November 24, 2007

Hiding medical history won't get you insurance: Supreme Court

Anyone not truthfully recording his past medical ailments in the application form seeking a life insurance cover could end up disentitling his kin from getting the promised amo-unt in the policy in case of his untimely death, the Supreme Court has ruled.

And this actually happened. One Chackochan did not mention a major operation for Andenoma thyroid, which he had undergone, in the life insurance policy application and died within five months of taking the policy. When his kin asked for the promised amount, Life Insurance Corporation (LIC) examined the medical records and found this serious lapse and cancelled the policy on the ground of hiding medical history.

The action of LIC was upheld by the apex court, which rejected the argument of the kin's counsel that the life insurance policy, being a requirement of social security, could not have been cancelled by LIC merely on the ground of suppression of medical history, especially when the corporation's doctor had examined the policy holder.

A Bench comprising Justices S B Sinha and H S Bedi said: “The purpose of taking a policy of insurance is not very material. It may serve the purpose of social security, but then the same should not be obtained with a fraudulent act by the insurer.”

Looking at the form in which Chackochan had stated that he had not undergone any operation and that his state of health has been good, the Bench said, “The proposer must show that his intention was bona fide. It must appear from the face of the record.”

It said a deliberate wrong answer, which has a great bearing on the contract of insurance, if discovered, might lead to the policy being vitiated by law.

“We are not unmindful of the fact that LIC, being a State within the meaning of Article 12 of the Constitution, its action must be fair, just and equitable but the same would not mean that it shall be asked to make a charity of public money, although the contract of insurance is found to be vitiated by reason of an act of the insured,” said Justice Sinha, writing the judgment for the bench.

If a person makes a wrong statement with knowledge of consequences thereof, he would ordinarily be not allowed to plead that disclosure of the suppressed facts would not materially alter the position, the court said rejecting the appeal filed by Chackochan's kin seeking the policy amount from LIC.

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