MANMOHAN NANDA versus UNITED INDIA ASSURANCE CO. LTD. & ANR on 6 December 2021

[2021] 11 S.C.R. 1138

SUPREME COURT REPORTS

[2021] 11 S.C.R.

AMANMOHAN NANDA

v.

UNITED INDIA ASSURANCE CO. LTD. & ANR

(Civil Appeal No. 8386/2015)

BDECEMBER 6, 2021

[DR. DHANANJAYA Y CHANDRACHUD ANDB. V. NAGARATHNA, JJ.]

Consumer Protection Act, 1986 – s.21 – Insurance –Repudiation of claim on ground of suppression or non-disclosureCof material facts – Appellant intended to travel to the USA –Appellant was issued a overseas mediclaim business and holidaypolicy – The appellant was medically examined at the instance ofrespondent No. 1 insurance company prior to the consideration ofhis request for issuance of a mediclaim policy – The medical reportDcategorically noted that the appellant had diabetes-type II (mellitus-II) – No other adverse medical condition was found – In the medicalexam report, specific queries were sought as to whether anyabnormalities were observed in the electrocardiogram test of theappellant and any possible illness or disease for which the appellantmay require medical treatment in the ensuing trip to the USA – ToEboth these queries, the doctor who examined the appellant hadanswered “normal” and “no” respectively – The insurer thereafteraccepted the proposal form – Thereafter, the appellant boarded aflight to USA, on exiting the airport, appellant felt weak and startedsweating – He was admittted at a medical centre – Three stents wereFinserted to remove blockage from his heart vessels – Appellantclaimed benefit under the mediclaim policy – However, appellantreceived a letter from respondent stating that his claim had beenrepudiated as the appellant had a history of hyperlipidaemia anddiabetes and the policy did not cover pre-existing conditions andcomplications arising therefrom – Aggrieved, the appellant filed aGcomplaint u/s.21(9) of the 1986 Act – The Commission held thatconcealment or non-disclosure of material facts regarding pre-existing heart ailment was a valid ground for repudiation of theinsurance claim by the respondent-insurer – On appeal, held:Appellant had in the proposal form disclosed that he was sufferingHfrom diabetes mellitus-II and for which the medical test reports were

submitted along with the proposal form which were considered bythe insurance company before the policy was issued to the appellant– In fact, the appellant stated in his representation against therepudiation of the policy that he was taking lipid-lowering medicinesnot because he was suffering from hyperlipidaemia but as it wascustomary to take such medication for prevention of cardio-vascularcomplications in diabetics – He also stated that he had informedthe physician-doctor, who examined him prior to obtaining the policy,of the medicines he was taking – Therefore, the insurance companywas well aware of the fact that the insured was a diabetic and wastaking all necessary medication for preventing further complicationsand controlling the disease – Hence, there was no suppression ofany material fact by the appellant to the insurer – The repudiationof the policy by the respondent insurance company was illegal andnot in accordance with law – Consequently, the appellant entitledto be indemnified under the policy.

Insurance – Mediclaim Policy – After assessment of medicalcondition – Held: The insurer must be able to assess the likely risksthat may arise from the status of health and existing disease, if any,disclosed by the insured in the proposal form before issuing theinsurance policy – Once the policy has been issued after assessingthe medical condition of the insured, the insurer cannot repudiatethe claim by citing an existing medical condition which was disclosedby the insured in the proposal form, which condition has led to aparticular risk in respect of which the claim has been made by theinsured.

Insurance – Mediclaim Policy – Object of – Held: The objectof seeking a mediclaim policy is to seek indemnification in respectof a sudden illness or sickness which is not expected or imminentand which may occur overseas – If the insured suffers a suddensickness or ailment which is not expressly excluded under the policy,a duty is cast on the insurer to indemnify the appellant for theexpenses incurred thereunder.

Doctrine/Principle – Principle of ‘uberima fides’ betweeninsurer and insured – Held: The insured has a duty to disclose allmaterial facts, the insurer must also inform the insured about theterms and conditions of the policy that is going to be issued to himand must strictly conform to the statements in the proposal form orprospectus, or those made through his agents – Thus, the principle AB

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Aof utmost good faith imposes meaningful reciprocal duties owed bythe insured to the insurer and vice versa – This inherent duty ofdisclosure was a common law duty of good faith originally foundedin equity but has later been statutorily recognised – It is also opento the parties entering into a contract to extend the duty or restrictit by the terms of the contract.B

Insurance – Mediclaim Policy – Contra Proferentem Rule –Appellant claimed insurance under a mediclaim policy –Respondents contended that as per the terms and conditions of thepolicy “all the complications arising out of pre-existing conditionis not payable” – Claim was repudiated – Held: Respondents wereCnot right in stating that as per the terms and conditions of the policy“all the complications arising out of pre-existing condition is notpayable” – Acute myocardial infraction can occur in a person whohas no history of diabetes mellitus-II – One of the risk factors forthe aforesaid cardiac episode is diabetes mellitus-II – The fact thatDthe appellant had diabetes mellitus-II was made known to theinsurance company – The aforesaid clause has to be read againstthe respondent insurer by applying the contra proferentem rule againstit – Otherwise, the very contract of insurance would becomemeaningless in the instant case – Hence, the respondent-insurancecompany was not right in repudiating the policy in question.E

Words and Phrases – “Material Fact” in insurance policy –Held: What constitutes a material fact would depend upon the natureof the insurance policy to be taken, the risk to be covered, as wellas the queries that are raised in the proposal form – If specificqueries are made in a proposal form then it is expected that specificFanswers are given by the insured who is bound by the duty todisclose all material facts.

Allowing the appeal, the Court

HELD: Uberrimae Fidei

G1. The insurance contracts are special contracts based onthe general principles of full disclosure inasmuch as a personseeking insurance is bound to disclose all material facts relatingto the risk involved. Law demands a higher standard of goodfaith in matters of insurance contracts which is expressed in thelegal maxim uberrimae fidei. [Para 30][1157-B-C]H

2. Just as the insured has a duty to disclose all materialfacts, the insurer must also inform the insured about the termsand conditions of the policy that is going to be issued to him andmust strictly conform to the statements in the proposal form orprospectus, or those made through his agents. Thus, the principleof utmost good faith imposes meaningful reciprocal duties owedby the insured to the insurer and vice versa. This inherent duty ofdisclosure was a common law duty of good faith originally foundedin equity but has later been statutorily recognised as noted above.It is also open to the parties entering into a contract toextend the duty or restrict it by the terms of the contract.[Para 34][1159-A-C]

3. Full disclosure must be made of all relevant facts andmatters that have occurred up to the time at which there is aconcluded contract. It follows from this principle that themateriality of a particular fact is determined by the circumstancesexisting at the time when it ought to have been disclosed, andnot by the events which may subsequently transpire. The duty tomake full disclosure continues to apply throughout negotiationsfor the contract but it comes to an end when the contract isconcluded; therefore, material facts which come to the proposer’sknowledge subsequently need not be disclosed. [Para 40][1160-D-F]

4. Thus, a proposer is under a duty to disclose to the insurerall material facts as are within his knowledge. The proposer ispresumed to know all the facts and circumstances concerningthe proposed insurance. Whilst the proposer can only disclosewhat is known to him, the proposer’s duty of disclosure is notconfined to his actual knowledge, it also extends to those materialfacts which, in the ordinary course of business, he ought to know.However, the assured is not under a duty to disclose facts whichhe did not know and which he could not reasonably be expectedto know at the material time. The second aspect of the duty ofgood faith arises in relation to representations made during thecourse of negotiations, and for this purpose all statements inrelation to material facts made by the proposer during the courseof negotiations for the contract constitute representations andmust be made in good faith. [Para 41][1160-F-H]

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A5. The basic rules to be observed in making a proposal forinsurance may be summarized as follows :

(a) A fair and reasonable construction must be put upon thelanguage of the question which is asked, and the answer givenwill be similarly construed. This involves close attention to theBlanguage used in either case, as the question may be so framedthat an unqualified answer amounts to an assertion by theproposer that he has knowledge of the facts and that theknowledge is being imparted. However, provided these canonsare observed, accuracy in all matters of substance will sufficeand misstatements or omissions in trifling and insubstantialCrespects will be ignored; (b) Carelessness is no excuse, unlessthe error is so obvious that no one could be regarded as misled.If the proposer puts ‘no’ when he means ‘yes’ it will not avail himto say it was a slip of the pen; the answer is plainly the reverse ofthe truth; (c) An answer which is literally accurate, so far as itDextends, will not suffice if it is misleading by reason of what is notstated. It may be quite accurate for the proposer to state that hehas made a claim previously on an insurance company, but theanswer is untrue if in fact he has made more than one; (d) Wherethe space for an answer is left blank, leaving the question un-answered, the reasonable inference may be that there is nothingEto enter as an answer. If in fact there is something to enter as ananswer, the insurers are misled in that their reasonable inferenceis belied. It will then be a matter of construction whether this is amere non-disclosure, the proposer having made no positivestatement at all, or whether in substance he is to be regarded asFhaving asserted that there is in fact nothing to state; (e) Wherean answer is unsatisfactory, as being on the face of it incompleteor inconsistent the insurers may, as reasonable men, be regardedas put on inquiry, so that if they issue a policy without any furtherenquiry they are assumed to have waived any further information.However, having regard to the inference mentioned in head (4)Gabove, the mere leaving of a blank space will not normally beregarded as sufficient to put the insurers on inquiry; (f) A proposermay find it convenient to bracket together two or more questionsand give a composite answer. There is no objection to his doing H

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so, provided the insurers are given adequate and accurateinformation on all points covered by the questions; (g) Any answergiven, however accurate and honest at the time it was writtendown, must be corrected if, up to the time of acceptance of theproposal, any event or circumstance supervenes to make itinaccurate or misleading. [Para 42] [1161-A-H; 1162-A-C]

