Repudiation of claim by LIC on the ground of suppression of material facts held proper

National Consumer Disputes Redressal Commission (NCDRC): While upholding the repudiation of the claim of the complainant by LIC on the ground of suppression of material facts, as proper, NCDRC observed that a contract between the parties falls in the category of contract uberrimae fidei, meaning a contract of utmost good faith on the part of the assured. When information on a specific aspect is asked for in the proposal form, an assured is under a solemn obligation to make a true and full disclosure of the information on the subject which is within his knowledge. It is not for the proposer to determine whether the information sought for, is material for the purpose of the policy or not. Earlier the deceased obtained LIC policy of Rs.1,00,000/- which commenced from July 9, 1994. He passed away due to cerebro-vascular accident in the hospital on 14.11.1994. The parents of the deceased filed the claim before LIC, which repudiated the claim stating that the assured was suffering from infective hepatitis and was hospitalized for treatment prior to his taking the policy. Feeling aggrieved, the parents filed complaint before District Forum, which directed the complainant to pay Rs.1,00,000/- alongwith interest @ 12% per annum w.e.f. 11.11.1994 till the date of payment. Cost of Rs.500/- was also awarded. The State Commission confirmed the order of the District Forum. While hearing the revision petition filed by LIC challenging the said orders, NCDRC observed that it is the fundamental principle of insurance law that utmost good faith must be observed by the contracting parties and good faith forbids either party from non-disclosure of the facts which the parties know. The opinion of the assured, whether or not a material fact is material, is irrelevant. Even if the assured fails to disclose a fact because he does not think it is material when in fact it is, does not avail him. “The time when the proposal form is filled in, irrespective of the fact whether the risk started earlier or not, is the crucial, main pillar and the foundation upon which the whole case rests. This fact is most important, single determinant of this knotty problem. In 01.08.1994, it was in the knowledge of the assured that he was suffering from above said diseases. It was the bounden duty of the assured to disclose the facts at that time. He had no qualms about lying. Consequently, his nominee or LRs are not entitled to any compensation,” noted the Commission. While holding that, “the duty of the Consumer Fora is not to find out whether there is a nexus between the accidental death and disease suppressed by the insured. That has nothing to do with the grant of compensation. The nexus point has to be eschewed out of consideration otherwise the uberrimae fidei shall stand violated,” NCDRC set aside the orders passed by District Forum and State Commission. LIC v. Ramamani Patra, 2015 SCC OnLine NCDRC 1741 , decided on August 3, 2015