Non-disclosure doesn't apply to known facts

Pawan Kumar had taken several policies from Life Insurance Corporation of India (LIC). The first three policies were taken between 1997 to 2007. The fourth policy was taken on November 17, 2009. The fifth and last policy with a coverage of Rs. 15 lakh was taken on November 18, 2009.

Paswan received burn injuries during some dispute, and expired on 30.11.2009. A first information report (FIR) was filed against the accused at Sonepat Police Station in Haryana.
 

Subsequently, when Paswan's brother Jagjit lodged a claim under the last policy issued on November 17, 2009, Life Insurance Corporation (LIC) repudiated it on March 31, 2012 on the ground that the insured had failed to disclose particulars of the previous policy taken on November 17, 2009.
 

Aggrieved, Jagit filed a complaint before the Jhajjar District Consumer Commission, which was contested by LIC. The District Commission allowed the complaint and ordered LIC to pay the sum insured of Rs. 15 lakh along with a 9 per cent interest from the date of death of the life assured.
 

LIC challenged the order, but its appeal was dismissed by the Haryana State Commission. LIC then filed a revision petition before the National Commission. LIC raised technical objections on the maintainability of the complaint. 

It contended that the policy had been obtained from the Rohtak Branch, so the complaint filed at Jhajjar was not maintainable as the cause of action had not arisen there.

On merits, LIC argued that the suppression of the previous policy would have an impact on the fundamental principles governing a contract of insurance. It claimed that the two policies were obtained through two different agents in order to mislead and defraud LIC. 
 

The suppression enabled Paswan to avoid the mandatory special medical check up which is required when the total sum insured exceeds Rs. 35 lakh. 
 

It argued that the disclosure of previous policies was a fundamental and material issue which went to the root of the dispute, and justified the repudiation of the claim.
 

Jagjit pointed out that he resided in Jhajjar and so did the agent through whom the policy was taken. The National Commission considered that the law provided that jurisdiction could be based on the complainant's place of residence. Since Jagjit was residing at Jhajjar, it concluded that the complaint would be maintainable before the Jhajjar District Commission.

It also observed that the question of non-disclosure applies only when a party does not have prior knowledge, whereas in the instant case LIC was well aware of the previous policy as there was a difference of just one day between the fourth policy taken on November 17, 2009 and the fifth policy taken on November 18, 2009. 
 

It pointed out that the scope in revision proceedings was limited and would be no justification for deviating from the well reasoned concurrent findings of the District and State Commissions.
 

Accordingly, by its order of June 4, 2023 delivered by Dr Inder Jit Singh, the National Commission dismissed LIC’s petition and ordered it to pay a further sum of Rs. 15,000 towards litigation costs.

The writer is a consumer activist