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Petitioner: AMERICAN LIFE INSURANCE COMPANY (PAKISTAN) LTD. VS Respondent: Master AGHA JAN JUDGMENT
Court Name: Sindh High Court Judge(s): Munib Akhtar, Muhammad Ather Saeed Title:AMERICAN LIFE INSURANCE COMPANY (PAKISTAN) LTD. vs Master AGHA JAN
JUDGMENT
Reported As: 2011 CLD 350 Result: Appeal dismissed Judgment JUDGMENT ' MUNIB AKHTAR, J.--- This is an appeal against the judgment and decree dated 7-5-2007 in Suit 1353 of 2003, which had been filed on the original side of this Court. The impugned judgment is reported as Master Agha Jan Ahmed and another v. American Life Insurance Company (Pakistan) Limited 2007 CLC 1237. The suit was filed by the present respondents, both claiming as beneficiaries under two life-insurance policies that had been taken out by their father ("the Assured") with the appellant, which is an insurance company engaged in the life-insurance business. The two policies were identical in all material respects, and each required, inter alia, a payout of Rs,35,00,000 to the beneficiaries on the death of the Assured. Each policy however, had an exclusion clause which provided that if the Assured committed suicide within a period of two years from the date of the policy, then the beneficiaries would only be entitled to a return of the premiums that had been paid thereon, less any amount payable to the insurance company. The two policies were taken out on or about 15-8-2000, and the Assured died on 24-12-2001, that is within the two-year period stipulated in the exclusion clause. The insurance company's case was that the Assured had committed suicide and hence it was not liable to make payment to the beneficiaries to the extent claimed by them, i.e., a sum of Rs,35,00,000 on each policy. The learned single Judge concluded that the exclusion clause did not apply and that the insurance company had failed to prove that the Assured had committed suicide. She accordingly decreed the suit in the sum of Rs,70,00,000. Being aggrieved by this decision, the insurance company has preferred the instant appeal. The respondents have also filed cross-objections, claiming that in addition to the decretal amount, they were entitled to liquidated damages pursuant to section 118 of the Insurance Ordinance, 2000
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on account of the late settlement of their claim. The liquidated damages were disallowed by the learned single Judge, both because learned counsel appearing for them did not press the point and because the learned Judge concluded that such damages were not payable "even otherwise". 2. It appears that the beneficiaries (who were minors at the time of the filing of the suit, and therefore sued through their mother) were the children of the Assured from his second marriage. The Assured also had a family from his first marriage, which included at least two sons, both of whom were adults. It appears that the Assured had substantial landholdings near Sukkur. At the relevant time, the respondents were in Karachi, whereas the sons from the Assured's first marriage were at Sukkur. On 24-12-2001, the Assured travelled by air from Karachi to Sukkur, where he was received by his two sons from the first marriage. The three men went to their residence, and shortly after their arrival there, one of the sons came to the local police station to make a report. According to him, their father had been mentally disturbed for some time on account of family and domestic problems. On arrival at Sukkur, the Assured had continued discussing these matters with his two sons and once they arrived at their residence, and entered the house, the Assured loaded his pistol in front of the sons and threatened to kill himself. According to the son, he and his brother tried to snatch the pistol from their father's hand but before they could do so, he had put the pistol in his mouth and pressed the trigger. The bullet passed through' the mouth and exited from the back of his neck. The Assured fell to the ground and according to the son died in front of the two brotheRs, Thus according to the son his father had committed suicide, and he had come to the police station to make a report in this regard. 3. Section 174 of the Code of Criminal Procedure ("the Code") requires that if a suicide is reported to the police, the officer incharge of the police station concerned (or any other duly authorized police officer) must, in the manner as laid down in the section, investigate the matter and make a report on the apparent cause of death. This report is to be submitted to the concerned Magistrate. Section 176 of the Code empowers the concerned Magistrate to make an inquiry into the matter, either instead of, or in addition to, the investigation to be carried out by the police under section 174. The Magistrate holding the inquiry is empowered to record evidence, and while conducting the inquiry, has all the powers as would be available to him when holding an inquiry into an offence. 