Say the ratio out loud before you open Reasoning — recalling it unprompted is exactly what the exam pays for.
Facts
The petitioner's husband was a clerk with Mackinnon Mackenzie Private Limited, where he had worked for about nineteen years. On 5 July 1975 he submitted a proposal for an endowment policy for twenty years for Rs 30,000, premiums payable through the salary savings scheme. He was examined by doctors on the Corporation's panel, who certified his sound health, and the policy issued on 7 July 1975.
On 4 October 1977, while lighting a stove in the kitchen, he accidentally sustained severe burns. He was removed to a nursing home and then to Cooper Hospital, and died on 8 October 1977. The Coroner certified death by toxaemia following fifty per cent burns sustained accidentally. That the burns were accidental was not in dispute.
The widow, who was the nominee, lodged her claim on 24 October 1977. By a letter of 25 August 1978 the Corporation repudiated all liability, alleging deliberate misstatement and withholding of material information about health. It pointed to negative answers about consulting a medical practitioner within five years, about specified ailments, and about absence from work on health grounds; and it asserted that it held indisputable evidence that before the proposal the deceased had suffered from bleeding from fissure cuts, inflamed piles and rectum, from low blood pressure, giddiness and weakness, and from influenza on several occasions, and had taken medical leave.
The only material the Corporation in fact produced was a certificate from the employer setting out the deceased's sick leave — which the widow herself had forwarded at the Corporation's own request.
Issue
Was the Corporation entitled to repudiate under the second part of s. 45 of the Insurance Act?
Held
No. The rule was made absolute and the Corporation was directed to pay the sum due under the policy with all bonuses and other benefits.
The reasoning, in four steps
One — the Corporation had no evidence. It claimed it was not bound to produce the material it held, on the excuse that disclosure might lead to its destruction. The court held the Corporation could not shelter behind such vague excuses; it plainly had nothing beyond the employer's certificate, and to conclude from a record of sick leave that the deceased had suffered serious illness, and to repudiate on that footing, was wholly illegal.
Two — trivial ailments are not material. It is not every petty ailment that a proposer must disclose; what must be disclosed is a serious ailment. Fever, flu and dysentery from time to time are not material matters, and failure to mention them is not suppression.
Three — taking medical leave is not consulting a medical practitioner. The concept of consultation with a medical practitioner is entirely different from obtaining a medical certificate because one is down with fever. There was nothing to warrant the conclusion that the deceased had consulted a practitioner in the five years before the policy.
Four — even assuming a misstatement, fraud was not shown. Under the second part of s. 45 it is not suppression alone that suffices; the suppression must be fraudulently made. Fraudulently connotes deliberate and intentional falsehood or suppression, and some strong material is needed before concluding that a policyholder has played a fraud on the Corporation. There was none. The deceased was forty-one when the policy was taken and had been examined by the Corporation's own panel doctors.
The relief, and why it is examinable
The court did not stop at directing payment. It awarded interest at fifteen per cent from the date the claim was lodged until payment, on the reasoning that the Corporation had enjoyed the use of money that was due, and it awarded compensatory costs in addition to normal costs because the Corporation had raised false and frivolous pleas and persisted in them.
How to use it
Pair it with Krishna Wanti Puri. The three Mithoolal conditions are the same in both; in Krishna Wanti Puri the Corporation proved heart disease known to the assured, and in Dipashri it proved nothing but a record of sick leave. The comparison is the best available demonstration that the burden under s. 45 is real, and it leads naturally to the observation in LIC v. Asha Goel that repudiation should be approached with extreme care and caution and never in a mechanical and routine manner.