Contra Proferentem Rule

6. The Contra Proferentem Rule has an ancient genesis.When words are to be construed, resulting in two alternativeinterpretations then, the interpretation which is against the personusing or drafting the words or expressions which have given riseto the difficulty in construction, applies. This Rule is often invokedwhile interpreting standard form contracts. Such contracts heavilycomprise of forms with printed terms which are invariably usedfor the same kind of contracts. Also, such contracts are harshlyworded against individuals and not read and understood mostoften, resulting in grave legal implications. When such standardform contracts ordinarily contain exception clauses, they areinvariably construed contra proferentem rule against the personwho has drafted the same. [Para 44][1162-F-H]

7. On a consideration of the aforesaid judgments, thefollowing principles would emerge: (i) There is a duty or obligationof disclosure by the insured regarding any material fact at thetime of making the proposal. What constitutes a material factwould depend upon the nature of the insurance policy to be taken,the risk to be covered, as well as the queries that are raised inthe proposal form; (ii) What may be a material fact in a case wouldalso depend upon the health and medical condition of theproposer; (iii) If specific queries are made in a proposal formthen it is expected that specific answers are given by the insuredwho is bound by the duty to disclose all material facts; (iv) If anyquery or column in a proposal form is left blank then the insurancecompany must ask the insured to fill it up. If in spite of any columnbeing left blank, the insurance company accepts the premiumand issues a policy, it cannot at a later stage, when a claim ismade under the policy, say that there was a suppression or non- AB

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Adisclosure of a material fact, and seek to repudiate the claim; (v)The insurance company has the right to seek details regardingmedical condition, if any, of the proposer by getting the proposerexamined by one of its empanelled doctors. If, on the considerationof the medical report, the insurance company is satisfied aboutthe medical condition of the proposer and that there is no risk ofBpre-existing illness, and on such satisfaction it has issued thepolicy, it cannot thereafter, contend that there was a possible pre-existing illness or sickness which has led to the claim being madeby the insured and for that reason repudiate the claim; (vi) Theinsurer must be able to assess the likely risks that may ariseCfrom the status of health and existing disease, if any, disclosed bythe insured in the proposal form before issuing the insurancepolicy. Once the policy has been issued after assessing themedical condition of the insured, the insurer cannot repudiatethe claim by citing an existing medical condition which wasdisclosed by the insured in the proposal form, which conditionDhas led to a particular risk in respect of which the claim has beenmade by the insured; (vii) In other words, a prudent insurer hasto gauge the possible risk that the policy would have to coverand accordingly decide to either accept the proposal form andissue a policy or decline to do so. Such an exercise is dependantEon the queries made in the proposal form and the answer to thesaid queries given by the proposer. [Para 52][1172-A-G]

8. The respondent insurance company could not haverepudiated the policy on the ground that acute myocardialinfraction suffered by the appellant on landing at San Francisco,FUSA was a “pre-existing and related complication” which wasexcluded under the policy. The insurer was informed about thepre-existing condition of the appellant, namely, diabetes mallitus-II and it was for insurer to gauge a related complication underthe policy as a prudent insurer and then issue the policy whensatisfied. In the absence of the same, the treatment availed byGthe appellant for acute myocardial infraction in USA could nothave been termed as a direct offshoot of hyperlipidaemia anddiabetes mellitus so as to be labelled as a pre-existing disease orillness which the appellant suffered from and had not disclosedthe same. At any rate, the appellant had in the proposal formH

disclosed that he was suffering from diabetes mellitus-II and forwhich the medical test reports were submitted along with theproposal form which were considered by the insurance companybefore the policy was issued to the appellant. In fact, the appellantstated in his representation dated 16[th] November, 2009, againstthe repudiation of the policy that he was taking lipid-loweringmedicines not because he was suffering from hyperlipidaemia butas it was customary to take such medication for prevention ofcardio-vascular complications in diabetics. He also stated thathe had informed the physician, who examined him prior toobtaining the policy, of the medicines he had been taking.Therefore, the insurance company was well aware of the fact thatthe insured was a diabetic and was taking all necessary medicationfor preventing further complications and controlling the disease.Hence in view of this Court, there was no suppression of anymaterial fact by the appellant to the insurer. [Para 66][1177-H;1178-A-E]

10. Further on the disclosures made by the appellant withregard to his existing disease, namely diabetes mellitus-II, theinsurance company considered the same and issued the policy inquestion to the appellant. The respondent insurance company asa prudent insurer considered the details given by the appellantin the proposal form and issued the policy. The insurance companydid not think that the medical and health condition of the appellantwas such which did not warrant issuance of a mediclaim policy.The insurance company therefore did not decline the proposal ofthe assured as a prudent insurer. [Para 67][1178-F-G]

11. Therefore, the respondents were not right in statingthat as per the terms and conditions of the policy “all thecomplications arising out of pre-existing condition is not payable.”As already noted, acute myocardial infraction can occur in a personwho has no history of diabetes mellitus-II. One of the risk factorsfor the aforesaid cardiac episode is diabetes mellitus-II. The factthat the appellant had diabetes mellitus-II was made known tothe insurance company. Therefore, it is observed that anycomplication which would arise from diabetes mellitus-II was alsowithin the consideration of the insurer. Despite the aforesaid factsregarding the medical record of the insured, the insurance AB

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Acompany decided to issue the policy to the appellant. The aforesaidclause has to be read against the respondent insurer by applyingthe contra proferentem rule against it. Otherwise, the very contractof insurance would become meaningless in the instant case.Hence, in considered view of this Court, the respondent-insurancecompany was not right in repudiating the policy in question.B[Para 68][1178-G-H; 1179-A-C]

General Assurance Society Ltd., v. Chandmull Jain AIR1966 SC 1644; Delhi Development Authority v. DurgaChand Kaushish AIR 1973 SC 2609; Md. KamgarhShah v. Jagdish Chandra AIR 1960 SC 953; UnitedCIndia Insurance Co. Ltd. v. Orient Treasures (P) (2016)3 SCC 49 : [2016] 1 SCR 1; Central Bank of India v.Hartford Fire Insurance Co. Ltd. AIR 1965 SC 1288;Sushilaben Indravadan Gandhi v. New India AssuranceCo. Ltd. (2021) 7 SCC 151 : 2020 (4) JT 539 – reliedDon.

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Satwant Kaur Sandhu v. New India Assurance Co.(2009) 8 SCC316 : [2009] 10 SCR 560; Canara Bankv. United India Insurance Co. (2020) 3 SCC 455 : 2020(3) SCALE 228;Oriental Insurance Co Ltd. v. MahendraConstruction (2019) 18 SCC 209; LIC of India v. Smt.G.M. Channabasamma (1991) 1 SCC 357 : 1991 ( 5)JT 73; Canara Bank v. United India Insurance Co.(2020) 3 SCC 455: 2020 (3) SCALE 228; Hari OmAgarwal v. Oriental Insurance Co. 2007 (98) DRJ 246;Sushilaben Indravadan Gandhi and Ors. v. The NewIndia Assurance Co. Ltd. and Ors. (2021) 7 SCC 151 :2020 (4) JT 539; Export Credit Guarantee Society v.Garg Sons International (2014) 1 SCC 686 : [2013] 1SCR 336; Satwant Kaur Sandhu v. New IndiaAssurance Co. (2009) 8 SCC 316 : [2009] 10 SCR 560;LIC of India v. Smt. G.M. Channabasemma (1991) 1SCC 357 : 1991 (5) JT 73; Canara Bank v. UnitedIndia Insurance Co. (2020) 3 SCC 455 : 2020 (3)SCALE 228; Reliance Life Insurance v. RekhabenNareshbhai Rathod, (2019) 6 SCC 175: [2019] 6 SCR733; Life Insurance Corporation of India v. Manish E

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Gupta, (2019) 11 SCC 371; Branch Manager BajajAllianz Life Insurance Co. v. Dalbir Kaur AIR 2020SC 5210; Sulbha Prakash Motegaonkar and Ors. v.Life Insurance Corporation of India, Civil Appeal No.8245/2015; Meenakshi Saxena & Anr. Vs. ECGCLimited (formerly known as Export Credit GuaranteeCorporation of India Limited) & Anr. – (2018) 7 SCC479 : [2018] 5 SCR 421 – referred to.

Carter v. Boehm (1766) 3 Burr 1905; Reynolds v.Phoenix Assurance Co. Ltd. (1978) 2 Lloyd’s Rep. 440– referred to.

Halsbury’s Laws of England, Fourth Edition, Para 375,Vol.25: Insurance; MacGillivray on Insurance Law (9[th]Edition, Sweet and Maxwell London, 1997 at p.280);Colinvaux’s Law of Insurance (6[th] Edi., 1990 at p.42)– referred to.

Case Law Reference

[2009] 10 SCR 560referred toPara 12[2016] 1 SCR 1relied onPara 45 (e)[2013] 1 SCR 336referred toPara 45 (f)[2009] 10 SCR 560referred toPara 50 (i)[2019] 6 SCR 733referred toPara 50 (ii)[2018] 5 SCR 421referred toPara 71 (ii)

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8386of 2015.

From the Judgment and Order dated 22.05.2015 of the NationalConsumer Disputes Redressal Commission, New Delhi in ConsumerComplaint No.92 of 2010.

Gopal Sankaranarayanan, Sr. Adv., Ms. Zehra Khan, ShrutanjayaBhardwaj, Ms. Shreya Choudhary for M/s Law Associates, Advs. forthe Appellant.

Ms. Sunaina Phul, Mohit Paul, Advs. for the Respondents.

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AThe Judgment of the Court was delivered byNAGARATHNA J.

