Mahaveer Sharma v. Exide Life Insurance Company Limited
Background
The appellant's father took a life insurance policy from Exide Life Insurance in 2014 and died in an accident in 2015. The insurer repudiated the death claim, alleging the deceased had suppressed material facts by disclosing only one prior policy (from Aviva) while not mentioning smaller policies held with the Life Insurance Corporation of India. Both the State and National Consumer Disputes Redressal Commissions upheld the repudiation, relying on precedent that non-disclosure of prior policies justifies rejection of a claim.
Decision Breakdown
The Supreme Court distinguished this case from precedents involving complete non-disclosure or concealment of health conditions, noting the deceased had made a "substantial disclosure". He disclosed an existing Aviva policy worth Rs. 40 lakhs (a far larger sum than the undisclosed LIC policies totaling about Rs. 2.3 lakhs) and even submitted a copy of that policy to the insurer. Applying the "prudent insurer" test, whether the omitted fact would actually have affected the insurer's decision to issue the policy, the Court held that failing to mention smaller, inconsequential policies would not have influenced a prudent insurer's risk assessment, especially since this was a life policy (not a health/Mediclaim policy) and death occurred by accident, not illness. It found the repudiation improper and ordered the insurer to pay the claim with 9% annual interest.
Lesson Learnt
Not every omission in an insurance proposal form counts as "material suppression" that justifies denying a claim: the test is whether the specific undisclosed fact would genuinely have changed a prudent insurer's decision to issue the policy, and a substantial, good-faith disclosure of the bigger picture can outweigh an omission of minor details.