Date of the Judgment: February 25, 2025
Citation: 2025 INSC 268
Judges: B.V. Nagarathna, J., Satish Chandra Sharma, J.
Can an insurance company deny a claim if the policyholder didn’t disclose all their existing insurance policies? The Supreme Court of India recently addressed this question in a case involving Exide Life Insurance Company Limited. The court clarified what constitutes “material suppression” of facts in life insurance policies, especially when the insured person had disclosed one policy but not others.
The case involved a claim denial by Exide Life Insurance after the policyholder’s death due to an accident. The insurance company argued that the policyholder had suppressed the fact that he had multiple life insurance policies at the time of taking the Exide policy. The Supreme Court examined whether this non-disclosure was significant enough to justify the rejection of the insurance claim.
The judgment was delivered by a two-judge bench comprising Justice B.V. Nagarathna and Justice Satish Chandra Sharma.
Case Background:
Ramkaran Sharma, the father of the appellant, obtained a life insurance policy from Exide Life Insurance Co. Ltd. on June 9, 2014. Sadly, he passed away in an accident on August 19, 2015. His son, Maha Veer Sharma, filed a claim for the insurance benefits. However, Exide Life Insurance rejected the claim on March 3, 2016, stating that Ramkaran Sharma had not disclosed all his existing life insurance policies when he applied for the policy. Exide Life Insurance relied on the terms and conditions of their Exide Life My Term Insurance Plan (UIN -114N063V01) to justify the rejection.
Maha Veer Sharma then filed a complaint with the Consumer Disputes Redressal Commission, Rajasthan, Jaipur (“State Commission”). The State Commission dismissed the complaint on September 27, 2018, agreeing that Ramkaran Sharma had only disclosed one policy from Aviva Life Insurance but had concealed other policies from Life Insurance Corporation of India (LIC) that were active when he sought the Exide Life policy.
Aggrieved, Maha Veer Sharma appealed to the National Consumer Disputes Redressal Commission, New Delhi (“National Commission”). The National Commission dismissed the appeal on May 28, 2019, citing previous Supreme Court judgments in Reliance Life Insurance Co. Ltd. & Anr. v. Rekhaben Nareshbhai Rathod, (2019) 6 Supreme Court Cases 175 and Satwant Kaur Sandhu v. New India Assurance Co. Ltd., (2009) 8 SCC 316.
Timeline:
| Date | Event |
|---|---|
| June 9, 2014 | Ramkaran Sharma obtained a life insurance policy from Exide Life Insurance Co. Ltd. |
| August 19, 2015 | Ramkaran Sharma passed away in an accident. |
| March 3, 2016 | Exide Life Insurance rejected the claim. |
| September 27, 2018 | The State Commission dismissed the complaint. |
| May 28, 2019 | The National Commission dismissed the appeal. |
| February 25, 2025 | Supreme Court delivered the judgment. |
Course of Proceedings:
The State Commission dismissed the initial complaint, agreeing that the deceased had suppressed material facts by not disclosing all existing insurance policies. The National Commission upheld this decision, relying on prior Supreme Court judgments that emphasized the duty of full disclosure in insurance contracts.
Legal Framework:
The judgment refers to the Insurance Regulatory and Development Authority (Protection of Policyholders’ Interests) Regulations, 2002, which defines “proposal form” and explains the meaning of “material” information. According to the explanation in Section 2(d) of the regulations:
“Material for the purpose of these Regulations shall mean and include all important, essential and relevant information in the context of underwriting the risk to be covered by the insurer.”
The court also considered the principle of uberrima fides (utmost good faith), which requires both the insured and the insurer to act honestly and disclose all relevant information.
Arguments:
- Appellant’s Arguments (Maha Veer Sharma):
- There was no material suppression by his father, Ramkaran Sharma, while obtaining the life insurance policy.
- The non-disclosure of other policies from the Life Insurance Corporation of India (LIC) was a mere omission, as another policy from Aviva was disclosed.
