SC rules no insurance payment if facts are suppressed
The Supreme Court has ruled that an insured person or nominee is not entitled to compensation if they had suppressed facts, quashing the accident death benefits against a lapsed policy that had been revived after the accident without disclosure about the mishap.
The bench of Justices Sanjiv Khanna and Bela Trivedi passed the ruling on an appeal from the Life Insurance Corporation (LIC), which had challenged a National Consumer Disputes Redressal Commission (NCDRC) order granting a claim from Sunita, wife of Pradeep Kumar who had died in a road accident.
“It is not disputed that the husband of the complainant had taken the life insurance policy on 14.04.2011, that the next premium had fallen due on 14.10.2011 but was not paid by him, that the husband of the complainant met with an accident on 06.03.2012, that thereafter the premium was paid on 09.03.2012 and that he expired on 21.03.2012,” the judgment, authored by Justice Trivedi, said.
“It is also not disputed that at the time of making payment of premium on 09.03.2012, it was not disclosed by the complainant or her husband to the appellant-Corporation about the accident which had taken placed on 06.03.2012.
“The said conduct on the part of the complainant and her husband in not disclosing about the accident to the corporation not only amounted to suppression of material fact and lacked bona fides but smacked of their mala fide intention, and therefore, the accident benefit claim of the complainant was liable to be rejected on the said ground alone.”
The judgment added: “It is (a) well settled legal position that in a contract of insurance there is a requirement of Uberrima fides i.e. good faith on the part of the assured.”
The apex court said the terms of an insurance policy had to be strictly construed, and that it was not permissible to rewrite the contract while interpreting the terms of the policy.
“In the instant case, condition No. 11 of the policy clearly stipulated that the policy has to be in force when the accident takes place. In the instant case, the policy had lapsed on 14.10.2011 and was not in force on the date of accident i.e. on 06.03.2012. It was sought to be revived on 09.03.2012 after the accident in question, and that too without disclosing the fact of accident which had taken place on 06.03.2012,” the judgment said.
“Thus, apart from the fact that the respondent complainant had not come with clean hands to claim the add-on/extra accident benefit of the policy, the policy in question being not in force on the date of accident as per the condition No. 11 of the policy, the claim for extra accident benefit was rightly rejected by the appellant-Corporation.”
After Kumar’s death, Sunita had filed a claim before the LIC, which paid her the assured sum of Rs 375,000 but not the additional sum of Rs 375,000 towards accident claim benefit.
She approached the district consumer forum, which ruled in her favour. The state commission set this ruling aside but on an appeal from Sunita, the NCDRC restored the district forum’s ruling. The LIC then appealed before the apex court on April 24, 2019.