Failure To Mention Other Policies Does Not Amount To Material Fact In Relation To Life Insurance Policy Availed: Supreme Court Directs Insurance Company To Release All Benefits To Claimant

The appeal before the Apex Court arose out of an order passed by the National Consumer Disputes Redressal Commission, New Delhi, (National Commission) upholding the order the Consumer Disputes Redressal Commission, Rajasthan, Jaipur (State Commission) by which the claim of the appellant was rejected on account of suppression of material facts.

The Division Bench of Justice B.V. Nagarathna and Justice Satish Chandra Sharma observed, “We are of the considered view that such a failure would not influence the decision of a prudent insurer to issue the policy proposed. The policy in question is not a Mediclaim policy; it is a life insurance cover and the death of the deceased has taken place on account of an accident. Accordingly, failure to mention about other policies does not amount to a material fact in relation to the policy availed and consequently, the claim could not have been repudiated by the respondent company.”

Advocate Abhijeet Singh represented the Appellant, while AOR Rakesh K. Sharma represented the Respondent.

Factual Background

The father of the appellant, Ramkaran Sharma, had obtained an insurance policy from the respondent, Exide Life Insurance Co. Ltd., in 2014 and, unfortunately, died in an accident thereafter. The appellant, being the son of late Ramkaran submitted a claim for payment of benefits under the policy. However, the said claim was repudiated on the ground that there was material suppression by the father of the appellant while applying for an insurance policy.

The appellant submitted a complaint before the State Commission, and the claim was dismissed on the grounds that while submitting the proposal, the deceased insurer had disclosed only one policy taken by him from Aviva Life Insurance, whereas he had concealed other insurance policies which he had taken from the Life Insurance Corporation of India and were in force at the time the insurance cover was sought. The Appellant’s appeal before the National Commission was also dismissed. Aggrieved thereby, the Appellant approached the Apex Court.

Reasoning

On a perusal of the facts, the Bench noticed that the father of the appellant at the relevant point of time was also insured by Life Insurance Corporation of India, and there were other insurance policies in existence at the time the insurance cover was issued by the respondent company. Moreover, the disclosed policy – issued by Aviva – was erroneously mentioned in the proposal form as assuring a sum of Rs.4 lakhs, whereas the policy was for Rs. 40 lakhs, an amount significantly more than the policies not disclosed and the sum assured by the subject policy herein.

Coming to the issue as to what falls from the phrase “material facts” and consequently what may be considered a ‘material suppression’ for the purpose of insurance contracts, the Bench observed, “An insurance is a contract uberrima fides. It is the duty of the applicant to disclose all facts which may weigh with a prudent insurer in assuming the risk proposed. These facts are considered material to the contract of insurance, and its non-disclosure may result in the repudiation of the claim. The materiality of a certain fact is to be determined on a case-to-case basis.”

The Bench mentioned that the insured had made a substantial disclosure inasmuch as he had disclosed that he had obtained another policy from a private insurer, Aviva, for an assured sum of Rs. 4 lakh (which was Rs 40 lakh), which was in force. The details of only one insurance cover were mentioned and not about others, which were produced by the insurer before the State Commission. This, according to the Bench, was a partial disclosure.

As per the Court, the present matter stood on a different footing of a substantial disclosure, which would be sufficient for a prudent insurer to determine the risk assumed. The respondent-insurer decided to issue a policy to the father of the appellant herein even though it was aware that there was another policy for a higher sum assured which was taken by the insured from Aviva. Thus, the insurer was also aware of the fact that the insured had capability and capacity to pay the premium for the policy obtained from Aviva and was confident that the insured could pay the premium in respect of the policy which was issued to the insured by the respondent-insurer for a sum lesser assured being Rs.25 lakh only.

Therefore, according to the Bench, the appellant herein was entitled to the benefit of the policy, which was issued by the respondent, as failure to mention other policies did not amount to a material fact in relation to the policy availed. Allowing the appeal, the Bench set aside the orders repudiating the claim of the appellant. “The respondent insurance company is directed to release all benefits under the policy in question along with an interest of 9% per annum from the date the amount became due till the date of its realization to the appellant”, it concluded.

Cause Title: Mahaveer Sharma v. Exide Life Insurance Company Limited & Anr. (Neutral Citation: 2025 INSC 268)

Appearance:

Appellant: Advocates Abhijeet Singh, Anirudh Singh, Chitrangda Rastravara, Dhananjai Shekhwat, Aishwary Mishra, Anjali Saxena, Dashrath Singh, AOR Gp. Capt. Karan Singh Bhati

Respondent: AOR Rakesh K. Sharma

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