1. This appeal assails order dated 22[nd] May, 2015, passed by theNational Consumer Disputes Redressal Commission (hereinafter referredto as “the Commission” for brevity) in Consumer Complaint No. 92/B2010 by which the complaint filed by the appellant was dismissed.

2. The facts in a nutshell are that the appellant had sought anoverseas mediclaim policy- B (hereinafter referred to as “mediclaimpolicy”) as he intended to travel to the United States of America (“USA”)to attend the wedding of his sister-in-law’s daughter. The appellant wasCmedically examined at the instance of respondent No. 1 insurancecompany prior to the consideration of his request for issuance of amediclaim policy. On his medical examination, the report categoricallynoted that the appellant had diabetes-type II (also known as diabetesmellitus). No other adverse medical condition was found.

D3. In the medical exam report, a specific query was sought as towhether any abnormalities were observed in the electrocardiogram testof the appellant. There was another query regarding any possible illnessor disease for which the appellant may require medical treatment in theensuing trip to the USA. To both these queries, Dr. Jitendra Jain, thedoctor who examined the appellant had answered “normal” and “no”Erespectively. The representative of the respondent insurer on receipt ofthe medical reports assured the appellant that on verification of the samethe policy would be issued.

4. The insurer thereafter accepted the proposal form and issuedthe Overseas Mediclaim Business and Holiday Policy bearing PolicyFNumber 190100/46/09/ 44/70000008 valid from 19[th] May, 2009 to 1[st]June, 2009, to the appellant. Thereafter, the appellant boarded a flight toSan Francisco, USA on 19[th] May, 2009 at around 1:00 a.m. from Delhiairport and reached San Francisco on the same day at around 2:00 p.m.(local time). On exiting the customs section at San Francisco airport,appellant felt weak and started sweating. His wife got him admitted atGthe SFO Medical Centre at San Francisco airport and after he receivedinitial medical treatment, he was shifted to the Mills Peninsula MedicalCentre (hereinafter referred to as “Medical Centre” for the sake ofbrevity) where angioplasty was performed on the appellant on 19[th] May,2009 and 22[nd] May and three stents were inserted to remove the blockageHfrom the heart vessels.

5. In order to avail the benefit under the mediclaim policy,appellant’s son-in-law contacted M/s Corris International, a foreigncollaborator of respondent No. 1 and 2, which was to provide emergencyassistance and claims administration services to the insured. M/s CorrisInternational sought certain documents regarding details of treatmentgiven by the Medical Centre as well as details of the mediclaim policyfor the purpose of considering the same for indemnifying the appellant.The appellant was discharged on 24[th] May, 2009.

6. Two and a half months thereafter, appellant started receivingbills from the cardio vascular wing of the Medical Centre and SFOMedical Centre towards the treatment he received at their facility. On19[th] August, 2009, the appellant sent a letter annexing all bills in originalas well as the discharge summary to the Divisional Manager ofrespondent No. 1 at their Bhopal office. The same letter was also sentto respondent No. 2.

7. On 22[nd] August, 2009, appellant received a letter fromrespondent No. 2 stating that his claim had been repudiated as the appellanthad a history of hyperlipidaemia and diabetes and the policy did notcover per-existing conditions and complications arising therefrom. Thesaid repudiation was with regard to Bill No.1 i.e. the bill raised by theMedical Centre for USD 2,29,719. The appellant protested against therepudiation and requested his claim to be settled on a priority basis asthe Medical Centre and the other centre in the USA where he had takentreatment had started pressing for release of payment. In this regard arepresentation was sent on 16[th] November, 2009. However, by its letterdated 9[th] April, 2010, respondent No.1 reiterated its repudiation of theclaim made by the appellant.

8. Being aggrieved, the appellant filed a complaint under Section21 (9) of the Consumer Protection Act, 1986 (hereinafter referred to as“Act” for brevity) against the respondents, being Consumer ComplaintNo.92/2010 before the Commission. A reply was filed to the complaintby respondent No.1 stating that appellant’s claim was rightly rejected byrespondent No.2 on the ground of non-disclosure of a pre-existing diseaseas the treatment report of the appellant showed prior medication such asstatins, which is a lipid lowering medicine. The said reply was filed on 3[rd]March, 2011. Respondent No.2 also filed its reply on 27[th] April, 2011.Appellant filed his rejoinder to the replies of the respondents in August,2011. Appellant also filed an additional affidavit enclosing medical opinionsof three doctors on affidavit stating that prescription of statins to a person A

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Ahaving diabetes-type II is by way of precaution and not because thepatient would be suffering from any cardiovascular disease. RespondentNo. 1 and 2 filed their evidence by way of affidavit and thereafter writtensubmissions were filed by both sides. Subsequently, the Commissiondismissed the complaint filed by the appellant on the ground of non-disclosure of material facts. Hence this appeal by the claimant. B9. Before proceeding further, it would be useful to encapsulatethe reasoning of the Commission for dismissing the complaint filed bythe appellant herein, as under:

(i) The Commission concluded that the complainant had ahistory of hyperlipidaemia and peptic-ulcer disease inCaddition to diabetes mellitus. Since this was disclosed bythe complainant to medical authorities in the USA, theCommission found that there was no reason why he couldnot have disclosed the condition to the respondent- insurancecompany at the time of obtaining the mediclaim policy.

D(ii)That statins are lipid lowering agents which are foundbeneficial in primary and secondary prevention of cardio-vascular complications in diabetics. Given that thecomplainant had admitted that he had been under statinmedication, it was found that he had a pre-existing diseaseof which disclosure had not been made.E

(iii) The Commission held that it was the duty of the complainantto have ensured that complete facts about his healthcondition were brought to the knowledge of the insurancecompany at the time of obtaining the insurance policy. Thecomplainant breached this duty of disclosure and acted in aFmanner contrary to the principle of ‘uberima fides’ betweenthe insurer and the insured.

(iv) Having regard to general condition 10 of the policy, theCommission found that for any sickness for which insuredhad sought advice or had taken medical treatment even atthe time of issuance of policy, the insured was not entitledGto claim benefit under the policy owing to the “pre-existingexclusion” under the policy.

(v) The Commission held that concealment or non-disclosureof material facts regarding pre-existing heart ailment wasa valid ground for repudiation of the insurance claim by theHrespondent - Insurer.

10. We have heard Mr. Gopal Sankarnarayanan, learned SeniorCounsel along with Ms. Zehra khan, learned counsel, for the appellantand Ms. Sunaina Phul, learned counsel for respondent No.1 and perusedthe material on record.

11. Learned Senior Counsel for appellant submitted that theappellant was about 55 years of age when he and his wife travelled toSan Francisco, USA to attend the wedding of his sister-in-law’s daughter.Appellant was issued overseas mediclaim policy by respondent No.1after undergoing the requisite medical tests namely: 1) Blood sugar test,2) Urine examination 3) Electrocardiogram test. Dr. Jitendra Jain,Assistant Professor in the Department of Medicine, Peoples’ MedicalCollege, Bhopal, examined the appellant and answered the medicalquestionnaire as provided in the proposal form. The mediclaim policy,issued to the appellant was for the period between 19[th] May, 2009 and1[st] June, 2009 and was subsequently extended to 21[st] June, 2009. Thepolicy in question contained the nature of coverage and excluded pre-existing conditions as defined in general condition 10. That on boardingthe flight to San Francisco from Delhi airport on 19[th] May, 2009, theappellant travelled in good health and was fit on the flight. It is only onarrival at San Francisco airport that the appellant felt weak and wasadmitted to the SFO Medical Centre for preliminary treatment and waslater shifted to the Medical Centre. The appellant availed the treatmentfor which the charges were USD 2,41,932, approximately Rs. 1,08,86,940at Rs.45 per USD. Since the respondent insurer erroneously repudiatedthe claim made by the appellant, the consumer complaint was filed beforethe Commission. The Commission by its order dated 22[nd] May, 2015,without appreciating the case of the appellant in its true perspective,dismissed the complaint on the ground that appellant had not disclosedtrue and complete information about his health while taking the policyand therefore the repudiation clause applied.

12. It was contended by learned Senior Counsel along with learnedcounsel for the appellant that the repudiation of the contract on the groundof suppression of pre-existing disease by appellant was wholly erroneous.Our attention was drawn to the fact that respondent No.1 had repudiatedthe claim on the premise that the appellant was suffering fromhyperlipidaemia at the time of seeking the insurance policy and in facthad been prescribed statins, which fact had not been disclosed to theinsurer. It was contended that the appellant had no knowledge that hewas suffering from hyperlipidaemia at the time of submission of the A

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Aproposal form. The obligation to disclose any fact extends only when thesaid fact is known to the appellant but not otherwise. In support of thissubmission, reliance was placed on Satwant Kaur Sandhu v. New IndiaAssurance Co. - (2009) 8 SCC 316. In fact, the proposal form itselfstipulates that it should be completed to the best of the insured’s“knowledge and belief”. The appellant had stated that he was not sufferingBfrom hyperlipidaemia and that the same was diagnosed for the first timeon 19[th] May, 2009 at the Medical Centre in San Francisco. The doctorhad noted “hyperlipidaemia”, under the column “IMPRESSION”, afterexamining the appellant on 21[st] May, 2009, but the same did not find aplace under “discharge diagnosis” issued to the appellant on 24[th] May,C2009. There was no intention to suppress any material fact by the appellantat the time of filling the proposal form as the appellant had no knowledgethat he was suffering from hyperlipidaemia as on 15[th] May, 2009, whenthe proposal form was filled by him.

