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Branch Manager, Bajaj Allianz Life Insurance Company Ltd & Ors. v. Dalbir Kaur

Civil Appeal · 2020 INSC 583Decided 9 Oct 2020
Civil Appeal No. 3397 of 2020
Dr. Justice D.Y. Chandrachud · Justice Indu Malhotra · Justice Indira Banerjee

Background

Kulwant Singh bought a life insurance policy in August 2014 naming his mother, Dalbir Kaur, as nominee, but died just over a month later. The insurer's investigation found he had concealed a pre-existing serious ailment (linked to alcohol abuse, with a recent hospitalisation for vomiting blood) when answering the health-disclosure questions in the proposal form, and it repudiated the claim on that basis. The District Forum, State Commission, and National Consumer Disputes Redressal Commission (NCDRC) all ruled against the insurer, holding the death was from natural causes unconnected to the undisclosed ailment, and the NCDRC also imposed Rs. 2 lakh in costs.

Decision Breakdown

The Supreme Court held that life insurance contracts are governed by the principle of utmost good faith, requiring full disclosure of material facts affecting the insurer's risk assessment. It found the NCDRC had wrongly relied on an earlier, distinguishable precedent (Sulbha Prakash Motegaonkar) involving an unrelated and non-life-threatening ailment, whereas here the concealed ailment and recent hospitalisation were directly material to the insurer's decision to issue the policy. Applying its precedents (Asha Goel, Satwant Kaur Sandhu, Rekhaben Nareshbhai Rathod), the Court set aside the NCDRC's ruling and held the repudiation was justified. However, since the insurer had already paid the claim amount during the litigation and the 70-year-old nominee was likely dependent on the deceased, the Court used its Article 142 powers to direct that no recovery be made from her, while still clarifying the legal position in the insurer's favour.

Lesson Learnt

Proposers for life insurance must truthfully disclose all known pre-existing health conditions: concealment of a material fact, even if the eventual cause of death appears unrelated, can be a valid ground for the insurer to repudiate the claim.

Official source (sci.gov.in)View Judgment (PDF)

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