Page 51 - The Insurance Times March 2025

Insurance Caselaws

When can life insurance claim be repu- closure could have allowed the insurer to question why the
insured had in a short span of time obtained two different
diated for not disclosing other existing life insurance policies.
policies - Supreme Court However, with respect to the present case, the Court ob-
The Supreme Court, while deciding an insurance-related served that the insured had already made a substantial dis-
claim, observed that insurance is a contract of utmost faith closure, while the other policies were of an inconsequential
and it is an insured's duty to disclose all material facts. Non- sum.
disclosure of such fact may result in repudiation of the claim; “The case at hand involves a slightly different consideration.
however, the materiality of a certain fact is decided on a The father of the appellant had disclosed one other life in-
case-to-case basis. surance policy availed by him at the time of filing the pro-
“An insurance is a contract uberrima fides. It is the duty of posal form, but failed to disclose other similar policies. While
the applicant to disclose all facts which may weigh with a the aforementioned judgement relates to a complete fail-
prudent insurer in assuming the risk proposed. These facts ure to disclose in the peculiar circumstances of two policies
are considered material to the contract of insurance, and being availed of in a short span of time, the present case
its non-disclosure may result in the repudiation of the claim. stands on a different footing of a substantial disclosure which
The materiality of a certain fact is to be determined on a would be sufficient for a prudent insurer to determine the
case-to-case basis.,” observed a bench of Justices B.V. risk assumed.”
Nagarathna and Satish Chandra Sharma. Taking a cue from this, the Court said that the present non-
In the present case, the appellant's father had taken an disclosure would not influence the decision of a prudent in-
insurance policy from the respondent (Exide Life Insurance) surer to issue the policy proposed.
for Rs 25 Lakhs. Following his father's death, the present “The policy in question is not a Mediclaim policy; it is a life
appellant submitted a claim for payment of benefits under insurance cover and the death of the deceased has taken
the policy. However, the claim was repudiated on the ground place on account of an accident. Accordingly, failure to
that that there was material suppression by the father of mention about other policies does not amount to a mate-
the appellant, who disclosed only one policy taken by him rial fact in relation to the policy availed and consequently,
from Aviva Life Insurance whereas concealed other life in- the claim could not have been repudiated by the respon-
surance policies. Since the appellant's claim was dismissed dent company.,” the Court observed.
by the State and the National Consumer Commission, he Thus, even though the insurer was aware that there was
approached the Apex Court. another policy for a higher sum assured, the insurer was
At the outset, the Court noted that the policy disclosed by confident that the insured had the capacity to pay the pre-
the appellant was for Rs. 40 Lakhs. This amount was signifi- mium in respect of the present policy.
cantly more than the policies not disclosed, which were of "The respondent-insurer decided to issue a policy to the
an aggregate amount of Rs 2.3 Lakhs. father of the appellant herein even though it was aware
The Court also relied on several cases including its decision that there was another policy for a higher sum assured which
Reliance Life Insurance Co. Ltd. & Anr. v. Rekhaben was taken by the insured from Aviva. Thus, the insurer was
Nareshbhai Rathod whereby the insurer was held to be also aware of the fact that the insured had capability and
entitled to repudiate the insurance claim because of the capacity to pay the premium for the policy obtained from
appellant's failure to disclose his previous insurance policies. Aviva and was confident that the insured had the capacity
The primary consideration that was weighed was that dis- to pay the premium in respect of the policy which was is-

46 March 2025 The Insurance Times