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Analysis Of Suicide Clause In Life Insurance Policy

A life insurance policy is an agreement between the policy owner (the insured) and the insurer (the insurance enterprise), whereby the insurer agrees to pay the designated beneficiary a certain sum of money in the event of the insured person's death (a premium). The policyholder selects to pay a set amount (at regular intervals or in lump sums). Life insurance policies are, in essence, legal contracts that specify the scope of the insured events.

To limit the insurer's obligation, certain exclusions are frequently spelled out in the contract. Typical examples include claims involving suicide, fraud, war, riot, and civil unrest. Suicide is the choice, intentional self-destructive behaviour of someone who kills themselves. Suicide includes all self-destructive behaviours.

There are clauses in life insurance policies that allow the insured to modify and limit the insurer's liability in the event of suicide. In cases where a policy contains such a clause, the insurer may refuse to issue the policy. Because suicide cannot be prevented by the insurance and the assumption is not made against it if the cause of death is not known, the insurers assume the risk of proving suicide.

That is also the case in India. Due to the insured person's inability to be the cause of his own loss and to a greater extent because the law would not permit him to do so, this method would prevent this allegation on a contractual level. "The influence of the suicide clause in life insurance contracts is examined in this study along with the evolution of law and policy in respect to claims on life insurance policies where the assured or insured committed suicide after the policy's start. It also offers a comparison of the provisions on suicide in the United States, the United Kingdom, and India."

Introduction
According to Hindu philosophy, "Yat bhavati tat nasyati," which indicates that everything that is created will eventually be destroyed, expresses the reality of insurance. In essence, it indicates that destruction always comes after creation.

Risk is a natural part of the process of life's variation. Ownership has a high relationship with risk. The business of insurance was developed out of the owner's desire to shield them from risk. The insurance policy, often known as the policyholder, is a contract (typically a standard form of contract) between the insurer and the insured, which establishes the claims that the insurer is legally obligated to cover.

The policy language, which specifies the risks covered, the exclusions, if any, and the benefits reimbursed upon the occurrence of an event like death, illness, etc., states the risks covered, the exclusions, and the benefits paid. In exchange for payment, known as the premium, the insurer pays for damages to the insured that are caused by covered perils.

The term "life insurance business"[1] refers to the activity of executing contracts for the insurance of human life, including any agreement under which the payment of money is guaranteed in the event of death (other than accidental death only) or the occurrence of any other event.

In India and the UK, there is no formal definition of a life insurance policy or life insurance contract. Nevertheless, it was described as "a contract in which the insurer, in return for a certain premium, either in lump sum or in any other periodical payments, in return agrees to pay to the assured or to the person for whose benefit the policy is taken a stated sum of money on the happening of a particular event contingent on the duration of human life," in the case of Dalby v. London and India Life Assurance Company[2].

Someone buys a life insurance policy to ensure their financial security in case of need. With the insured, the insurer enters into a contract to pay a death benefit in the amount assured to the person the insured designates in the case of the insurer's untimely demise. Every insurance provider is required to make certain that only legitimate claims resulting from the policyholder's death are made.

Insured Event under Life Insurance

The loss of life assured as a result of a sickness or accident is the insured situation in a standard life insurance policy. It doesn't matter if the death resulted from natural or unnatural causes, or even from a criminal act committed by a third party. Courts will not uphold agreements whose goals go against public policy. The maxim ex turpi causa non oritur action, which literally means that no cause of action emerges out of a wrong, expresses one of the fundamental principles of legal theory based on public policy: no one shall be permitted to profit from his own wrong.

According to this view, life insurance legislation grants the legal representatives of the assured the right to collect the assured's life policy upon his passing, regardless of whether the death was brought on by a natural cause or an accident, including a third party's criminal act. The aforementioned rule is subject to two exceptions[3]: the first occurs when the assured dies as a result of the assured breaking a criminal law; the second occurs when the assured commits suicide.

