ISLAMABAD: The Supreme Court has noted that life insurance policy cannot be avoided after two years on the ground of any falsity or inaccuracy in the insured's statement, unless the insurer is able to show that statement was material matter or suppressed fact. A three-judge bench, headed by Justice Umar Ata Bandial, passed this judgment on the appeal of State Life Insurance Corporation against the Peshawar High Court (PHC) verdict.
The apex court dismissed the corporation's appeal. The judgment said as per Section 80 of the Insurance Ordinance 2000; "After two years, a life insurance policy cannot be avoided on the ground of any falsity or inaccuracy in, or of, any statement made of the sort indicated in the provisions, unless the insurer is able to show that (a) the statement was on a material matter or suppressed facts that it was material to disclose; (b) it was made fraudulently by the insured; and (c) the insured knew at the time of making the statement that it was false or suppressed facts that it was material to disclose."
The judgment authored by Justice Munib Akhtar states that Section 80 creates a legal bar which has to be overcome by the insurer. The bar itself is automatic and hardly requires any evidence to be led by the claimants. It is for the insurer to take the plea that it is not hit by the bar, and then establish its case by leading appropriate evidence that the three conditions stipulated therein exist.
Abdul Rehman, an employee of WAPDA took out a life insurance policy with the appellant insurance -company on or about 01.08.2002. The insured passed away on 07.02.2010 and Attaur Rehman (respondent), his legal heir, lodged a claim under the policy. That claim was rejected on 15.04.2011, and gave no specific reason. The respondent commenced proceedings, on or about 25.11.2011, before the Insurance Tribunal constituted under the Insurance Ordinance, 2000.
The Tribunal through judgment dated 07.06.2014 decreed the claim in sum of Rs400,000, which was the insured amount. The appellant (Corporation) filed an appeal against the Tribunal's decision before the PHC, which was dismissed on 09.05.2018.
The appellant then approached the Supreme Court. The lawyer of State Life contended that insured (Rehman) had been suffering from diabetes and a heart condition for approximately 12 years prior to the taking out of the policy. He had been operated upon, and coronary artery bypass grafting was carried out in or around 1997. It was submitted that these medical conditions were concealed and thus breached Section 75 of the Ordinance regarding the "utmost good faith".
The judgment noted that the record produced by the appellant contained insured statements when the policy was taken out regarding his medical condition/history, and the results of his medical examination (carried out at that time). That examination was by a doctor of the appellant's choice.
The apex court observed that the insured was thoroughly medically examined by a doctor of appellant's own choice. The doctor's report, dated 30.07.2002, gave the insured a clean chit. The examining doctor found the insured to be: "fit. first class". The judgment said when the medical examination and report are considered in the light of the evidence as a whole, it is clear that the appellant was induced to issue the life insurance policy not on account of the insured statements. Rather, the appellant's own medical examiner and his report that was clearly the most important factor.
The court noted that it is a well-known fact that insurers in the life insurance business do not issue policies without a thorough medical examination of the person proposed to be insured, and unless the resultant report is found satisfactory or acceptable. If therefore the medical examiner chosen by the insurer is negligent or the SOPs established for the examination are so lax as to fail to result in a properly thorough examination, the burden of that fault lies on the insurer. In such a situation, the insured cannot be held to account for any non-disclosure such as would enable the insurer to escape liability on the policy unless there is fraud or a fraudulent misrepresentation.
Copyright Business Recorder, 2021
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