When Can Life Insurance Claim Be Repudiated For Not Disclosing Other Existing Policies? Supreme Court Explains

The Supreme Court, while deciding an insurance-related claim, observed that insurance is a contract of utmost faith and it is an insured's duty to disclose all material facts. Non-disclosure of such fact may result in repudiation of the claim; however, the materiality of a certain fact is decided on a case-to-case basis.“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.,” observed a bench of Justices B.V. Nagarathna and Satish Chandra Sharma.In the present case, the appellant's father had taken an insurance policy from the respondent (Exide Life Insurance) for Rs 25 Lakhs. Following his father's death, the present appellant submitted a claim for payment of benefits under the policy. However, the claim was repudiated on the ground that that there was material suppression by the father of the appellant, who disclosed only one policy taken by him from Aviva Life Insurance whereas concealed other life insurance policies. Since the appellant's claim was dismissed by the State and the National Consumer Commission, he approached the Apex Court.At the outset, the Court noted that the policy disclosed by the appellant was for Rs. 40 Lakhs. This amount was significantly more than the policies not disclosed, which were of an aggregate amount of Rs 2.3 Lakhs.The Court also relied on several cases including its decision Reliance Life Insurance Co. Ltd. & Anr. v. Rekhaben Nareshbhai Rathod whereby the insurer was held to be entitled to repudiate the insurance claim because of the appellant's failure to disclose his previous insurance policies. The primary consideration that was weighed was that disclosure could have allowed the insurer to question why the insured had in a short span of time obtained two different life insurance policies.However, with respect to the present case, the Court observed that the insured had already made a substantial disclosure, while the other policies were of an inconsequential sum.“The case at hand involves a slightly different consideration. The father of the appellant had disclosed one other life insurance policy availed by him at the time of filing the proposal form, but failed to disclose other similar policies. While the aforementioned judgement relates to a complete failure to disclose in the peculiar circumstances of two policies being availed of in a short span of time, the present case stands on a different footing of a substantial disclosure which would be sufficient for a prudent insurer to determine the risk assumed.”Taking a cue from this, the Court said that the present non-disclosure 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.,” the Court observed.Thus, even though the insurer was aware that there was another policy for a higher sum assured, the insurer was confident that the insured had the capacity to pay the premium in respect of the present policy."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 had the capacity to 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."In view of this, the Court found that the repudiation was improper and it directed to release all benefits under the policy along with an interest of 9% per annum to the appellant. As an upshot, the appeal was allowed and the impugned orders were set aside.Case Name: MAHAVEER SHARMA v. EXIDE LIFE INSURANCE COMPANY LIMITED & ANR., Arising out of SLP (Civil) No. 2136 OF 2021Citation : 2025 LiveLaw (SC) 253Click here to read/ download the judgment

When Can Life Insurance Claim Be Repudiated For Not Disclosing Other Existing Policies? Supreme Court Explains

Gyanvi Khanna

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