According to the ruling in the case of Liberty National Life Insurance Co. v. Weldon[4], "the purposeful wrongdoing of the guaranteed has always been considered as an implied exception in a policy not only in life insurance but in other branches as well." For instance, in the case of fire insurance, the assured is prohibited from claiming benefits if the fire was started by his intentional misconduct.

The public policy principle that no one may benefit from his own wrong or guilty conduct comes into play and is required to recover under the policy when the assured violates the law or commits an act that carries a death sentence and is sentenced to death. The assured or his representative is then reported to have died by himself.

It is evident that when the assured person committed suicide, the claims under the policy are denied. In such cases, it would be against public policy for the insured person to get any profit from his death without first receiving a guarantee from the legal system. This notion exonerates the insurance company from responsibility when a person dies as a result of criminal activity, a war, or a duel.[5]

Felo De Se or Suicide

Suicide was previously referred to as felo de se or felonia de se in Latin. The Athenians would "punish" the self-murderer by chopping off his hand, or, more accurately, off the self-murderer's corpse.

Felo de se is a latin word that translates to "felon of himself." It's an archaic legal term that usually refers to suicide. Adults who committed suicide were considered criminals and so punished by the king. A youngster or individual who is mentally unwell or unable of doing his or her own tasks and kills oneself would not be regarded a felo de se and thus would not be punished. The term felo de se is not commonly used in legal practise. Suicide is not usually an unexpected or unforeseen insurance incident.

There are many causes of death that can trigger a life insurance policy, from diseases to accidents to negligence or misconduct by third parties. When death-related insurance occurs, the insurer is usually responsible for payments. However, the principle implies that the insurer has been liberated from liability, as it is in other insurance divisions where the insured case is perpetrated on the basis of the insured individual's or his officer's willful and unlawful activity.

For identical reasons, the risk of assured people being killed by third parties fits within the limits of the standard life policy, and the insured suicide commission, however irrational, is not an exception to the risk.

In 2014, changes were made to insurance policies, and all insurance policies no longer included a suicide provision. Prior to 2014, such businesses would not accept claims where the insurer committed suicide. However, beginning in 2014, adjustments were made with the pain and hardships of those left behind in the family in mind.

Exception to Suicide Clause in the Insurance Policy

Traditionally, suicide provisions rendered the insurance policy effectively null and invalid, rendering all premium payments useless and the deceased largely unrepresented. It was also far worse than the deceased's suicide attempt. Things have changed since then. A second type of suicide clause has received international attention. In such a circumstance, the whole payout made during the policy's term is returned to the family, even though the policyholder would not have to pay the death benefit for his own life.

In 2014, policy changes were implemented, and all insurance policies no longer had a suicide provision. Until 2014, no claims were received in instances where an insurer committed suicide. However, adjustments have been proposed since 2014 to address the difficulty and concerns of family members. On January 1, 2014, the policy idea was announced, covering the relatives of covered individuals who died by suicide.

Suicidal death protection under a term insurance plan begins 12 months from the policy's issue date or 12 months after the policy has been enhanced. If the insured's suicide is the real cause of death, the applicant will be completely compensated, including full death benefits: Before January 2014, the suicide provision was deemed to be invalid, and no family claim was owed.

Both in India and in England, the situation is distinct. In England, suicide and execution for murder are conveniently placed on the same plane, and the beneficiary is not entitled to reclaim the policy if the insured commits suicide or is executed for a crime.

In certain ways, life insurance is a significant institution in India, as it is linked to a large charitable fund established, primarily for unfortunate spouses and children. However, life insurance is not purely charitable. Wives and children have frequently contributed significant financial, labour, and sacrifice contributions to the life insurance fund.

Their ownership of the fund was established prior to the commission of the crime. What difference does it make whether the insured died as a result of his own actions, the actions of a stranger, or an accident? It should not be overlooked in this context that life insurance policies are frequently used in the market to get money loans. If an assignee's rights to value are likely to be terminated by events over which he has no control, the instrument's economic worth will suffer significantly.

