ISLAMABAD: The Supreme Court has ruled that an insurance company cannot avoid a life insurance policy after two years of its coming into effect merely for the reason that the policy contains false information or inaccuracies about the insured person’s health condition.

And to prove the allegations of fraud or falsity, the insurance company has to come up with strong evidence that the insured person at the time of applying for the insurance, deliberately suppressed material facts about his health conditions, which were essential to disclose at the time of taking the policy, held a nine-page judgement authored by Justice Munib Akhtar.

Justice Akhtar was a member of the three-judge Supreme Court bench that had taken up an appeal by the State Life Insurance Corporation (SLIC) against the May 9, 2018 judgement of the Peshawar High Court (PHC). The final hearing was held on March 3, 2021 but the verdict was issued by the Supreme Court bench headed by Justice Umar Ata Bandial on Saturday.

Justice Akhtar also expected that the insurance tribunal, which decided insurance disputes, would in future take a robust view about its powers in case it felt that an insurance policy was being avoided unfairly or harshly by the insurance companies.

However, the judgement also explained that nothing definitive or binding could be ruled about the insurance tribunal’s exercise of power since the issue was not involved in the present case. This was only by way of a signpost for the future, according to the verdict.

The case revolved around the claim lodged by Attaur Rehman, respondent and the legal heir of Abdul Rehman, who had taken a life insurance policy from the SLIC but passed away on Feb 7, 2010.

On April 15, 2011, the SLIC rejected the claim lodged by the heir under the policy without affording a specific reason of not accepting the claim.

Consequently, the respon­dent approa­ched the insurance tribunal — constituted under the Insurance Ordi­nance 2000 — which dec­reed on June 7, 2014 the claim to the tune of Rs400,000, the insured amount.

Later, the PHC also upheld the tribunal’s decision on May 9, 2018 and subsequently the insurance company moved the SC during the hearing of which counsel for the SLIC Sanaullah Zahid argued that prior to the policy the insured person had a cardiac condition, which was so severe that it had even required a heart operation and that the coronary condition was continuing at the time of the policy.

This was a material concealment that vitiated the entire policy and thus allowed the insurance company to avoid the policy, he argued.

The judgement, however, recalled that the insured person was also thoroughly medically examined by a doctor of the insurance company’s own choice. The July 30, 2002 doctor’s report gave the insured a clean chit and in the sections relating to coronary matters the medical health/status of the insured was stated to be perfectly normal.

Thus the examining doctor found the insured person to be fit, the judgement said, adding that the insurance company was induced to issue the life insurance policy not on account of the statements of the insured person, but the medical examiner’s report.

The verdict noted that this was the industry custom and practice uniformly followed in all cases that the insurers in the life insurance business did not issue policies without a thorough medical examination of the person proposed to be insured, and unless the resultant report was found satisfactory or acceptable.

If the medical examiner chosen by the insurer is negligent or the SOPs established for the examination are so lax as to fail to result in a properly thorough examination, the burden of that fault lies on the insurer and not the insured, according to the SC judgement.

In such a situation, the insured could not be held to account for any non-disclosure such as would enable the insurer to escape liability on the policy unless there was fraud or a fraudulent misrepresentation, the judgement added.

Subsequently, the apex court rejected the appeal by the insurance company on the ground that there was no merit to the present appeal.

Published in Dawn, June 28th, 2021