13. It was next contended that the proposal form was worded inDsuch a manner that there was no specific query which could have led tothe appellant disclosing that he was suffering from hyperlipidaemia. Thisargument was made as an alternative submission on the assumption thatthe appellant had in fact knowledge that he was suffering fromhyperlipidaemia at the time of filling up of proposal form seeking insurancepolicy.E

14. It was further contended that the proposal form and theinsurance policy did not define the terms “pre-existing disease,” “pre-existing ailment,” “pre-existing condition”, ”disease” or “illness.” Thatquery number 2 of part 2 dealing with “medical history” in the proposalform namely “have you ever suffered from any illness or disease upFto the date of making this proposal”, was too vague and the appellantleft the column blank. Failure to fill in all the queries in the proposal formcannot be termed as suppression or misdeclaration vide Canara Bankv. United India Insurance Co. - (2020) 3 SCC 455.

15. Further, question number 5 which read, “Have you everGsuffered from any illness or disease or had any accident prior tothe first day of insurance” is also overarching as no person can answersuch a question in the negative. Every person to whom a mediclaimpolicy is offered, would have, at some point of time, suffered from somedisease or illness but for the same to be considered as a pre-existingHdisease, ailment, condition or illness on which ground a claim could be repudiated, there is need for a specific definition to be incorporated inthe policy. This is because every disease or illness cannot be consideredas a pre-existing disease or condition so as to exclude the benefit of thepolicy to a policy holder. According to the learned Senior Counsel for theappellant, the nature of a disease or illness which would exclude a policyholder or an insured from the benefits of the said policy must be clearlymentioned in the policy itself. The same cannot be vague or non-specificso as to enable the insurer to interpret the policy to its benefit whenevera claim is made under the mediclaim policy.

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16. It was submitted that for an insurer to repudiate the policy itmust establish suppression or a misrepresentation of material facts onthe part of the insured vide Oriental Insurance Co Ltd. v. MahendraConstruction - (2019) 18 SCC 209 and LIC of India v. Smt. G.M.Channabasamma - (1991) 1 SCC 357. In order to repudiate the policy,the insurance company was also required to prove the following:

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(a) That the heart attack suffered by the appellant on 19[th] May,D2009 was caused by diabetes mellitus-type II andhyperlipidaemia, (b)That hyperlipidaemia was a “pre-existing condition,”

(c) That this fact was known to the appellant and wassuppressed by him at the time of filling up the proposal form,Ei.e. on 15[th] May, 2009.

17. Instead, respondent insurer only denied that the acute coronarysyndrome for which the complainant-appellant herein had to be treatedat the Medical Centre was a sudden and unexpected sickness. Therespondents, on the other hand, found that a past history of diabetesmellitus and hyperlipidaemia were the main causes for the cardiovascularailment for which the insured was treated. In support of this stand, theinsurer filed only an affidavit of evidence of its panel doctor, Dr. P.R.Purandare, which merely opined- “It is obvious that the insured wassuffering from diabetes mellitus and hyperlipidaemia. Also, he wastaking medications for the same.”

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18. There was no evidence let in by the respondents to show thatthe pre-existing condition of diabetes mellitus- type II was the cause forthe heart attack suffered by the appellant on 19[th] May, 2009 or that theappellant had any pre-existing heart related illness, disease or condition.

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A19. It was further urged that the appellant had filed dischargesummary notes of the doctors at the Medical Centre where he wastreated for the period between 19[th] May, 2009 and 24[th] May, 2009 and aperusal of the said documents would indicate that the appellant was“without prior coronary history.” That from the discharge summary notesper se, there can be no proof of the appellant suffering fromBhyperlipidaemia as on 15[th] May, 2009 when he filled the proposal formor that the same was a pre-existing condition. That in fact, the dischargesummary indicated the “discharge diagnosis” given to the appellant on24[th] May, 2009 which only mentioned: (a) Acute anterior wall myocardial infraction with congestive heart, C

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(b) Diabetes-type II.

20. That the respondent failed to prove that the heart attack sufferedby the appellant on 19[th] May, 2009 was caused by diabetes mellitus-type II and hyperlipidaemia. That appellant had disclosed that he was adiabetic and was on medication and the tests done for the same showedDgood results. It was submitted that the respondent further failed to provethat the appellant was suffering from hyperlipidaemia at the time offilling the proposal form and had made a false representation andsuppressed material facts. E21. Referring to the specific terms of the insurance policy, it wascontented by the learned Senior Counsel for appellant that an insurancepolicy should be given a purposive interpretation in favour of the insured-appellant herein. The insurance policy and its components must be readas a whole and given a meaning which furthers the expectations ofparties and also of the realities of the insurance business vide CanaraFBank v. United India Insurance Co. - (2020) 3 SCC 455. Further,the exemption of liability clauses in insurance contracts are to beconstrued contra proferentem, in favour of the insured in case ofambiguity vide Sushilaben Indravadan Gandhi v. New IndiaAssurance Co. Ltd. - (2021) 7 SCC 151. Reliance was also placed onGHari Om Agarwal v. Oriental Insurance Co. - 2007 (98) DRJ 246wherein the Delhi High Court found that repudiation of a claim towardstreatment for a heart attack on the ground of pre-existing ailment ofdiabetes, which was disclosed, was illegal because the object of theinsurance policy was to “cater to medical expenses incurred by theassured” and therefore the exclusion clause could be overridden in lightHof the object.

22. It was contended by learned Senior Counsel for the appellantthat the insurance company had failed to prove that the appellant hadsuppressed any material fact which was in his knowledge at the time offilling the proposal form and that the heart attack suffered by the appellanton 19[th] May, 2009 arose “out of a pre-existing condition” and wastherefore outside the purview of the insurance policy.

23. As opposed to the aforesaid arguments, learned counsel forrespondent No.1 supported the repudiation of the policy by the insurerand the dismissal of the complaint by the Commission on grounds ofmisrepresentation and non-disclosure of material facts in the proposalform, by the appellant insured. It was submitted that had the appellantdisclosed that he was suffering from hyperlipidaemia which was anexisting disease as on the date of the making of the proposal, the insurermay not have issued the mediclaim policy to him. The insured thereforedid not disclose this vital fact and had not answered the column relatedto illness or disease suffered by him up to the date of the filling up of theproposal form. It was contended that there was a specific clause in theschedule of the policy under the heading “important” to the followingeffect :

“Notwithstanding anything stated in the policy, it is herebyagreed that all claims occasioned by, happening through orin consequence of any disease which is existing on the dateof commencement of risk, whether specifically declared ornot, the proposal form completed by the insured, is excludedfrom the scope of the policy.”

24. It was also necessary that the policy form had to be completeddisclosing all material facts and failure to do so could nullify the policyitself.

25. It was contended by learned counsel for respondent No. 1that the medical history which was suppressed by the appellant in theproposal form required to be filled up by him prior to the issuance of thepolicy, was in fact disclosed to the doctors in USA where he was giventreatment, by stating that he was prescribed statins which is for thepurpose of controlling/treating hyperlipidaemia. In sum and substance,the submission was that the non-disclosure or the failure to disclose thepast medical history relating to a pre-existing medical condition in theproposal form was a good reason to repudiate the policy. This aspect A

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Awas rightly appreciated by the Commission and consequently theCommission dismissed appellant’s complaint, which Order would notcall for any interference in this appeal.

26. Learned counsel for the respective parties have relied uponcertain judgments of this Court in support of their submissions, whichBshall be referred to later.

Points for consideration

27. Having regard to the submissions of the learned Senior Counseland learned counsel for the respective sides, the following points wouldCarise for our consideration:

(i) Whether the appellant herein had suppressed or notdisclosed material facts in the proposal form which couldhave led the insurer to repudiate the policy in question?

D(ii)Whether the Commission was justified in dismissing thecomplaint?

(iii) What Order?

28. The fact that a policy namely, Overseas Mediclaim Policy-B,was issued by the respondent insurance company to the appellant is notEin dispute. The appellant intended to travel to USA to attend his sister-in-law’s daughter’s wedding which was to take place in May, 2009.Consequently, the appellant sought an overseas mediclaim policy. Dr.Jitendra Jain, the doctor who examined the appellant prior to issuance ofthe policy noted as per Annexure A-2 that the appellant had diabetesFmellitus-II (DM-2) which was controlled on drugs. There was no mentionof any past history of any disease, operation, accident, investigation etc.An electrocardiogram test (ECG) was taken and the doctor noted thesame as “normal.” The doctor further noted that there was no currentillness or disease which would possibly require medical treatment duringthe proposer’s (appellant’s) forthcoming trip. The doctor did notGrecommend any stress test. It was also found that in the blood and urinetests of the appellant there was no trace of sugar. The serum glucose/fasting test result showed 92%, which was well within the normal valuesi.e. between 70-110 mgs %. The urine examination also did not revealany abnormality. Thereafter the appellant was requested to fill up theHproposal form.

29. Before we proceed, it is necessary to discuss two aspects ofthe matter which give rise to the controversy in the present appeal. Thefirst is what may be expressed in the legal maxim uberrimae fidei orthe principle of good faith and the corresponding principle of disclosureof all material facts by the parties to an insurance policy. The secondprinciple is expressed in the contra proferentem rule.

Uberrimae Fidei

30. It is observed that insurance contracts are special contractsbased on the general principles of full disclosure inasmuch as a personseeking insurance is bound to disclose all material facts relating to therisk involved. Law demands a higher standard of good faith in mattersof insurance contracts which is expressed in the legal maxim uberrimaefidei.

31. Mac Gillivray on insurance law 13th Ed. has summarised theduty of an insured to disclose as under:

“...the assured must disclose to the insurer all facts materialto an insurer’s appraisal of the risk which are known ordeemed to be known by the assured but neither known nordeemed to be known by the insurer. Breach of this duty by theassured entitles the insurer to avoid the contract of insuranceso long as he can show that the non-disclosure induced themaking of the contract on the relevant terms.”