Circumstances when Suicide Clause is not Applicable

  • The insurer has the right to decline your request if the expired policy is renewed and the subsequent owner commits suicide 365 days after the policy's renewal date.
  • Second, when insured, it provides false/inconvenient information to the insurer, which is prima facie misleading and leads to the claim being rejected.
  • Third, it is critical to pick a candidate when it is certain that the candidate will accept insurance. In extremely rare cases, the nominee dies before the policy payout is due. In that case, the legal heirs will be entitled to the money.
  • Finally, if the policyholder was covered by group insurance policies, the policyholder's employer cannot seek a suicide death allowance. According to the Policy Bazaar, the suicide clause is not protected by the community insurance policy because it has been in effect for one year and the suicide clause requires more than one year. As a result, it is not featured here.

Applicability after a year:

In a year, life insurance will protect it against the moral risk of the business and will help to prevent insurance fraud. The policyholder will also fail to pay the loan and will purchase a life insurance policy to cover the covered sum. It is also believed that one year is enough time to be free of such a mindset.

However, after one year, suicide compensation is granted for emotional and debt distress, which may cause him psychological stress and is the only viable alternative. After the policyholder's death, the insured's dependents may face these issues. The claim coverage would safeguard them in this case because life insurance is a great way to keep the dependent's life financially safe when a family member dies.

Position in India

Suicide is not a punishable offence in India. Suicide attempts are criminal under Section 309 of the I.P.C., whereas suicide abetment is punishable under Section 306[6]. In India, committing suicide is not and cannot be considered a crime. Because the formation of a Statute is Indian criminal law, English common law in India is inapplicable not this regard.

In Faquir Singh v. Union Of India, the insured died as a result of hypoxia caused by the rope wrapped around his neck, resulting in a heart attack[7]. However, the fact of suicide was not confirmed, and there was critical evidence suggesting it may potentially be a murder. In this case, the rejection to provide postal insurance benefits to the insured's father because his death was ruled a suicide was erroneous.

The contract in Northern India Assurance Co. v. Kanhayala stated that if Moolchand, the insured, caused his own death for a year before the policy went into effect, the coverage would become void.[8] When his insurance was more than 13 months old, he committed suicide by poison after discovering his wife's adultery and transferred the insured policy to his son, Kanhayalal. The court upheld the assigned son's contention that suicide was not a criminal in India and that India was not subject to English law laws that allowed it to occur as a felony.

In the case of [9]Scottish Union and National Insurance Co. v. Jahan Begum, the issue of whether suicide is against public policy in India was raised, and the insurer was the only company in India to issue policies that did not impose suicide restrictions and paid the insured amount in the lifetime insured committed.

Life insurance is an important institution for our country's vast charitable fund, particularly for unlucky mothers and children. It is a significant institution in some ways. However, life insurance is not pure love. However, life insurance is not purely charitable. Wives and children have frequently made significant contributions to the life insurance fund via labour and sacrifice. Their right to the fund was granted before the offence was committed.

Position in England and Common Law

"The position of the law in England was that when the insured person died by suicide while he was in good health, it equated a fraudulent act to felo de se, and so the insurance company was relieved of obligation because no one could have benefited from his own misbehaviour."

Beresford v. Royal Insurance Co Ltd[10] is a leading case on this subject, in which the executors of Major Rowlandson's estate sued to recover the sum of 50,000 supposedly payable under the defendant's five life insurance policies." The Court of Appeal ruled that "it was contrary to public policy for the plaintiff to be permitted to enforce the contract," and granted the defendants' motion for summary judgement. It is the court's overriding duty and inherent power to refuse its assistance in enforcing a promise where the plaintiff has to set up his own crime or the estate of a deceased seeks to benefit from the deceased's crime."

The effect of the above decision does not preclude an insured person from suing the company and cannot reinforce the common interpretation of the above-mentioned suicide clause and restrict suicide on the company, even where it has been clearly demonstrated that this is suicide, the company will not be prevented from denying liability and payment on the basis of public policy. Suicide is an act of felony under common law and a criminal in India; nevertheless, suicide is not regarded a crime by ordinary or legislative measures.

