Whether medical
examination was compulsory for issuance of Policy to take place prior to
accepting premium
D.
Srinivas—Appellant
Versus
SBI Life Insurance Co.
Ltd. & Ors.—Respondents
Civil
Appeal No. 2216 of 2018—Decided on 16.2.2018
Date
of Judgement: February 16, 2018
Whether
medical examination was compulsory for issuance of Policy to take place prior
to accepting premium, was the question before the Hon’ble Supreme Court Bench
in view of the facts and circumstances of the case that the insurance company
accepted the premium, waived the condition precedent of medical examination. In
such circumstances the Respondent Insurance Company could not reject the claim
on the ground that the medical examination of insurer was not done and the Contract of Insurance was not complete.
Brief
Facts of the case:Consumer, his wife and son Mr. D. Venugopal had obtained a
housing loan of Rs.30,00,000/- from Life Insurance Company for construction of
a house in Hyderabad. The proposal was accompanied by good health declaration
by the insured. D. Venugopal expired in 2009. Consequently, the said life
insurance obtained in his name came into force, obligating the insurer to pay the
outstanding amount in their loan account. The consumer approached the insurer
and the bank informing them about the demise of D. Venugopal and requested them
to settle the insurance claim and to discharge the outstanding loan amount in
their house loan account. Since the insurer did not accede to his request, he
filed a consumer complaint before the State Commission.
The
insurer contested the complaint mainly on the ground that the proposal for the
policy was not accepted as the insured did not present himself for medical
examination in spite of repeated requests made by the insurer. Thus, the
insurer pleaded no deficiency in service and denied its liability in connection
with the payment to the insured. The State Commission allowed the complaint.
However, the National Commission, by majority, allowed the appeal. Aggrieved by
the National Commission’s order, the Appellant approached the Supreme Court
The
respondents company have contended that there is no concluded contract
between the parties. Therefore, the insurer was not bound to discharge loan
merely on the ground of receipt of premium for issuing policy. The deceased did
not appear for medical examination. Therefore, the policy could not be
completed on receipt of the death intimation.
The
Supreme Court in the case allowed the appeal and made the following
observations:
That
facts and circumstances indicate that the insurer was only trying to get out of
the bargain, which they had willfully accepted. Thus, the Policy was accepted
by the Insurer.In the instant case there was a complete contract as there was
clear presumption of the acceptance of the proposal in favour of the proposer
The
specific condition in the policy was that in case the loan amount exceeds
Rs.7.5 lacs the medical examination was compulsory. That if the medical
examination was compulsory for such cases it should have been done along with
filing of the proposal form before the payment of the premium. If the proposal
was not accepted for any reason the premium would have been credited to the
account of the proposer. The premium has not been refunded. From this, it is
clear that the insurance company had not rejected the proposal.
It
is further part of the scheme of the policy that in the case of joint housing
loan the full loan amount will be insured even if the policy is issued in the
name of only one loanee. In this case, the insured was D. Venugopal son of the
appellant, whereas the loan is the joint loan in the name of the appellant, his
son – the insured and wife of the appellant.
That
the insurance contract being a contract of utmost good faith, is a two-way
door. The standards of conduct as expected under the utmost good faith
obligation should be met by either party to such contract.
That
in the instant case the condition precedent for acceptance of the premium was
the medical examination. It would be logical for the insurance company to
accept the premium based on the medical examination and not otherwise.
Therefore, by the very fact that they accepted the premium waived the condition
precedent of medical examination.
That
the rejection of the policy must be made in a reasonable time so as to be fair
and in consonance with the good faith standards. In the case, it could not be
held that such enormous delay was reasonable.With reference to the facts of the
present case, the Court remarked that the premium was paid in 2008. That it was
only in 2011 that the respondent insurance company informed the appellant that
the policy was not accepted by them.
Dr
Prem Lata
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