4. It appears that the concerned police officer investigated the matter and submitted his report to the concerned Magistrate. According to his report, the death of the Assured was accidental. However the Sessions Judge, Shikarpur directed the IIIrd Judicial Magistrate, Shikarpur to make an inquiry into the matter pursuant to section 176. The Magistrate recorded the statements of both the sons who had been with their father at the time of his death, the Medico-legal Officer who had conducted the post mortem, the police officer who had investigated the matter, and certain other persons as well. After considering all the evidence, the Magistrate concluded that the Assured had committed suicide and accordingly made his report on or about 12-4-2002. As will be seen below, this report provided the basis on which the insurance company (i.e., the appellant) refused to honour the claim made by the respondents on the ground that their father, the Assured, had committed suicide. 5. In the meanwhile, the respondents had filed their claim with the appellant under the two policies. According to the respondents, the appellant sought certain information from them, which was duly provided but the appellant failed to make any payment on the insurance policies, and eventually by means of a letter dated 7-8-2003, refused to do so on the basis of the Magistrate's report according to which the Assured had committed suicide. It was in these circumstances that the respondents instituted the aforesaid Suit 1353 of 2003. The appellant filed its written statement after which issues were framed and evidence was recorded on commission. The respondents, as plaintiffs, produced two witnesses; one being their mother and the other being one Mr. Zaheer Ahmed Khan, who was a retired District and Sessions Judge. The appellant, as the defendant,
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examined only one witness, being its chief executive. All the witnesses produced a number of documents as part of their respective testimonies. 6. Although a number of issues were framed in the suit, the matter was argued before the learned single Judge, and also before us, on only two grounds, since learned counsel appearing for the parties were of the view that these grounds fully covered the matters in issue. These grounds were as follows (ground (a) comprising of two parts): (a) whether, as a matter of law, an insurance company could (i) absolutely avoid payment on a life insurance policy if the assured committed suicide, or in any case (ii) avoid payment if there was an exclusion clause to this effect, and the assured committed suicide during the period of exclusion? (b) whether, in the facts and circumstances of the present case, it had been proved that the Assured had committed suicide? ' The learned single Judge, in a judgment which is, if we may say so with the utmost respect, on occasion a bit difficult to follow, answered both these questions against the appellant and in favour of the respondents and decreed the suit in the manner aforesaid. 7. Learned counsel appearing for the appellant insurance company assailed the impugned judgment on the same points that had been taken by him before the learned single Judge. His case was that it was contrary to public policy for an insurance company to be liable on a life insurance policy if the assured committed suicide, since the beneficiaries would benefit from the assured's own wrong (ground (a)(i) above). He further submitted that in any case, both the policies in question contained an exclusion clause with specific reference to the Assured committing suicide within a period of two years, and the Assured (and his beneficiaries) were contractually bound by the terms thereof (ground (a)(ii) above). His case was that it had been conclusively established by the Magistrate's inquiry that the Assured had committed suicide and therefore, on any view of the matter, the appellant insurance company did not have any liability under the policies (except to the limited extent as stated in the exclusion clause). Accordingly, he prayed that the appeal be allowed. 8. Both the learned counsel appearing on behalf of the respondents supported the impugned judgment. Their case was that as a matter of law, it would be contrary to public policy if the beneficiaries of a life insurance policy were denied their claim thereunder on account of the suicide of the assured. Even if the exclusion clause were regarded as valid, the onus lay on the insurance company to prove that the facts and circumstances of the case came within its ambit. They submitted that the alleged suicide of the Assured had not been established. According to learned counsel, the Magistrate's report had no evidentiary value in civil proceedings, and it was not even a judicial order, but merely a finding of an administrative nature. They also submitted, on the basis of their cross-objections, that the learned single Judge had erred in confining the decretal amount only to the payout on the policies. According to them, the beneficiaries were also entitled to liquidated damages under section 118 of the Insurance Ordinance, 2000 and prayed that the decretal amount be varied and enhanced by the amount payable to the beneficiaries in terms thereof. 