In England, the Suicide Act of 1961 repealed the law that made attempting suicide a crime. Though suicide is no longer an offence in and of itself, anyone who supports, encourages, advises, or procures another's suicide or attempts to commit suicide is guilty of an offence and faces up to 14 years in prison if convicted. The Act of 1961 [11]in England states that "the rule of law which makes it a crime for a person to commit suicide is hereby abrogated."[12]

The history of suicide and life insurance has demonstrated that civil law severely penalises such methods of consensual dying. Where there is a criminal mode of death, individuals who engage in the crime cannot generally take benefit of death.

Position in the U.S.A.
The applicable suicide exclusions in the United States stated that "if the insured, whether sane or insane, dies by suicide within two years of the Policy Date, Our liability is limited to an amount equal to the total premiums paid, and suicide by the Insured, whether sane or insane, within two years of the Policy Date is not covered by this policy."

In Federal Guar. Life Ins. Co. v. Wilkins[13], it was determined that "An insurer may deny a claim for life insurance benefits based on the insured's suicide as long as the policy includes a provision denying coverage for suicide death." If an insurer has an arguable basis for denying a claim based on suicide, such as a coroner's report indicating suicide, the insurer cannot be held liable for bad faith claim denial."

However, it is a factual issue that can be better determined in a declaratory judgement suit, if an insured has effectively committed suicide and no payments are due. Furthermore, suicide is illegal in Alabama. The insurer can prevent the presumption from being applied by providing direct proof of suicide rather than circumstantial evidence.[14]

According to the National Center for Health Statistics, the suicide rate in the United States increased by 35% between 1999 and 2018.[15] According to the National Mental Health Institute, women between the ages of 45 and 54 are more likely to commit suicide than men between the [16]ages of 65 and beyond. These are the age groups most likely to carry life insurance.

According to the American Foundation for Suicide Prevention, suicide is the tenth largest cause of death in the United States, costing a total of $69 billion[17] in 2015 alone. As a result, many life insurance plans include additional provisions in the fine print to account for suicide.

Insurance companies usually need you to have an active policy for at least one to two years, either through your own private policy or one offered by your company. The American Council of Life Insurers (ACLI) reports that "99% of all life insurance claims are paid in full, but you must be paid up premium-wise in full to receive benefits, whether suicide is the cause of death or not."

Future of Suicide Clause in Insurance Policy

In this day and age, more and more rules regarding suicide are being developed. Furthermore, the suicide clause has been largely eliminated by policies. Statistics appear to indicate that they provide little value to them. The majority of those at high risk of suicide would not be prevented by the insurance coverage.

Suicide awareness that is more complex has also affected the issue. In recent days, the symptoms, side effects, or health conditions of suicide have been seen rather than as an option. Studies are beginning to reveal that suicide is not solely caused by mental disease; depression is not a cause.

Deception through self-homicide appears to be significantly less important now that advanced psychology and medicine have established a new definition of suicide. Why should suicide not be insured if, like cancer, it is an incurable medical condition? When looking for the right life insurance policy, it makes sense to have a suicide clause or no clause at all if you suffer from depression and are at high risk of suicide. New regulations were enacted that require "reasonable" life insurance policies to cover suicide (reasonable in this case means no more than two years).

The notion is that no healthy person can buy an insurance in order to save the window for two years; it's a sufficient indication of mental sickness, and it's a covered exposure. This protects the needs of innocent families while also limiting a casual view of suicide.

As a result, there is a chance that in the coming years, the law pertaining to the suicide clause will be applicable all over the world due to the growing need for the safety of other family members.

Conclusion and Suggestions
Life insurance protects against the possibility of death and the like; yet, if the proceeds of insurance are unavailable, it is against the public interest for individuals who see no other way out of financial difficulties except to commit suicide.

