Smt. Krishna Wanti Puri v. Life Insurance Corporation of India AIR 1975 Del. 19
FACT-
- Late Dharam Pal Puri had taken out four life insurance policies with the Corporation during his lifetime.
- Smt. Krishna Wanti Puri (plaintiff/petitioner), the widow of Late Dharam Pal Puri, filed a suit against the Life Insurance Corporation of India(defendant) to recover Rs. 85,000/- along with profits and interest on four insurance policies.
- The Corporation resists the suit. The main ground of defence is that Dharam Pal Puri was suffering from heart disease, that he knows about his ailment, that he had consulted doctors about his disease but fraudulently suppressed these facts.
ISSUE-
- The main issue revolved around whether Smt. Krishna Wanti Puri, as the widow and assignee, was entitled to claim the amount from the insurance policies or whether the Corporation could avoid paying based on Dharam Pal Puri's alleged fraudulent suppression of material facts about his health condition.
RULE-
- The principle of utmost good faith (uberrima fides) in insurance contracts was highlighted, emphasizing the insured's duty to disclose all material facts known or ought to be known to them.
- Section 45 of the Insurance Act, which restricts insurers from challenging a policy on the grounds of inaccurate statements in the proposal form unless the insurer proves fraudulent misrepresentation, knowledge of falsity, and materiality of the facts suppressed.
HELD-
- The deceased, Dharam Pal Puri, failed to disclose his pre-existing heart condition(Mitral stenosis) when filling out the proposal forms for the insurance policies.
- Evidence from medical professionals indicated that Dharam Pal Puri had been suffering from heart disease since 1946, which he deliberately concealed.
- Dr. Santosh Singh: Dharam Pal Puri had heart disease about seven years, testified on the patient's records.
- Dr. (Miss) S. Padmavati: Certified that Dharam Pal Puri had heart disease about five or seven years, based on her examination records.
- Dr. V.K. Dewan: Confirmed Dharam Pal Puri's heart condition and his treatment records.
- Despite contradictory statements in later certificates, the court relied on the original evidence provided by the doctors to establish the timeline and nature of Dharam Pal Puri's illness.
- In Mithoolal Nayak v. Life Insurance Corporation of India [AIR 1962 SC 814] and laid down that the three conditions for the application of the second part of S. 45 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 policy holder, 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.
- The court concluded that the Corporation was entitled to avoid the insurance policies due to Dharam Pal Puri's fraudulent suppression of material facts about his health.
- As a result, the plaintiff's claim for the insurance amount was dismissed, and each party was ordered to bear its own costs.
- Furthermore, the court held that the premiums paid on the policies were forfeited, as per the policy terms, due to the fraudulent misrepresentation by the insured.
COMMENTARIES NOTE-
- 37.2 Effect of inaccurate or false statement on the policy
Mere inaccuracy or falsity in respect of some recitals or items in the proposal is not sufficient. The burden of proof is on the insurer to establish these circumstances and unless the insurer is able to do so, there is no question of the policy being avoided on ground of misstatement of facts. The contracts of insurance including the contract of life assurance are contracts uberrima fide and every fact material must be disclosed, otherwise, there is good ground for rescission of the contract. The duty to disclose material facts continues right up to the conclusion of the contract and also implies any material alteration in the character of the risk which may take place between proposal and its acceptance. If there are any misstatements or suppression of material facts, the policy can be called into question. For determination of the question whether there has been suppression of any material facts, it may be necessary to also examine whether the suppression relates to a fact which is in the exclusive knowledge of the person intending to take the policy and it could not be ascertained by reasonable enquiry by a prudent person[LIC of India v Asha Goel, AIR 2001 SC 549].
It is well settled that a contract of insurance is contract uberrimae fides and there must be complete good faith on the part of the assured. The assured is thus under a solemn obligation to make full disclosure of material facts which may be relevant for the insurer to take into account while deciding whether the proposal should be admitted or not and this duty cannot be diluted. However, the burden of proving that the insured had made false representations and suppressed material facts is undoubtedly on the insurer [LIC of India v GM Channabasamma, AIR 1991 SC 392].
Even the fact that the medical officers of the LIC had certified the life of the assured as good is not of much consequence, when the false answers given by the assured to questions in proposal form vitiate the contract itself [ Sarojam v LIC of India, 1985 Ker LT 865; Seelam Ramanamma v Dvl Manager LIC of India, AIR 2000 AP 350].