9. Since all the learned counsel referred essentially to the same decisions, we have refrained from noting them separately along with their submissions, and examine the case-law cited below. We have heard the learned counsel, examined the relevant record with their assistance and carefully considered the case law referred to and relied upon by them. Learned counsel for the appellant placed strong reliance on a decision of the House of Lords reported as Beresford v. Royal Insurance Company Ltd. [1938] 2 All ER 602. The policies in question (there were in all five policies involved) each contained a condition that if the assured committed suicide within one year of the issuance of the policy, the policy would be void against any person claiming thereunder. The policies were
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issued in 1925 and the assured committed suicide in 1934, i.e. After the period of exclusion. The House of Lords nonetheless held that the policies were unenforceable on account of the suicide. In his leading speech, Lord Atkin said:-- "I think that the principle is that a man is not to be allowed to have recourse to a court of justice to claim a benefit from his crime, whether under contract or under a gift. No doubt the rule pays regard to the fact that to hold otherwise would in some cases offer an inducement to crime, or remove a restraint to crime, and that its effect is to act as a deterrent to crime, but, apart from these considerations, the absolute rule is that the courts will not recognize chose to accruing to a criminal from his crime. ' The application of this principle to the present case is not difficult. Deliberate suicide, felo de se, is, and always has been, regarded in English law as a crime, though by the very nature of it the offender escapes personal punishment... 6 The remaining question is whether the principle applies where the criminal is dead and his personal representative is seeking to recover a benefit which takes shape only after his death. It must be remembered that the money becomes due, if at all, under an agreement made by the deceased during his life for the express purpose of benefiting his estate after his death. During his life, he had power of complete testamentary disposition over it. I cannot think the principle of public policy to be so narrow as not to include the increase of the criminal's estate amongst the benefits of which he is deprived by his crime. His executor or administrator claims as his representative, and, as his representative, falls under the same ban." (pg 607) ' It is pertinent to note that a little earlier in his speech, Lord Atkin had noted that in the absence of an express condition (i.e., stipulation or exclusion) relating to suicide, the policy would be unenforceable if the assured committed suicide. This followed simply as a matter of construction of the policy. On this point, Lord Atkin had said: "If there is no express reference to suicide in the policy, two results follow. In the first place, intentional suicide by a man of sound mind, which I will call sane suicide, ignoring the important question of the test of sanity, will prevent the representatives of the assured from recovering. On ordinary principles of insurance law, an assured cannot by his own deliberate act cause the event upon which the insurance money is payable. The insurers have not agreed to pay on that happening.... ' On the other hand, the contract may, and often does, expressly deal with the event of suicide, and that whether sane or insane. It may provide that death arising at any time from suicide of either class is not covered by the policy. It may make the same stipulation in respect of suicide of either or both classes happening within a limited time from the inception of the policy. The rights given to the parties by the contract must be ascertained according to the ordinary rules of construction, and it is only after such ascertainment that the question of public policy arises.... ' My Lords, I entertain no doubt that, on the true construction of this contract, the insurance company have agreed with the assured to pay to his executors or assigns on his death the sum assured, if he dies by his own hand, whether sane or insane, after the expiration of one year from the commencement of the assurance.... The contract between the parties has thus been ascertained. There now arises the question whether such a contract is enforceable in a court of law. In my opinion, it is not enforceable." (pp 604-5) 10. Learned counsel for the respondents on the other hand, relied on Scottish Union and National Insurance Co. v. N. Roushan Jehan Begum AIR 1945 Oudh 152. The policies in this case did not contain any express exclusion clause or condition regarding suicide and, as accepted by the insurance company at the time that the policies were issued, the obligation to make payment on the death of the assured included death by suicide. The assured committed suicide, and his beneficiary made a claim on the policies. The insurance company refused to make payment