32. Lord Mansfield in Carter v. Boehm (1766) 3 Burr 1905has summarised the principles necessitating disclosure by the assured inthe following words:

“Insurance is a contract of speculation. The special factsupon which the contingent chance is to be computed lie mostcommonly in the knowledge of the assured only; theunderwriter trusts to his representation, and proceeds uponconfidence that he does not keep back any circumstance inhis knowledge to mislead the underwriter into a belief thatthe circumstance does not exist. The keeping back suchcircumstance is a fraud, and therefore the policy is void.Although the suppression should happen through mistake,without any fraudulent intention, yet still the underwriter isdeceived and the policy is void; because the risk run is reallydifferent from the risk understood and intended to be run at A

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Athe time of the agreement. The policy would be equally voidagainst the underwriter if he concealed...Good faith forbidseither party, by concealing what he privately knows, to drawthe other into a bargain from his ignorance of the fact, andhis believing the contrary.”

BThe aforesaid principles would apply having regard to the natureof policy under consideration, as what is necessary to be disclosed are“material facts” which phrase is not definable as such, as the samewould depend upon the nature and extent of coverage of risk under aparticular type of policy. In simple terms, it could be understood that anyfact which has a bearing on the very foundation of the contract ofCinsurance and the risk to be covered under the policy would be a “materialfact”.

33. Under the provisions of Insurance Regulatory andDevelopment Authority (Protection of Policyholders’ Interests)Regulations,2002 the explanation to Section 2 (d) defining “proposal form”Dthrows light on what is the meaning and content of “material.” For aneasy reference the definition of “proposal form” along with the explanationunder the aforesaid Regulations has been extracted as under:

“2. Definitions.—In these regulations, unless the contextotherwise requires-E

(d) “Proposal Form” means a form to be filled in by theproposer for insurance, for furnishing all material informationrequired by the insurer in respect of a risk, in order to enablethe insurer to decide whether to accept or decline, toundertake the risk, and in the event of acceptance of theFrisk, to determine the rates, terms and conditions of a coverto be granted.

Explanation: “Material” for the purpose of these regulationsshall mean and include all important, essential and relevantinformation in the context of underwriting the risk to beGcovered by the insurer.”

Thus, the Regulation also defines the word “material” to meanand include all “important”, “essential” and “relevant” information in thecontext of guiding the insurer in deciding whether to undertake the riskor not.H

34. Just as the insured has a duty to disclose all material facts, theinsurer must also inform the insured about the terms and conditions ofthe policy that is going to be issued to him and must strictly conform tothe statements in the proposal form or prospectus, or those made throughhis agents. Thus, the principle of utmost good faith imposes meaningfulreciprocal duties owed by the insured to the insurer and vice versa. Thisinherent duty of disclosure was a common law duty of good faith originallyfounded in equity but has later been statutorily recognised as noted above.It is also open to the parties entering into a contract to extend the duty orrestrict it by the terms of the contract.

35. The duty of the insured to observe utmost good faith is enforcedby requiring him to respond to a proposal form which is so framed toseek all relevant information to be incorporated in the policy and to makeit the basis of a contract. The contractual duty so imposed is that anysuppression or falsity in the statements in the proposal form would resultin a breach of duty of good faith and would render the policy voidableand consequently repudiate it at the instance of the insurer.

36. In relation to the duty of disclosure on the insured, any factwhich would influence the judgment of a prudent insurer and not aparticular insurer is a material fact. The test is, whether, thecircumstances in question would influence the prudent insurer and notwhether it might influence him vide Reynolds v. Phoenix AssuranceCo. Ltd. (1978) 2 Lloyd’s Rep. 440. Hence the test is to be of aprudent insurer while issuing a policy of insurance.

37. The basic test hinges on whether the mind of a prudent insurerwould be affected, either in deciding whether to take the risk at all or infixing the premium, by knowledge of a particular fact if it had beendisclosed. Therefore, the fact must be one affecting the risk. If it has nobearing on the risk it need not be disclosed and if it would do no morethan cause insurers to make inquiries delaying issue of the insurance, itis not material if the result of the inquiries would have no effect on aprudent insurer.

38. Whether a fact is material will depend on the circumstances,as proved by evidence, of the particular case. It is for the court to rule asa matter of law, whether, a particular fact is capable of being materialand to give directions as to the test to be applied. Rules of universalapplication are not therefore to be expected, but the propositions set outin the following paragraphs are well established :

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1160SUPREME COURT REPORTS

A(a) Any fact is material which leads to the inference, in thecircumstances of the particular case, that the subject matter ofinsurance is not an ordinary risk, but is exceptionally liable to beaffected by the peril insured against. This is referred to as the‘physical hazard”.

B(b) Any fact is material which leads to the inference that theparticular proposer is a person, or one of a class of persons, whoseproposal for insurance ought to be subjected at all or accepted ata normal rate. This is usually referred to as the ‘moral hazard’.

The materiality of a particular fact is determined by theCcircumstances of each case and is a question of fact.

39. If a fact, although material, is one which the proposer did notand could not in the particular circumstances have been expected toknow, or if its materiality would not have been apparent to a reasonableman, his failure to disclose it is not a breach of his duty.

D40. Full disclosure must be made of all relevant facts and mattersthat have occurred up to the time at which there is a concluded contract.It follows from this principle that the materiality of a particular fact isdetermined by the circumstances existing at the time when it ought tohave been disclosed, and not by the events which may subsequentlyEtranspire. The duty to make full disclosure continues to apply throughoutnegotiations for the contract but it comes to an end when the contract isconcluded; therefore, material facts which come to the proposer’sknowledge subsequently need not be disclosed.

41. Thus, a proposer is under a duty to disclose to the insurer allFmaterial facts as are within his knowledge. The proposer is presumed toknow all the facts and circumstances concerning the proposed insurance.Whilst the proposer can only disclose what is known to him, the proposer’sduty of disclosure is not confined to his actual knowledge, it also extendsto those material facts which, in the ordinary course of business, heought to know. However, the assured is not under a duty to discloseGfacts which he did not know and which he could not reasonably beexpected to know at the material time. The second aspect of the duty ofgood faith arises in relation to representations made during the course ofnegotiations, and for this purpose all statements in relation to materialfacts made by the proposer during the course of negotiations for thecontract constitute representations and must be made in good faith.H

42. The basic rules to be observed in making a proposal forinsurance may be summarized as follows :

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(a) A fair and reasonable construction must be put upon thelanguage of the question which is asked, and the answergiven will be similarly construed. This involves close attentionto the language used in either case, as the question may beBso framed that an unqualified answer amounts to anassertion by the proposer that he has knowledge of the factsand that the knowledge is being imparted. However,provided these canons are observed, accuracy in all mattersof substance will suffice and misstatements or omissions inCtrifling and insubstantial respects will be ignored.

(b) Carelessness is no excuse, unless the error is so obviousthat no one could be regarded as misled. If the proposerputs ‘no’ when he means ‘yes’ it will not avail him to say itwas a slip of the pen; the answer is plainly the reverse ofthe truth.

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(c) An answer which is literally accurate, so far as it extends,will not suffice if it is misleading by reason of what is notstated. It may be quite accurate for the proposer to statethat he has made a claim previously on an insurancecompany, but the answer is untrue if in fact he has madeEmore than one.

(d) Where the space for an answer is left blank, leaving thequestion un-answered, the reasonable inference may be thatthere is nothing to enter as an answer. If in fact there issomething to enter as an answer, the insurers are misled inthat their reasonable inference is belied. It will then be amatter of construction whether this is a mere non-disclosure,the proposer having made no positive statement at all, orwhether in substance he is to be regarded as having assertedthat there is in fact nothing to state.

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(e) Where an answer is unsatisfactory, as being on the face ofit incomplete or inconsistent the insurers may, as reasonablemen, be regarded as put on inquiry, so that if they issue apolicy without any further enquiry they are assumed to havewaived any further information. However, having regard H

to the inference mentioned in head (4) above, the mereleaving of a blank space will not normally be regarded assufficient to put the insurers on inquiry.

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(f) A proposer may find it convenient to bracket together twoor more questions and give a composite answer. There isBno objection to his doing so, provided the insurers are givenadequate and accurate information on all points covered bythe questions.

(g) Any answer given, however accurate and honest at thetime it was written down, must be corrected if, up to thetime of acceptance of the proposal, any event orcircumstance supervenes to make it inaccurate ormisleading.

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[Source : Halsbury’s Laws of England, Fourth Edition,Para 375, Vol.25 : Insurance]D

43. Sometimes the standard of duty of disclosure imposed on theinsured could make the insured vulnerable as the statements in theproposal form could be held against the insured. Conversely, certainclauses in the policy of insurance could be interpreted in light of thecontra proferentem rule as against the insurer. In order to seek specificEinformation from the insured, the proposal form must have specificquestions so as obtain clarity as to the underlying risks in the policy,which are greater than the normal risks.

