DATE OF THE ORDER:
24 April 2019
JUDGES:
Justice DY Chandrachud
PARTIES:
Reliance Life Insurance (Appellant)
Rekhaben Nareshbhai Rathod (Respondent)
SUBJECT
In this case, the court analyzed the nature of disclosure and grounds of repudiation of the claim. The court allowed the appeal and allowed the respondent to withdraw 50% of the decretal amount.
OVERVIEW
i. The spouse of the Respondent purchased a life insurance policy from the Appellant in 2009. Before that, the respondent had purchased the life insurance policy from Max New York Life Insurance Co. Ltd in 2009.
ii. The information regarding the Max New York Life Insurance policy was not disclosed to the Appellant at a time when the policy was issued to the Respondent.
iii. After the death of the Respondent's spouse, she claimed the Policy in February 2010.
iv. Max New York informed the Appellant that the Respondent's spouse had been previously insured with them. After that, the Appellant rejected the claim with the Respondent.
v. The Respondent filed a complaint which was dismissed by the district commission on the grounds of non-disclosure.
vi. However, the State Commission and the National Commission allowed the appeal stating the omission of the insured to disclose a previous policy of insurance would not influence the mind of a prudent insurer
vii. Later, the appellant filed an appeal against the judgment of the National Consumer Disputes Redressal Commission.
viii. Counsel appearing on behalf of the appellant submitted that-
- The respondent suppressed the fact despite the specific disclosures required in the proposal form and it is a breach of duty of the proposer to furnish complete details
- The claim was rejected by the appellant within two years. If the information in the proposal form is not disclosed the insurer is entitled to reject the claim under Sections 17 and 19 of the Contract Act 1872
- Section 45 provides that the policy cannot be called in question on the ground of misstatement after two years. A repudiation within two years is not governed by Section 45 and NCDRC’s judgment is contrary to the law laid down by the court.
ix. Counsel appearing on behalf of the respondent submitted that:
- The agent induced the insured to take a life insurance policy by taking his signature on a blank proposal form with the premium in cash.
- A non-disclosure of a previous insurance policy cannot be a ground for rejecting the claim.
- There is no prohibition in holding any number of life insurance policies from different insurers.
LEGAL PROVISIONS
- Section 45 of the Insurance Act 1938 - Policy not to be called in question on the ground of misstatement after two years
- Section 17 of the Contract Act 1872 - Fraud defined
- Section 19 of the Contract Act 1872 - Voidability of agreements without free consent
- Article 142 of the Indian Constitution - Enforcement of decrees and orders of Supreme Court and unless as to discovery, etc.
ANALYSIS OF THE ORDER
i. After analyzing the requirements of Section 45 the court held:
- Every fact of the material must be disclosed otherwise it a ground for cancellation of the contract. If there are any suppression of facts, the policy can be called into question.
- A mediclaim policy is meant to assure the policy-holder regarding expenses pertaining to injury, accidents or hospitalisations. It is a non-life insurance policy but it is a contract of insurance and falls in the category of contract.
- The arguments of the respondent regarding the signature cannot be accepted.
ii. The court allowed the appeal and set aside the impugned judgment and order of the NCDRC dated 20 February 2015. The consumer complaint filed was dismissed.
iii. The respondent was allowed to withdraw 50% of the decretal amount.
CONCLUSION
Life insurance protects a family's financial future in the event of an untimely death within the policy's term. People inquire about Section 45 of the Insurance Act of 1938 when selecting a life insurance plan from any insurer. According to this section, the first three years of a life insurance policy are important because no insurer can contest a claim if the insured dies after this time. The policyholder must disclose all material facts while purchasing life insurance. The onus is on the insurer that if the insurer had been aware of the fact, no life insurance policy would have been issued. One should always read terms and conditions before signing the proposal. Once its signed, it is deemed that you have read all the questions and answers filled therein. There is a presumption in law.
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