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relying, in part, on the Beresford case (supra) to submit that suicide being contrary to public policy, the policies were unenforceable in the facts of the case. This defence was rejected, and the beneficiary's suit was decreed. The insurance company appealed to the Oudh High Court, but the appeal failed. The High Court held as follows:-- "Upon a reading of the criminal law of this country we are convinced that suicide is not an offence in India and is not against public policy by reason of its being a crime.... ' Public policy in regard to suicide must... Be public policy determined by the sense in which the law and public opinion of the country in which it takes place understand it. Suicide in India under certain circumstances is approved, and we conceive that in a country like Japan, for example, suicide is considered to be highly meritorious in certain circumstances.... In India we would unhesitatingly hold that suicide is not against public policy as exhibited by the normal conception of society, as conceived by its laws. We must, therefore, overrule the contention of the learned counsel for the appellant on this behalf." (pp 159-60) 11. It will be seen that of the two questions of law that comprise ground (a) (see para 6 supra), the first question is broader in scope than the second one. In our view, since there is an exclusion clause involved in the present case and the death of the Assured took place during the period covered by the said clause, it would be more appropriate to first consider whether such a clause, as a matter of contract between the parties, is valid and binding upon them. If so, then it would not be necessary to examine and determine the first question of ground (a), since the matter would be covered by the second question. We would also note that the two cases relied upon by learned counsel for the parties are not, strictly speaking, applicable. In the Beresford case, the period of exclusion had expired, and in the Scottish Union case, there was no such clause at all. We would therefore confine our decision to a consideration of the second question, and leave open the resolution of the first question to a case in which it falls directly to be determined. In our view, it would not be contrary to public policy for a life insurance policy to include an exclusion clause of the nature presently under consideration. A policy being a contract between the insurance company and the assured, it is entirely open to them to settle whether, and if so how, any cover is to be provided in case the assured commits suicide. The matter was explained thus in a standard treatise on insurance law: "There is nothing... To prevent the insurers from expressing the policy to cover even sane suicide by the assured, on the one hand, or from excepting all suicide, sane or insane, from the risk on the other, provided they use apt words to do so.... Generally, no suicide exception clause is inserted in life policies.... When a suicide exception clause is inserted, there is a tendency for it to be limited so as to apply only for one or two years from the date of the policy." (Colinvaux's Law of Insurance, 7th ed., 1997, pp 337-8; internal citations omitted) ' In our view, in the present case, the exclusion clause validly formed part of the insurance policies under which the respondents claimed. Learned counsel for the respondents contended that even if valid, such a clause ought only to apply if it was established that the assured had taken out the policy with the intention of committing suicide (and thereby benefiting his assigns or beneficiaries). In our view, the exception clause does not admit to any such interpretation or application. The language is clear and must, subject to the rules of interpreting and applying exclusion clauses to which we will presently refer, be applied as it stands. We turn therefore to examine the exception clause and to consider whether it stood established that the case at hand came within its scope and ambit. 12. The exclusion clause in both the policies was in identical terms and provided as follows:--- "Suicide: if the Insured commits suicide, while sane or insane, within two years from the Date of Issue or from the date of any reinstatement of the Policy, the Insurance under this Contract shall
