Case Note & Summary
The petitioner, Aditya Birla Sun Life Insurance Co. Ltd., challenged an award dated 31 December 2020 passed by the Insurance Ombudsman, Goa/Mumbai Metropolitan Region, which directed the petitioner to settle a death claim of Rs. 30 lacs in favor of respondent no. 2, Fatema F. Chhatriwala, the wife of the deceased insured, Dr. Fakhruddin F. Chhatriwala. The insured had applied for a life insurance policy on 29 December 2017 through an online proposal form. The proposal form contained questions regarding medical history, including diabetes and hypertension, which the insured answered in the negative. The insured died on 18 June 2018. When the claim was made, the petitioner repudiated it on the ground that the insured had suppressed material facts regarding his health, specifically diabetes and hypertension, relying on medical records from a hospital. The respondent approached the Insurance Ombudsman, who allowed the claim, holding that the insurer failed to prove that the insured knowingly suppressed information. The petitioner filed a writ petition under Article 227 of the Constitution. The court framed two issues: (i) maintainability of the writ petition against an Ombudsman award, and (ii) whether non-disclosure of ailments disentitles the claimant. On the first issue, the court held that a writ petition under Article 227 is maintainable against an Ombudsman award, as the Ombudsman is a quasi-judicial authority, and Article 227 confers supervisory jurisdiction on the High Court. However, the scope is limited to correcting errors of jurisdiction or patent illegality. On the second issue, the court examined Section 45 of the Insurance Act, 1938, which provides that a policy cannot be called in question after two years on the ground of misrepresentation unless the insurer proves that the insured knowingly suppressed material facts. The court noted that the policy was issued on 29 December 2017 and the death occurred on 18 June 2018, within two years. The insurer relied on medical records from a hospital, but those records were from a period after the policy was issued. The court found that the insurer failed to produce any evidence to show that the insured was aware of his ailments at the time of the proposal. The Ombudsman had correctly held that the suppression was not deliberate. The court dismissed the petition, upholding the Ombudsman's award.
Headnote
A) Insurance Law - Insurance Ombudsman - Maintainability of Writ Petition - Rule 17(6) read with Rule 17(8) of the Insurance Ombudsman Rules, 2017 - Article 227 of the Constitution of India - The court held that although the award of the Insurance Ombudsman is binding on the insurance company, a writ petition under Article 227 is maintainable to correct errors of jurisdiction or patent illegality. The court examined the scope of Article 227 and concluded that it can be invoked against decisions of tribunals and quasi-judicial authorities, including the Insurance Ombudsman, albeit within narrow limits. (Paras 3, 5-10) B) Insurance Law - Life Insurance - Non-Disclosure of Pre-Existing Ailments - Section 45 of the Insurance Act, 1938 - The court held that for the insurer to avoid a policy on grounds of non-disclosure, it must prove that the insured knowingly suppressed material facts with intent to deceive. The burden is on the insurer to show that the answers in the proposal form were false and that the insured had knowledge of the ailment at the time of proposal. Mere existence of a medical condition is insufficient. (Paras 11-15) C) Insurance Law - Life Insurance - Materiality of Suppression - Section 45 of the Insurance Act, 1938 - The court held that the insurer must establish that the non-disclosed information was material to the risk and that the insured had a duty to disclose. In this case, the insurer failed to prove that the insured was aware of his diabetes and hypertension at the time of the proposal, as the medical records relied upon were from a period after the policy was issued. The Ombudsman's finding that the suppression was not deliberate was upheld. (Paras 16-20) D) Insurance Law - Life Insurance - Burden of Proof - Section 45 of the Insurance Act, 1938 - The court held that the burden of proving deliberate suppression lies on the insurer. The insurer must produce evidence to show that the insured had knowledge of the ailment and intentionally withheld it. In the absence of such evidence, the policy cannot be repudiated. The court affirmed the Ombudsman's award directing settlement of the claim. (Paras 21-25)
Issue of Consideration
(i) Whether a writ petition under Article 227 of the Constitution is maintainable against an award of the Insurance Ombudsman under Rule 17(6) read with Rule 17(8) of the Insurance Ombudsman Rules, 2017; (ii) Whether non-disclosure of existing ailments by an insured in the proposal form disentitles the claimant to benefits under the policy.
Final Decision
The court dismissed the writ petition, upholding the award of the Insurance Ombudsman dated 31 December 2020 directing the petitioner to settle the death claim for Rs. 30 lacs in favor of respondent no. 2.
Law Points
- Insurance Ombudsman award binding on insurer
- maintainability of writ petition under Article 227
- non-disclosure of pre-existing ailments
- materiality of suppression
- burden of proof on insurer
- Section 45 of Insurance Act
- 1938
