Picture this. Say you already have a life insurance policy (A). You buy another life insurance plan (B) without disclosing to them that you are already covered under plan A. In one of its recent verdicts, the Supreme Court of India ruled that this could be valid grounds for the issuer of your policy B to reject any claims you make to them.
According to the bench of Justices B.V. Nagarathna and Satish Chandra Sharma, “An insurance is a contract uberrima fides. It is the duty of the applicant to disclose all facts which may weigh with a prudent insurer in assuming the risk proposed. These facts are considered material to the contract of insurance, and its non-disclosure may result in the repudiation of the claim.”
For the case in concern, the appellant’s father had purchased a life insurance plan from the respondent, namely Exide Life Insurance for Rs 25 Lakhs. Following his father’s death, when the appellant’s presented his claims to Exide for benefit payout, his claim was repudiated, or rejected.
The reason? Exide Life Insurance noted that the appelant’s father had not disclosed all his other life insurance policies, and brought to their notice only once policy he had taken from Aviva Life Insurance. This was, in their view, “non-disclosure of material facts”, and hence, valid grounds for claim rejection.
Ravi Bhadani, Partner at SNG & Partner Advocates & Solicitors agrees, “The rationale of life insurance is that it is a protection from economic loss, and the sum insured or amount of risk cover should align with the insured’s lifetime value or financial exposure. Insurers assess the overall risk exposure before determining the coverage amount. Failure to disclose can lead to claim denial or policy cancellation on grounds of misrepresentation or concealment of material facts.”