Suicide-related regulations or a suicide clause not only legalises one's life, but also contradicts Indian government policy. Sex felony. Suicide policies would encourage commercial suicide in the instance of willful self-destruction. Many of these media campaigns did not capture the attention of Indians to the law or policymakers. Unfortunately, the researcher was unable to locate any cases pending before the Supreme Court of India that challenged the legitimacy of suicide clauses in situations when the policyholder committed suicide.

Another scenario involves the suspicion of a financial institution or family members of the insured who are scheme beneficiaries, which is a violation of the IPC. This is an offence, but investigatory agencies and prosecutors had difficulties determining anything because the case did not aggravate anyone enough to bring the matter before the court and the police.

Because the insured's representatives profit from the situation, it is in their best interests to substantiate those claims. The notion that modern life plans include provisions for suicide in the event of purposeful death does not excuse the conduct if someone waited for or committed suicide for one or two years.

If a person is in a financial crisis in the centre of his or her life, rather than live in pain, he or she should commit suicide for the happiness of his or her loved ones. Although insurance is rarely a primary reason to suicide those who are already upset, knowing that death comes with a cash compensation for their relatives could provide added motivation.

Suicide clauses in life insurance contracts in India are comparable to those found in other parts of the world. It refers to the payment or refund of premium to the beneficiaries in the event that the insurer commits suicide within the policy's prescribed period of one or two years if the insured destroys him in a sane state of mind. However, if he commits suicide on purpose and in a sane state of mind, the policy will be paid to his beneficiaries or representatives.

The practise of paying the proceeds after the stipulated period of time in the case of intentional suicide in a fit state of mind by the insured is justified on the logical presumption that no one can plan and wait to commit suicide for such period does not suffice the legality of the enforcement of life policies in such cases. The claim appears to be banned on a contractual level since the assured cannot be the architect of his own loss, and on a broader level because the law will not allow him to profit from his own illegal activities.

The current legal practise in the aforementioned situation must be altered to exclude the benefit to the legal representatives as well as beneficiaries of the life insured, regardless of the demands of the sympathetic position. Denying this would violate the core tenet of criminal law that no one should profit from his own wrongdoing. As a result, there is a probability that in the next years, the law relating to the suicide clause will be applicable all over the world due to the growing need for the protection of other family members.

End-Notes:
  1. Section 2(11) of Insurance Act of India (1938)
  2. Dalby v London and India Life Assurance Company (1884) 15 C.B 365
  3. Insurance Act of India, 1938, Section 2 (11)
  4. Liberty National Life Insurance Co. v Weldon (1957) Alabama 100 So 2d 696.
  5. Ibid.
  6. Section 306 & 309 of the Indian Penal Code, 1860
  7. Faquir singh v. Union Of India AIR 2002 J&K 62
  8. Northern India Assurance Co. v. Kanhayala (1938) lah ore High Court , P.561
  9. Scottish Union and National Insurance Co. v. Jahan Begum AIR 1945 Oudh 152
  10. Beresford v. Royal Insurance Co Ltd [1938] 2 ALL ER 602.
  11. Halsbury's Laws of England, 4th ed. 2000 Reissue, Vol. 11(1), Para 106
  12. Section 1 of Suicide Act 1961, UK.
  13. Fed. Guar. Life Ins. Co. v. Wilkins, 435 So. 2d 10, 13 (Ala. 1983).
  14. Jefferson Standard Life Ins. Co. v. Pate, 274 So. 2d 291, 294 (Ala. 1973).
  15. Hedegaard H, Curtin SC, Warner M. Increase in suicide mortality in the United States, 19992018. NCHS Data Brief, no 362. Hyattsville, MD: National Center for Health Statistics. 2020.
  16. https://www.nimh.nih.gov/health/statistics/suicide.shtml
  17. The Centers for Disease Control and Prevention (CDC) Data and Statistics Fatal Injury Report for 2019.
Written By: Nikita Johri, Final year law student at UPES, Dehradun

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