Contra Proferentem Rule

Contra Proferentem Rule

F44. The Contra Proferentem Rule has an ancient genesis. Whenwords are to be construed, resulting in two alternative interpretationsthen, the interpretation which is against the person using or drafting thewords or expressions which have given rise to the difficulty inconstruction, applies. This Rule is often invoked while interpretingstandard form contracts. Such contracts heavily comprise of forms withGprinted terms which are invariably used for the same kind of contracts.Also, such contracts are harshly worded against individuals and not readand understood most often, resulting in grave legal implications. Whensuch standard form contracts ordinarily contain exception clauses, theyare invariably construed contra proferentem rule against the personwho has drafted the same.H

45. Some of the judgments which have considered the contraproferentem rule are referred to as under :

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a)In General Assurance Society Ltd., v. Chandmull Jain -AIR 1966 SC 1644, it was held that where there is anambiguity in the contract of insurance or doubt, it has to beconstrued contra proferentem against the InsuranceBCompany.

b) In Delhi Development Authority v. Durga ChandKaushish - AIR 1973 SC 2609, it was observed:

“In construing a document one must have regard, not toCthe presumed intention of the parties, but to the meaningof the words they have used. If two interpretations ofthe document are possible, the one which would giveeffect and meaning to all its parts should be adoptedand for the purpose, the words creating uncertainty inthe document can be ignored.”D

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c)Further, in Central Bank of India v. Hartford FireInsurance Co. Ltd. AIR 1965 SC 1288, it was held:

“What is called the contra proferentem rule should beapplied and as the policy was in a standard form contractprepared by the insurer alone, it should be interpreted inEa way that would be favourable to the assured.”

d)In Md. Kamgarh Shah v. Jagdish Chandra AIR 1960SC 953, it was observed that where there is an ambiguity itis the duty of the court to look at all the parts of the documentto ascertain what was really intended by the parties. Buteven here the rule has to be borne in mind that the documentbeing the grantor’s document it has to be interpreted strictlyagainst him and in favour of the grantee.

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e)In United India Insurance Co. Ltd. v. Orient Treasures(P) (2016) 3 SCC 49 this Court quoted Halsbury’s lawsof England (5th Ed. Vol. 60, Para 105) on the ContraProferentem rule as under :

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“Contra proferentem rule.-Where there is ambiguity inthe policy the court will apply the contra proferentemrule. Where a policy is produced by the insurers, it is H

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their business to see that precision and clarity are attainedand, if they fail to do so, the ambiguity will be resolvedby adopting the construction favourable to the insured.Similarly, as regards language which emanates from theinsured, such as the language used in answer to questionsin the proposal or in a slip, a construction favourable tothe insurers will prevail if the insured has created anyambiguity. This rule, however, only becomes operativewhere the words are truly ambiguous; it is a Rule forresolving ambiguity and it cannot be invoked with a viewto creating a doubt. Therefore, where the words usedare free from ambiguity in the sense that, fairly andreasonably construed, they admit of only one meaning,the Rule has no application.”

f)Learned counsel for the appellant have relied uponSushilaben Indravadan Gandhi and Ors. v. The NewIndia Assurance Co. Ltd. and Ors. (2021) 7 SCC 151wherein it was observed that any exemption of liabilityclause in an insurance contract must be construed, in caseof ambiguity, contra proferentem against the insurer. Inthe said case reliance was placed on Export CreditGuarantee Society v. Garg Sons International (2014) 1SCC 686 wherein this court held as under:

“The insured cannot claim anything more than whatis covered by the insurance policy. “The terms of thecontract have to be construed strictly, withoutaltering the nature of the contract as the same mayaffect the interests of the parties adversely.” Theclauses of an insurance policy have to be read asthey are. Consequently, the terms of the insurancepolicy, that fix the responsibility of the insurancecompany must also be read strictly. The contract mustbe read as a whole and every attempt should be madeto harmonise the terms thereof, keeping in mind thatthe Rule of contra proferentem does not apply in caseof commercial contract, for the reason that a Clausein a commercial contract is bilateral and hasmutually been agreed upon.”

46. Delving on the facts of the case and on consideration of IMT-5 and IMT-16 of the comprehensive private car (B) policy with regardto the limitation of liability clause, it was observed that the contraproferentem rule applies in case of real ambiguity and if on a reading ofthe whole policy the meaning of the clauses of a contract are clear thereis no room for the application of the doctrine. On the facts of the saidcase, the appeal was allowed by holding that the insurance companywas liable to pay the entire amount claimed. The said case arose froman appeal against the order of the High Court of Gujarat wherein theCourt had directed that the liability of the insurer shall be limited to asum of Rs. 25,000/- and the remaining claim amount shall be payable bythe employer (hospital) of the deceased. Ambiguity arising with regardto the interpretation of the term ‘employee’ as appearing in the limitationof liability clause in the insurance contract was construed contraproferentem against the insurance company by holding that the deceasedwas not an employee of the hospital and that therefore, the entire liabilitywould lie upon the insurer. This Court, therefore, required the insurertherein to pay the entire claim amount to the wife of the deceased.

47. MacGillivray on Insurance Law (9th Ed., Sweet and MaxwellLondon, 1997 at p. 280) deals with the rule of Contra Proferentem asunder :

“The contra proferentem Rule of construction arises onlywhere there is a wording employed by those drafting theClause which leaves the court unable to decide by ordinaryprinciples of interpretation which of two meanings is the rightone. ‘One must not use the Rule to create the ambiguity - onemust find the ambiguity first.’ The words should receive theirordinary and natural meaning unless that is displaced by areal ambiguity either appearing on the face of the policy or,possibly, by extrinsic evidence of surrounding circumstances.”

48. Colinvaux’s Law of Insurance (6th Ed., 1990 at p. 42) haselucidated on the said rule in the following words:

“Quite apart from contradictory clauses in policies,ambiguities are common in them and it is often very uncertainwhat the parties to them mean. In such cases the Rule is thatthe policy, being drafted in language chosen by the insurers,must be taken most strongly against them. It is construedcontra proferentem, against those who offer it. In a doubtful A

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Acase the turn of the scale ought to be given against the speaker,because he has not clearly and fully expressed himself.Nothing is easier than for the insurers to express themselvesin plain terms. The assured cannot put his own meaning upona policy, but, where it is ambiguous, it is to be construed inthe sense in which he might reasonably have understood it. IfBthe insurers wish to escape liability under given circumstances,they must use words admitting of no possible doubt.”

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49. The aforesaid principles could be applied to the present casehaving regard to the nature of the policy in question i.e. a mediclaimpolicy, the specific queries in the proposal form and the answers theretoCgiven by the appellant in the context of the general and specific clausestherein.

50. But before entering upon the factual controversy in the instantcase, it would be useful to discuss the relevant judgments cited at theBar : D

(i) Learned Senior Counsel for appellant have relied upon thefollowing judgments in support of the claim of the appellant:-

a) Satwant Kaur Sandhu v. New India Assurance Co. (2009)8 SCC 316 :

In the said case the husband of the appellant therein hadEtaken a mediclaim policy provided by the respondent insurer thereinfor the period from 7[th] May, 1990 to 6[th] May, 1991. The appellanttherein suddenly fell ill and was admitted to a hospital in Ludhianaand thereafter to a health centre in Chennai where his conditiondeteriorated ultimately leading to his death on 26[th] December, 1990.FThe insurance company therein was informed about his deathand a claim for reimbursement was made. The respondent insurertherein made inquiries from Madras Institute of Nephrology(Health Centre) and obtained a certificate dated 6[th] May, 1992,stating that the deceased was a known case of “chronic renalfailure/diabetic nephropathy” and that the complainant was onGregular haemodialysis at his place leading to his death. Theinsurance company therein repudiated the claim. The core questionconsidered by this Court in the said case was whether the factthat the policy holder was suffering from chronic diabetes andrenal failure at the time of taking out the mediclaim policy was aHmaterial fact and therefore, on account of non-disclosure of this

fact in the proposal form, the respondent Insurance Companywas justified in law in repudiating the claim of the appellant therein.

This Court dealt with the concept of material fact andobserved at para 20 as under:

“20. The upshot of the entire discussion is that in aContract of Insurance, any fact which would influencethe mind of a prudent insurer in deciding whether toaccept or not to accept the risk is a “material fact”. Ifthe proposer has knowledge of such fact, he is obligedto disclose it particularly while answering questions inthe proposal form. Needless to emphasise that anyinaccurate answer will entitle the insurer to repudiatehis liability because there is clear presumption that anyinformation sought for in the proposal form is materialfor the purpose of entering into a Contract ofInsurance.”

Ultimately this Court held as under:

“21. Bearing in mind the aforestated legal position, wemay advert to the facts in hand. As noted earlier, theproposal form contained the following two questions:

Details of illness which may require treatment in the nearfuture; Details of treatment/surgical operation in the last twomonths.

Answers given by the proposer to the two questions were“Sound Health” and “Nil” respectively. It would bebeyond anybody’s comprehension that the insured wasnot aware of the state of his health and the fact that hewas suffering from diabetes as also chronic Renalfailure, more so when he was stated to be on regularhaemodialysis. There can hardly be any scope for doubtthat the information required in the afore- extractedquestions was on material facts and answers given tothose questions were definitely factors which would haveinfluenced and guided the respondent - InsuranceCompany to enter into the Contract of MediclaimInsurance with the insured.”

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Learned counsel for the respondent insurer has also reliedupon Satwant Kaur Sandhu supra and has emphasised on para20 of the said judgment extracted above.

It was observed that there was clear suppression of materialfacts relating to the health of the insured and that therefore, therespondent insurer was fully justified in repudiating the insurancecontract. But the aforesaid judgment is sought to be distinguishedby learned counsel for appellant.

(b) In LIC of India v. Smt. G.M. Channabasemma (1991) 1SCC 357, it was observed that there is an obligation upon theassured to disclose all material facts which may be relevant to theinsurer but after issuing a policy, the burden of proving that theinsured had made false representations and suppressed materialfacts is on the insurer. In the said case, it was held that thephysician’s statement did not lead to a conclusion that therespondent therein was influenced by a serious disease for a longtime. On consideration of the evidence led by the parties therein,it was observed that the insurer had failed to prove that the insuredwas suffering from diabetes or tuberculosis at the time of fillingup the proposals for the policies or that he had given any falseanswer in his statements or suppressed any material fact whichhe was under a duty to disclose. The finding of the Trial Courtthat the assured had committed fraud on the insurer while takingout the policies was reversed and the appeal was allowed.

