Kiran Raj

The Supreme Court has set aside the rejection of an insurance claim on the ground of alleged suppression of material facts, directing the insurer to release the policy benefits along with interest. The Court observed that the insured had made substantial disclosure regarding existing insurance policies and that the insurer was aware of other policies at the time of issuance. It was recorded that the failure to disclose additional policies did not constitute suppression of material facts warranting claim repudiation. The Court directed the insurance company to release the policy amount with 9% annual interest from the date it became due until realization.

The case arose from a dispute regarding an insurance claim under a policy obtained by the appellant’s father from Exide Life Insurance Company Limited. The insured, Ramkaran Sharma, had taken the policy on June 9, 2014, and passed away in an accident on August 19, 2015. The appellant, Mahaveer Sharma, submitted a claim under the policy, which was rejected by the insurer on March 3, 2016. The rejection was based on an alleged suppression of material facts regarding other insurance policies held by the insured at the time of application.

Following the repudiation, the appellant filed a complaint before the Consumer Disputes Redressal Commission, Rajasthan, Jaipur, which dismissed the claim on September 27, 2018. The appellant then appealed to the National Consumer Disputes Redressal Commission (NCDRC), which also dismissed the appeal on May 28, 2019, citing the Supreme Court's rulings in Reliance Life Insurance Co. Ltd. v. Rekhaben Nareshbhai Rathod and Satwant Kaur Sandhu v. New India Assurance Co. Ltd.. The appellant then approached the Supreme Court, challenging the findings of the lower fora.

The appellant argued before the Supreme Court that his father had not suppressed any material fact while obtaining the policy. It was contended that the insured had disclosed a policy obtained from Aviva Life Insurance but had inadvertently omitted three other policies from the Life Insurance Corporation of India (LIC). The appellant submitted that this omission was not intentional and did not relate to health or any risk factor. It was further argued that the insurance agent had filled out the proposal form and that the insured had provided the necessary details, including a copy of the Aviva policy. The appellant relied on Mahakali Sujatha v. Branch Manager, Future Generali India Life Insurance Company Limited, contending that non-disclosure of certain facts should not automatically lead to claim repudiation.

The respondent insurance company defended its decision, asserting that the insured was required to disclose all existing policies at the time of application. It was submitted that the insured had policies with LIC that were not disclosed and that the failure to provide this information constituted suppression of material facts. The respondent relied on Manmohan Nanda v. United India Assurance Company Limited, arguing that the duty of utmost good faith required full disclosure. It was contended that the claim was rightly repudiated under the policy terms.

The Court examined the statutory framework and judicial precedents governing material disclosures in insurance contracts. It was recorded that “an insurance contract is based on the principle of utmost good faith, requiring both parties to disclose all relevant facts affecting the risk.” The Court examined the regulatory provisions under the Insurance Regulatory and Development Authority (Protection of Policyholders’ Interests) Regulations, 2002, which define material facts as “all important, essential and relevant information in the context of underwriting the risk to be covered by the insurer.”

The Court noted that “while the insured did not disclose three LIC policies, he had disclosed a policy from Aviva with a sum assured of Rs. 40 lakhs.” It was further recorded that “the insurer was provided with a copy of the Aviva policy at the time of application, and the sum assured under the disclosed policy was significantly higher than the non-disclosed policies.” The Court observed that the insurer had accepted the proposal despite having knowledge of at least one existing policy and had chosen to issue the insurance policy.

Addressing the issue of material suppression, the Court referred to Rekhaben Nareshbhai Rathod, where claim repudiation was upheld due to the complete failure to disclose another policy. It was observed that “the present case stands on a different footing, as the insured made a substantial disclosure regarding one of his existing policies.” The Court distinguished between cases involving a complete failure to disclose and those where there was partial disclosure.

The Court examined the judgment in Manmohan Nanda, which held that “an insured’s duty to disclose material facts extends to all facts that would influence a prudent insurer in assessing risk.” It was recorded that “what constitutes a material fact depends on the nature of the insurance policy and the risk covered.” The Court also referred to Mahakali Sujatha, noting that “the burden of proving suppression of material facts rests on the insurer.”

The Court held that “the failure to disclose additional policies did not affect the insurer’s decision to issue the policy, as it was already aware of an existing policy for a higher sum assured.” It was recorded that “the sum assured under the non-disclosed policies was relatively small compared to the disclosed policy.” The Court concluded that the omission was not material in the context of the insurance contract.

The Court also examined the question of whether the insurer had waived its right to repudiate the claim. It was recorded that “where an insurer has knowledge of existing policies and proceeds with issuing a new policy, it cannot later claim suppression of material facts as a ground for repudiation.” The Court found that the insurer had accepted the premium and issued the policy despite being aware of another existing policy and that the non-disclosure of additional policies did not materially alter the risk.

Based on these findings, the Supreme Court set aside the orders of the State Commission and the National Commission. The Court directed the insurer to release the policy benefits along with an interest of 9% per annum from the date the amount became due until realization.

Case Title: Mahaveer Sharma v. Exide Life Insurance Company Limited & Anr.
Case Number: 2025 INSC 268; SLP (Civil) No. 2136 of 2021
Bench: Justice B.V. Nagarathna and Justice Satish Chandra Sharma

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