552 of 2003 : 2009 (Supp. II) OLR 353, decided on 6.8.2009, while dealing with a similar question regarding repudiation of claim by the LIC for alleged non-disclosure of material facts, held in the facts of the case, that as the deceased insured was suffering from minor ailments like Gastritis with superficial Stomach Ulcer, which is not a serious disease having any bearing on the risk undertaken by the L.I.C., the non-disclosure of the same cannot be said to be material, especially when the same did not affect the life expectancy of the deceased insured. Moreover as the cause of death of the insured was admitted due to Viral Encephalitis coupled with Cardio Respiratory arrest, which had no nexus with the previous ailments of the deceased insured, the repudiation of the policy and rejection of the claim by the L.I.C. was not proper and justified.
15. The legal position which emerges from the aforementioned judicial pronouncements is that the test to determine materiality is whether the fact not disclosed has any bearing on the risk under taken by the insurer. If the fact has any bearing on the risk, it is a material fact. If the insured failed to disclose in the proposal form trivial ailments suffered by him temporarily on some occasions, the same cannot be construed as fraudulent suppression of material facts, so as to repudiate the contract of insurance.
16. The Insurance policy, apart from its special feature, is a contract between a person seeking to be insured and the insurer. In interpreting the terms of contract of insurance, they should receive fair, reasonable and sensible construction in the consonance with the purpose of the contract as intended by the parties. Emphasis in such cases is laid more upon a practical and reasonable, rather than, on a literal and strained construction. In interpreting the contract of insurance neither the coverage under a policy should be unnecessarily broadened, nor should the policy be rendered ineffective inconsequence of unnatural or unreasonable construction. An attempt should be to construe a contract in liberal manner so as to accomplish the purpose or the object for which it is made. In the absence of ambiguity, neither party can be favoured but where the construction is doubtful, the Courts lean strongly against the party who prepared the contract. Where there is a susceptibility of two interpretations, the one favourable to the insured is to be preferred.
17. In the present case, the insured admittedly died on 18.6.2004 due to heart failure and there is no material on record or any medical evidence to show that the insured had suffered from any serious disease affecting his life expectancy in any manner, prior to his taking the said three policies. The medical book maintained by the employer of the insured disclosed that he had complained of lower back pain in the year 1999, which was non-specific and no neurological disorder or deficiency was noticed and the insured did not suffer from any serious disease or illness during his service period. Merely because the insured had not disclosed in the proposal form some minor ailments of trivial nature suffered by him temporarily on some occasions, as has been reflected in the medical book of the insured, which had no material bearing on the risk undertaken by the LIC or even any remote nexus with the ultimate cause of his death, the same cannot be construed as fraudulent suppression of material facts, so as to authorise the LIC to repudiate its liabilities under the contract of insurance. Accordingly, the repudiation of the insurance policies and rejection of the claim by the LIC was not proper and justified.
18. In view of the foregoing reasons, the impugned letter of repudiation dated 30.3.2005 (Annexure-7) is quashed and the LIC, opposite party Nos.1 and 2 are directed to pay the sum assured under the Policy Nos. 583852302 and 583851466, and to continue the Policy No. 583707315 and pay the sum assured on its maturity, as per the terms of the said policy.
Writ Petition is accordingly allowed.
B.P. Das, J.
19. I agree.