(c) Canara Bank v. United India Insurance Co. (2020) 3 SCC455, is a case in which this Court held that if a column is leftblank, the insurance company should ask the insured to fill up thecolumn. If the insurance company while accepting the proposalform does not ask the insured to clarify any ambiguity then theinsurance company after accepting premium cannot urge that therewas a wrong declaration made by the insured. Leaving out a columnblank does not mean that there was a misdescription of facts. Tomake a contract void, the non-disclosure should be of some verymaterial fact. Therefore, the insurer therein was directed toindemnify the insured in the case. The judgment in Satwant KaurSandhu (supra) was distinguished and held not applicable in thiscase.

d) Hari Om Agarwal v. Oriental Insurance Co. 2007 (98)DRJ 246, is a decision on a mediclaim policy. In the said case, itwas held that the insured had suffered from diabetes as well ashypertension at the time of submission of the proposal. The insuredwas advised to undergo ECG which he did. Thereafter, theproposal was accepted and the cover note was issued. Clause4.1 of the policy therein came up for interpretation. It was observedthat hypertension and diabetes could lead to a host of ailmentssuch as stroke, cardiac disease, renal failure, liver disorder,depending upon various factors. Such ailments can equally arisein non-diabetics and those without hypertension. Giving acontextual interpretation to clause 4.1 of the policy, it was observedthat such an interpretation was necessary to avoid rendering amedical cover meaningless. Hence the main purpose rule waspressed into service by holding that clause 4.1 of the said policycould not be used to override the primary liability of the insurer.

(ii) The following citations were relied upon by learned counselfor respondent No. 1 in support of validity of the repudiationof the insurance claim:

a) Reliance Life Insurance v. Rekhaben Nareshbhai Rathod,(2019) 6 SCC 175, is a case where the insured therein, whileseeking a life insurance policy failed to disclose in the proposalform that he had earlier obtained another insurance cover for hislife, two months before obtaining the policy in question. The spouseof the assured therein submitted a claim under the terms of thepolicy after the death of the assured. The insurance companyrepudiated the claim on the ground of non-disclosure of the factthat insured had taken out another policy to insure his life beforeobtaining the policy in question. The State Commission found thatthe repudiation of claim was unjustified as the omission of theinsured to disclose a previous policy of insurance would not haveinfluenced the mind of a prudent insurer. The National Commissionaffirmed the findings of the State Commission. In an appeal beforethis Court, the decision of the National Commission was reversedand the Court allowed the claim to be repudiated by the insurer. Itwas held that the disclosure of the earlier cover was material toan assessment of the risk which was being undertaken by theinsurer. The duty of full disclosure required that no information ofsubstance or interest to the insurer be omitted or concealed.

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b) In Life Insurance Corporation of India v. Manish Gupta,(2019) 11 SCC 371, the respondent therein had obtained amediclaim policy from the appellant insurer. The proposal formsought disclosure of health details and medical information of theassured. With regard to the query as to whether the proposer/assured had suffered from any “cardio-vascular disease e.g.palpitations, heart attack, stroke, chest pain,” the assured answeredin the negative. The assured underwent a mitral valve replacementsurgery. A claim for treatment expenses was made by the hospitalwhere treatment was administered and the said claim wasrepudiated by the insurer on the ground of non-disclosure of pre-existing cardiac condition. An appeal filed before this Court wasallowed. This Court, on consideration of documentary materialplaced before it found that the discharge card of the assuredrecorded his history of “rheumatic heart disease since childhood.”This Court therefore allowed the repudiation of claim by the insureron the ground that the assured had failed to disclose, at the timeof seeking the mediclaim policy, that he had suffered fromrheumatic heart disease since childhood.

51. We have also considered the following judgments :

51. We have also considered the following judgments :

c) In Branch Manager Bajaj Allianz Life Insurance Co. v.Dalbir Kaur - AIR 2020 SC 5210, a proposal form was submittedto the appellant therein for a life insurance policy containingquestions pertaining to the health and medical history of theproposer and required a specific disclosure as to whether theproposer had undergone any treatment. The proposer answeredthe queries in the negative. Further a query regarding specificdiseases or disorders suffered was also responded to in thenegative. A policy of insurance was issued by the insurer on 12[th]August, 2014, insuring the life of the proposer for a sum of Rs.8.50 lakhs payable on maturity with the death benefit of Rs. 17lakhs. On 12[th] September, 2014, the insured, Kulwant Singh, diedgiving rise to a claim under the policy. The claim was subjected toan independent investigation and the records revealed that thedeceased had been suffering from hepatitis C. The claim wasrepudiated giving rise to a consumer complaint which was allowedby the District Forum. The appeal before the State Forum wasalso dismissed, so also by the National Commission, the revision

was dismissed. Being aggrieved the insurance company hadpreferred an appeal before this Court. It was held that theinvestigation conducted by the insurer in the said case clearlyindicated that the deceased was suffering from a pre-existingmedical condition which was not disclosed to the insurer despitespecific queries relating to any ailment, hospitalisation or treatmentundergone by the proposer in column 22 of the proposal formtherein. Hence the judgment of the Commission was set aside butsince the claim amount was paid to the respondent, exercisingjurisdiction under Article 142 of the Constitution it was directedthat no recoveries be made by the respondent insurer therein.

In the aforesaid judgment, this Court distinguished SulbhaPrakash Motegaonkar and Ors. v. Life Insurance Corporationof India, Civil Appeal No. 8245/2015 decided on 5[th] October,2015, by holding that in the said case the assured therein sufferedmyocardial infraction and succumbed to it. The claim wasrepudiated by the insurance company on the ground that therewas a suppression of a pre-existing lumbar spondylitis. It was inthis background that this Court held that the alleged concealmentwas of such a nature that would not dis-entitle the deceased fromgetting his life insured. In other words, the pre-existing ailmentwas clearly unrelated to the cause of death.

52. On a consideration of the aforesaid judgments, the followingprinciples would emerge:

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(i) There is a duty or obligation of disclosure by the insuredregarding any material fact at the time of making theproposal. What constitutes a material fact would dependupon the nature of the insurance policy to be taken, the riskto be covered, as well as the queries that are raised in theproposal form.

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(ii) What may be a material fact in a case would also dependGupon the health and medical condition of the proposer.

(iii) If specific queries are made in a proposal form then it isexpected that specific answers are given by the insuredwho is bound by the duty to disclose all material facts.

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A(iv)If any query or column in a proposal form is left blank thenthe insurance company must ask the insured to fill it up. Ifin spite of any column being left blank, the insurancecompany accepts the premium and issues a policy, it cannotat a later stage, when a claim is made under the policy, saythat there was a suppression or non-disclosure of a materialBfact, and seek to repudiate the claim.

(v) The insurance company has the right to seek details regardingmedical condition, if any, of the proposer by getting theproposer examined by one of its empanelled doctors. If, onCthe consideration of the medical report, the insurancecompany is satisfied about the medical condition of theproposer and that there is no risk of pre-existing illness, andon such satisfaction it has issued the policy, it cannotthereafter, contend that there was a possible pre-existingillness or sickness which has led to the claim being madeDby the insured and for that reason repudiate the claim.

(vi) The insurer must be able to assess the likely risks that mayarise from the status of health and existing disease, if any,disclosed by the insured in the proposal form before issuingthe insurance policy. Once the policy has been issued afterEassessing the medical condition of the insured, the insurercannot repudiate the claim by citing an existing medicalcondition which was disclosed by the insured in the proposalform, which condition has led to a particular risk in respectof which the claim has been made by the insured.F

(vii) In other words, a prudent insurer has to gauge the possiblerisk that the policy would have to cover and accordinglydecide to either accept the proposal form and issue a policyor decline to do so. Such an exercise is dependant on thequeries made in the proposal form and the answer to theGsaid queries given by the proposer.

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53. We shall now consider the facts of the present case. Therelevant portion of proposal form for the overseas mediclaim policy-B isextracted as under:

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A54. The proposal form was submitted by the appellant on 15[th]May, 2009. The proposed date of departure of the appellant to USA was19[th] May, 2009. As required, the proposal form was accompanied with:(a) ECG test printout with report, (b) fasting blood sugar and urine striptest report. The proposal form also stated :B“In the absence of such medical tests and reports due to ashortage of time before travel, cover may still be grantedsubject to a satisfactory proposal form by the sum assuredunder the policy, in respect of expenses incurred for thetreatment of illness, disease shall be restricted to US 10,000Dollars only which shall not cover the cost of medical treatmentCfor pre-existing disease. In case of accident, however, thefull sum of insured benefit will be available.”

55. Learned counsel for the insurer contended that in the columnsdealing with medical history - query no. 2 which reads, “have you eversuffered from any illness or disease up to the date of making thisDproposal” no answer was given by the appellant. Hence, there wassuppression of the fact that the appellant was suffering from a heartdisease for which he was prescribed statins and the said fact was materialfact as it related to a pre-existing disease or illness which is excludedunder the policy. In support of this submission, reliance was placed onEthe following clause:

“IMPORTANT

Notwithstanding anything stated in the policy it is hereby andagreed that all claims occasioned by, happening through orin consequence of any disease which is existing at the date ofFcommencement of risk, whether specifically declared or not,the proposal form completed by the insured, is excluded fromthe scope of the policy.”

In support of this clause, reliance was placed on clause 10 (b)(typed as 11 (b) in Annexure A-6.) and 10 (c) which state that the policyGwas not designed to provide an indemnity in respect of medical services,the need for which arises out of a pre-existing condition as defined underclause 10 (b). A pre-existing condition was defined to mean “any sicknessfor which the insured person had sought medical advice or hadtaken medical treatment in the preceding 10 months prior to thecommencement of travel.”H

56. It was contended that there was non-disclosure or suppressionof the fact that the appellant had been advised to take statins owing to acholesterol problem, which is a risk-factor for cardiac disease and thisfact was not disclosed in the proposal form whereas it was mentioned tothe doctor who treated the appellant in USA. Hence the repudiation ofthe policy was justified.