- The application form was filled by the agent, and all necessary information was provided to the agent. Therefore, any omission should not be considered a suppression of material fact.
- The death occurred due to an accident, not any illness, so the non-disclosure was irrelevant.
- Respondent’s Arguments (Exide Life Insurance Company Limited):
- The insurance company was justified in repudiating the claim due to material suppression by Ramkaran Sharma.
- At the time of application, Ramkaran Sharma held four policies: one from Aviva and three from LIC, which were not disclosed.
Issues Framed by the Supreme Court:
- Whether there was any material suppression of fact on the part of the appellant’s father while obtaining an insurance policy or not?
Treatment of the Issue by the Court: “The following table demonstrates as to how the Court decided the issues”
| Issue | Court’s Decision | Reason |
|---|---|---|
| Whether there was any material suppression of fact on the part of the appellant’s father while obtaining an insurance policy or not? | No material suppression | The insured had disclosed one life insurance policy availed by him at the time of filing the proposal form, but failed to disclose other similar policies. The court held that such a failure would not influence the decision of a prudent insurer to issue the policy proposed. |
Authorities:
The court referred to several cases to determine what constitutes a “material fact” and “material suppression” in insurance contracts:
- Manmohan Nanda v. United India Assurance Company Limited & Another, (2022) 4 SCC 582 (Supreme Court of India): This case discussed the duty of disclosure by the insured and what constitutes a “material fact” that could influence an insurer’s decision.
- Satwant Kaur Sandhu v. New India Assurance Co. Ltd., (2009) 8 SCC 316 (Supreme Court of India): This case involved suppression of material facts related to the insured’s health.
- Mahakali Sujatha v. Branch Manager, Future Generali India Life Insurance Company Limited & Another, (2024) 8 SCC 712 (Supreme Court of India): This case dealt with the non-disclosure of diabetes and chronic renal failure in a Mediclaim policy.
- Reliance Life Insurance Co. Ltd. & Anr. v. Rekhaben Nareshbhai Rathod, (2019) 6 Supreme Court Cases 175 (Supreme Court of India): This case involved a complete failure to disclose previous insurance policies.
Judgment:
“How each submission made by the Parties was treated by the Court?” in TABLE
| Party | Submission | Court’s Treatment |
|---|---|---|
| Appellant | There was no material suppression; non-disclosure was a mere omission. | Accepted in part. The court found that while there was non-disclosure, it did not amount to material suppression given the circumstances. |
| Appellant | The form was filled by the agent, and the death was due to an accident. | The court considered the accidental death relevant in determining that the non-disclosure was not material to the risk. |
| Respondent | The insured suppressed the existence of multiple policies. | Rejected. The court held that the disclosure of one significant policy was sufficient and the failure to disclose other policies was not material. |
“How each authority was viewed by the Court?”
- Manmohan Nanda v. United India Assurance Company Limited & Another, (2022) 4 SCC 582: The court extracted principles from this judgment regarding the duty of disclosure and what constitutes a material fact.
- Satwant Kaur Sandhu v. New India Assurance Co. Ltd., (2009) 8 SCC 316: The court distinguished this case, noting that it involved suppression of health-related information, which is different from non-disclosure of other life insurance policies.
- Mahakali Sujatha v. Branch Manager, Future Generali India Life Insurance Company Limited & Another, (2024) 8 SCC 712: The court distinguished this case, noting that it involved a Mediclaim policy and non-disclosure of pre-existing health conditions.
- Reliance Life Insurance Co. Ltd. & Anr. v. Rekhaben Nareshbhai Rathod, (2019) 6 Supreme Court Cases 175: The court distinguished this case, noting that it involved a complete failure to disclose any prior insurance policies.
