Insurance agent not liable if due care taken

Source: Law et al. news

An agent with Life Insurance Corporation (LIC) of India cannot be held liable for suppression of facts by the insured, if the agent takes due care in verifying details of the insured. Ruling thus the Gujarat High Court allowed an appeal by an agent on the ground that in this case the agent had taken steps to verify the claim of insured who however had concealed his medical history.

The Bench comprising Chief Justice SJ Mukhopadhaya and Justice JB Pardiwala was hearing a petition of one Geetaben Modi. Modi had challenged termination of her agency and forfeiture of renewal commission by LIC. LIC claimed that Modi had suppressed the fact that an insured, SB Gorange, who was suffering from cancer was issued an insurance policy.

Modi claimed that she was unaware of the fact that Gorange was suffering from cancer and claimed to have taken proper care in verifying

the details from him and his family. She also claimed to have inquired with the insured as to whether he was taking any treatment for any disease or admitted in hospital who had an obligation to disclose any ailment.

Modi had also inquired with the mother, brother and brother's wife in this regard and all of them had claimed that the insured had no ailment and was not hospitalized at any point of time. Before accepting the risk, Modi also arranged for medical examination of Garange through the approved medical examiner, who certified that the insured was quite healthy. Other medical reports also showed that Gorange was not suffering from any disease.

 

The corporation after conducting an enquiry finally terminated her agency and refused to give renewal commission which petitioner challenged. A single judge bench, however, dismissed her petition and an appeal was preferred before the division bench.

The Chief Justice in his judgement stated, “We hold that the respondent-Corporation has dealt with the matter in a very slipshod manner. Respondent-Corporation is a State within the meaning of Article 12 of the Constitution and is expected to act fairly.”

The court observed that the facts of the case don’t show that there was any meeting of minds or any conspiracy hatched for the purpose of defrauding the Corporation.

Advocate CN Trivedi appeared for petitioner.