57. We have considered the aforesaid submissions in light of therelevant clauses in the proposal form and by taking into considerationthe arguments of the learned Senior Counsel for the appellant.

58. On a reading of the queries pertaining to medical history it isnoted as under:

(i) Query no. 1 which reads, “are you in good health and freefrom physical and mental disease and infirmity?” The answergiven was “yes.”

This indicates the current status of health at the time of filling upof the proposal form.

(ii) On the other hand, query no. 2 which reads “have you eversuffered from any illness or disease up to the date of makingthis proposal?”, is a query with regard to the past health conditionof the insured.

(iii) The above is discerned from query no. 4 which reads, “haveyou ever been admitted to any hospital, nursing home/clinicfor treatment or observation?”

(iv) Query no. 5 which reads, “have you suffered from any illnessor disease or had an accident prior to the first day ofinsurance?”

59. On a contextual and conjoint reading of the aforesaid queriesit is evident that the object of seeking answers from a proposer to theaforesaid queries was, as a prudent insurer to discern whether theproposer had any pre-existing condition for which he had taken medicaladvice or medical treatment in the 12 months preceding thecommencement of travel. Any disclosure of an illness or disease suffered/diagnosed in 12 months preceding the commencement of travel wouldindicate a pre-existing condition which fact may lead a prudent insurernot to provide an indemnity in respect of medical services, the need forwhich may arise during the term of the mediclaim policy or lead theinsurer to reduce the scope and coverage of risk under the policy.

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A60. In the instant case, since the appellant herein answered queryno. 1 in the affirmative and query no. 4 and 5 in the negative it impliesthat he did not suffer from any illness or disease up to the date of makinghis proposal apart from what had been disclosed by him, namely diabetesmellitus-II. The respondent insurer being appraised about the said medicalcondition of the appellant, issued policy to the appellant herein. TheBrespondent insurer did not consider the said medical condition of theappellant as a risk factor for any possible cardiac ailment during theterm of the policy so as to decline acceptance of the proposal form andissuance of the mediclaim policy. Also, report of the ECG was consideredby one of the panel doctors of respondent-insurer and having found theCsame to be normal, the policy was issued to the appellant.

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61. That apart, query no. 8 in the policy is worded in followingterms:

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61. That apart, query no. 8 in the policy is worded in followingterms:

“Please give details of any knowledge of any positiveexistence of any ailment, sickness or injury which may requireDmedical attention whist on tour abroad.”

The answer to the same was “NIL.”

62. In support of the aforesaid answer, the submission of learnedSenior Counsel along with learned counsel for appellant was that ECGEreport and blood and urine test reports were given as the appellant hadknowledge of his ailment, namely, diabetes mellitus-II and the same weretaken into consideration favourably by the insurer as the said reportsshowed normal results. It was contended by learned Senior Counsel forthe appellant that the appellant had no knowledge of any heart ailmentwhich could require medical attention whilst on tour abroad.F

63. It was further submitted that the appellant was on statins andthe same was prescribed to him as diabetes mellitus-II which wasdisclosed by the appellant in the proposal form is one of the risk factorsfor cardiac disease. Thus, in order to reduce the risk of a cardiac ailmentin future, statins were prescribed. The same is also prescribed forGcontrolling hyperlipidaemia but the appellant did not suffer from any heartailment or hyperlipidaemia.

64. We find considerable force in the argument made on behalf ofthe appellant. This is because while diabetes mellitus-II is a risk factorfor a cardiac ailment in a person, it is not a hard and fast rule that everyHperson having diabetes mellitus-II would necessarily suffer from a cardiac disease. Conversely, a person who does not suffer from diabetes mellitus-II can also suffer from a cardiac ailment. Thus, what the appellant hadknowledge of was the existence of diabetes mellitus-II, for which hewas under treatment. In order to disclose the status of the said diseasehe had submitted his ECG report, blood and urine test reports whichshowed normal results. The fact that ECG report showed normalparameters would indicate that the appellant had no cardiac disease.The prescription of statins to the appellant was only as a precaution toprevent a possible cardiac ailment from developing in the future asdiabetes mellitus-II is a risk factor for such a disease. But by that, itcannot be deduced or inferred that because the appellant had a cardiacailment or hyperlipidaemia, he was prescribed statins.

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65. Further, what was required to be disclosed in query no. 8under the caption medical history was “Knowledge of any positive existence of any ailment, sicknessor injury which may require medical attention whist on tourabroad”

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This means that any ailment, sickness or injury of which theproposer had positive knowledge of, and which may require imminentmedical attention whilst on tour abroad and during the term of the policyhad to be disclosed. If the proposer had no knowledge of any ailment hehad, obviously there could be no disclosure of any ailment or sicknesswhich would require medical attention whilst on tour abroad. In fact, theaforesaid query has also to be considered in the context of the furtherdeclaration sought by the insurance company to the effect that theproposer was:

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(a) not travelling against the advice of a physician, (b)not on the waiting list of any medical treatment,

(c) not travelling for the purpose of receiving medicaltreatment, (d)not received a terminal prognosis for a medicalGcondition before the date of submitting the proposalform.

66. Viewed in the aforesaid perspective, it is held that therespondent insurance company could not have repudiated the policy onthe ground that acute myocardial infraction suffered by the appellant on H

Alanding at San Francisco, USA was a “pre-existing and relatedcomplication” which was excluded under the policy. The insurer wasinformed about the pre-existing condition of the appellant, namely, diabetesmallitus-II and it was for insurer to gauge a related complication underthe policy as a prudent insurer and then issue the policy when satisfied.In the absence of the same, the treatment availed by the appellant forBacute myocardial infraction in USA could not have been termed as adirect offshoot of hyperlipidaemia and diabetes mellitus so as to be labelledas a pre-existing disease or illness which the appellant suffered fromand had not disclosed the same. At any rate, the appellant had in theproposal form disclosed that he was suffering from diabetes mellitus-IICand for which the medical test reports were submitted along with theproposal form which were considered by the insurance company beforethe policy was issued to the appellant. In fact, the appellant stated in hisrepresentation dated 16[th] November, 2009, against the repudiation of thepolicy that he was taking lipid-lowering medicines not because he wassuffering from hyperlipidaemia but as it was customary to take suchDmedication for prevention of cardio-vascular complications in diabetics.He also stated that he had informed the physician, Dr. Jitendra Jain, whoexamined him prior to obtaining the policy, of the medicines he had beentaking. Therefore, the insurance company was well aware of the factthat the insured was a diabetic and was taking all necessary medicationEfor preventing further complications and controlling the disease. Hencein our view, there was no suppression of any material fact by the appellantto the insurer.

67. Further on the disclosures made by the appellant with regardto his existing disease, namely diabetes mellitus-II, the insurance companyFconsidered the same and issued the policy in question to the appellant.The respondent insurance company as a prudent insurer considered thedetails given by the appellant in the proposal form and issued the policy.The insurance company did not think that the medical and health conditionof the appellant was such which did not warrant issuance of a mediclaimpolicy. The insurance company therefore did not decline the proposal ofGthe assured as a prudent insurer.

68. Therefore, the respondents were not right in stating that asper the terms and conditions of the policy “all the complications arisingout of pre-existing condition is not payable.” As already noted, acutemyocardial infraction can occur in a person who has no history of diabetesH

mellitus-II. One of the risk factors for the aforesaid cardiac episode isdiabetes mellitus-II. The fact that the appellant had diabetes mellitus-IIwas made known to the insurance company. Therefore, it is observedthat any complication which would arise from diabetes mellitus-II wasalso within the consideration of the insurer. Despite the aforesaid factsregarding the medical record of the insured, the insurance companydecided to issue the policy to the appellant. The aforesaid clause has tobe read against the respondent insurer by applying the contraproferentem rule against it. Otherwise, the very contract of insurancewould become meaningless in the instant case. Hence, in our consideredview, the respondent-insurance company was not right in repudiatingthe policy in question.

69. The object of seeking a mediclaim policy is to seekindemnification in respect of a sudden illness or sickness which is notexpected or imminent and which may occur overseas. If the insuredsuffers a sudden sickness or ailment which is not expressly excludedunder the policy, a duty is cast on the insurer to indemnify the appellantfor the expenses incurred thereunder.

70. Hence in the instant case, the repudiation of the policy by therespondent insurance company was illegal and not in accordance withlaw. Consequently, the appellant is entitled to be indemnified under thepolicy. In view of the aforesaid discussion, we hold that the Commissionwas not right in dismissing the complaint filed by the appellant herein.

71. The appeal is allowed in the following terms:

(i) The respondents are directed to indemnify the appellantregarding the expenses incurred by him towards his medicaltreatment within a period of one month from the date ofreceipt of a copy of this judgment with interest at the rateof 6% per annum from the date of filing the claim petitionbefore the Commission till realisation.

(ii) Since the expenses incurred by the appellant was in termsof US Dollars and the claim would be paid in terms of IndianRupees, the exchange rate as it existed on the date theclaim petition was filed by the appellant herein before theCommission or at Rs.45 INR, whichever is lesser, shall bereckoned for the purpose of determining the conversion rate A

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1180SUPREME COURT REPORTS[2021] 11 S.C.R.

Aof US Dollars into Indian Rupees vide Meenakshi Saxena& Anr. Vs. ECGC Limited (formerly known as ExportCredit Guarantee Corporation of India Limited) & Anr.– (2018) 7 SCC 479.

(iii) The appellant is also entitled to Rs. 1,00,000/- payable byBthe respondents towards the cost of litigation.

Ankit Gyan

Appeal allowed.

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