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Life Insurance Corporation of India v. Sunita

Special Leave Petition (Civil) · 2021 INSC 704Decided 29 Oct 2021
Special Leave Petition (Civil) No. 13868 of 2019
Justice Sanjiv Khanna · Justice Bela M. Trivedi

Background

Sunita's husband took a life insurance policy from LIC that included an accident-death benefit rider, but he failed to pay a premium due in October 2011. He met with a fatal accident on 6 March 2012, then paid the overdue premium on 9 March 2012 without disclosing the accident, and died from his injuries on 21 March 2012. LIC paid the base sum assured but refused the additional accident benefit since the policy was not in force on the date of the accident; the National Consumer Disputes Redressal Commission (NCDRC) sided with Sunita and ordered LIC to pay the accident benefit too.

Decision Breakdown

The Supreme Court held that the policy's own terms required it to be "in force" for the full sum assured at the time of the accident for the accident benefit to apply, and here the policy had lapsed for non-payment well before the accident occurred. The subsequent revival on 9 March 2012, obtained, moreover, without disclosing that an accident had already taken place, could not retroactively bring the 6 March accident within cover, and insurance contracts require utmost good faith (uberrima fides) from the insured. The Court held the NCDRC's decision was erroneous, allowed LIC's appeal, set aside the NCDRC order, and rejected the claim for the accident benefit.

Lesson Learnt

An add-on benefit like an accident rider only protects events that occur while the underlying policy is actually in force; reviving a lapsed policy afterwards does not retroactively cover an accident that happened during the lapse, especially if the policyholder withheld that fact while reviving it.

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

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