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pay a sum equal to the premiums paid less any indebtedness under the Policy and less any partial surrenders and no more." ' Before proceeding further, it would be appropriate to set out the rules of interpretation that apply to exclusion clauses (by which we mean not merely those clauses whereby the insurance company excludes all liabilities, but also those by which its liability is limited in some form or another). In a recent decision reported as Trustees Executors Limited v QBE Insurance (International) Limited [20091 NZHC 1403, the New Zealand High Court stated the relevant rules in the following terms:--- "In particular in relation to exclusion clauses:--- (a) the onus of establishing that an exclusion clause applies is on the insurer; (b) exclusion clauses should be narrowly construed; (c) ambiguities are generally to be construed against the insurer if they have drafted the Policy." (para.31) ' The Supreme Court of Canada has taken the same view, most recently in Progressive Homes Ltd. v Lombard General Insurance Company of Canada 2010 SCC 33, where after stating the general rules of interpretation applicable to insurance contracts, and citing its own earlier decisions, the Court observed as follows:--- "When these rules of construction fail to resolve the ambiguity, courts will construe the policy contra proferentem --- against the insurer.... One corollary of the contra proferentem rule is that coverage provisions are interpreted broadly, and exclusion clauses narrowly." (para 24; internal citations omitted) ' The Supreme Court observed that the onus lies on the insured to establish that the loss suffered by him is covered by the policy, but if he discharges this burden, then it is for the insurance company to show that the exclusion clause "clearly and unambiguously excludes coverage" (para 51). In a similar vein, the Supreme Court of Ireland, in Analog Devices BV and others v. Zurich Insurance Company and another 120051 IESC 12, cited with approval the following passage from General Principles of Insurance Law (6th ed., 1993) by E.R. Hardy Ivamy:--- "Since exceptions are inserted in the policy mainly for the purpose of exempting the insurers from liability for a loss which, but for the exception, would be covered by the policy, they are construed against the insurers with the utmost strictness. It is the duty of the insurers to except their liability in clear and unambiguous terms." ' Learned counsel for the respondents relied upon a Division Bench decision of this Court reported as Foremost Trading Company v Caledonian Insurance Company Ltd. And others PLD 1988 Kar. 131, where it was held as under:--- "... [I]t will suffice to observe that once an insured proves the factum that the loss is occasioned on account of risk covered by the Insurance Policy, .The burden is shifted on the Insurance Company to prove that the case is covered by an exception provided in the Insurance Policy or that there was a breach of condition on the part of the insured as to disentitle him to lodge a claim under the Insurance Policy. It may also be observed that the question of burden of proof depends on the facts of each case.... [I] f an insured files a suit for recovery of the loss occasioned on account of fire against the Insurance Company, the burden of proof that in fact the loss had occurred on account of fire would be on the insured and in case the Insurance Company wants to defeat the above claim on the ground that the fire was caused by the insured himself, the burden of proof as to the latter averment would be on the Insurance Company. However, the general principle of law of evidence is that if the onus of proof is not discharged the party on whom it lies fails." (pp 138- 9) ' In the present case, it is of course not in dispute that the Assured died on 24-12-2001. The event for which the life insurance policies were taken out had admittedly occurred. The onus therefore lay on the appellant to establish that the exclusion clause was applicable, limiting its liability to the extent
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therein provided. The clause is to be construed against the appellant "with the utmost strictness", and the appellant must establish "clearly and unambiguously" that the Assured's death came within its ambit, i.e., that the latter had committed suicide. 13. As already noted, the appellant's case is based squarely on the Magistrate's inquiry report under section 176 of the Code whereby he had concluded that the Assured had committed suicide. Before examining this report, it is necessary to say a few words about the evidence tendered by the appellant in the suit, which was the testimony of its chief executive. In our view, this evidence was largely inadmissible as being nothing more than hearsay. The chief executive did not himself examine the matter of whether the Assured committed suicide. He did not (e.g.) visit Sukkur, or talk to any of the persons involved (such as the sons of the Assured from the first marriage). It appears (from the chief executive's cross-examination) that the appellant had outsourced the legwork of the investigation to a private firm, Business Resources Group (BRG). However, none of the relevant employees or officers of BRG were examined by the appellant. Indeed, it was specifically stated by the chief executive that the appellant was contractually bound not to produce them as witnesses. However, that did not (and could not) absolve the appellant from requirements…
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