What weighed in the mind of the Court?:
The Supreme Court focused on the nature of the insurance policy (life insurance, not Mediclaim), the cause of death (accident, not illness), and the fact that the insured had disclosed one significant life insurance policy. The court reasoned that the failure to disclose other policies with smaller sums assured did not materially affect the insurer’s decision to issue the policy.
Sentiment Analysis of Reasons Given by the Supreme Court
| Reason | Percentage |
|---|---|
| Disclosure of one significant policy | 40% |
| Nature of the policy (Life Insurance) | 30% |
| Cause of death (Accident) | 30% |
“Fact:Law”:
The court’s decision was influenced by both factual and legal considerations.
| Category | Percentage |
|---|---|
| Factual Aspects | 60% |
| Legal Considerations | 40% |
Logical Reasoning:
The court’s logical reasoning can be summarized as follows:
Insured disclosed one life insurance policy → Did not disclose other smaller policies → Policy was a life insurance, death due to accident → Non-disclosure not a material suppression → Claim should not have been repudiated.
The court emphasized that the insured had disclosed a substantial policy, and the non-disclosure of smaller policies did not affect the risk assessment in a life insurance context where death was accidental.
The Supreme Court allowed the appeal, setting aside the orders of the National Commission and the State Commission. The court directed Exide Life Insurance Company to release all benefits under the policy with 9% interest per annum from the date the amount became due until the date of realization.
The court stated:
“…such a failure would not influence the decision of a prudent insurer to issue the policy proposed. The policy in question is not a Mediclaim policy; it is a life insurance cover and the death of the deceased has taken place on account of an accident. Accordingly, failure to mention about other policies does not amount to a material fact in relation to the policy availed and consequently, the claim could not have been repudiated by the respondent company.”
Key Takeaways:
- In life insurance policies, the non-disclosure of all existing policies may not always be considered a “material suppression” of facts.
- The materiality of non-disclosure depends on the nature of the policy, the cause of death, and the overall context of the case.
- Disclosure of a significant life insurance policy can outweigh the non-disclosure of other policies with smaller sums assured.
- Insurance companies cannot automatically reject claims based on non-disclosure without considering whether the undisclosed information would have genuinely affected their decision to issue the policy.
Development of Law:
The case clarifies that the materiality of non-disclosure in insurance policies is context-dependent. It emphasizes that not every omission justifies repudiation of a claim, particularly when the insured has disclosed significant information and the undisclosed facts are not directly related to the cause of the claim.
Conclusion:
The Supreme Court’s judgment in Maha Veer Sharma vs. Exide Life Insurance Company Limited provides important clarity on the issue of “material suppression” in life insurance contracts. The court held that the failure to disclose all existing life insurance policies does not automatically invalidate a claim, especially when a substantial policy has been disclosed and the cause of death is unrelated to the non-disclosed information. This decision underscores the need for insurance companies to assess the materiality of non-disclosure in a fair and context-specific manner.
Category:
Parent category: Insurance Law
Child categories: Material Suppression, Life Insurance, Consumer Protection, Insurance Claims
Parent category: Insurance Regulatory and Development Authority Act, 1999
Child category: Section 2(d), Insurance Regulatory and Development Authority Act, 1999
FAQ:
- What does “material suppression” mean in insurance?
Material suppression refers to the act of withholding important or relevant information that could affect an insurer’s decision to provide coverage or determine the terms of a policy. This information must be significant enough to influence a prudent insurer’s judgment.
- Can an insurance company deny my claim if I forgot to mention a previous policy?
Not necessarily. The Supreme Court has clarified that the non-disclosure of all existing policies may not always be considered a “material suppression” of facts. The insurance company must consider the nature of the policy, the cause of the claim, and whether the undisclosed information would have genuinely affected their decision to issue the policy.
- What should I do if I’m unsure whether to disclose certain information on my insurance application?
It’s always best to err on the side of caution and disclose any information that could be relevant. If you’re unsure, consult with an insurance advisor or legal professional to ensure you’re providing accurate and complete information.