2024 (11) TMI 1 - SC - Indian Laws

Insurance claim repudiation overturned as insurer failed to prove material fact suppression under Section 45

MAHAKALI SUJATHA Versus THE BRANCH MANAGER, FUTURE GENERALI INDIA LIFE INSURANCE COMPANY LIMITED & ANOTHER

MAHAKALI SUJATHA Versus THE BRANCH MANAGER, FUTURE GENERALI INDIA LIFE INSURANCE COMPANY LIMITED & ANOTHER - 2024 INSC 296 Issues Involved:1. Whether the respondent insurance company was justified in repudiating the insurance claim on the grounds of suppression of material information regarding existing policies with other insurers.2. The applicability and interpretation of Section 45 of the Insurance Act, 1938, in the context of alleged suppression of material facts.3. The principle of 'uberrimae fidei' (utmost good faith) and its application in insurance contracts.4. The burden of proof and its discharge in the context of alleged non-disclosure of material facts.5. The application of the contra proferentem rule in interpreting ambiguous terms in insurance contracts.Detailed Analysis:1. Repudiation of Insurance Claim:- The insurance company repudiated the claim on the grounds that the insured-deceased had suppressed material facts regarding existing life insurance policies with other insurers. The NCDRC upheld this repudiation, relying on the precedent set by the Supreme Court in 'Reliance Life Insurance Co Ltd vs. Rekhaben Nareshbhai Rathod,' which supported repudiation due to non-disclosure of existing insurance policies.- However, the Supreme Court found that the insurance company failed to provide adequate evidence to substantiate their claim of suppression. The details provided were incomplete, lacked corroborative evidence, and did not establish that the insured had indeed taken multiple policies from other insurers.2. Section 45 of the Insurance Act, 1938:- Section 45 restricts the insurer from questioning a policy after two years from its commencement, unless it can prove that a statement was on a material matter, suppressed facts which were material to disclose, and that it was fraudulently made by the policyholder.- The Court emphasized that the burden of proof lies on the insurer to establish the materiality of the fact suppressed and the knowledge of the insured about such suppression. In this case, the insurer failed to discharge this burden adequately.3. Principle of Uberrimae Fidei:- Insurance contracts are governed by the principle of utmost good faith, requiring full disclosure of all material facts by the insured. The insurer argued that the insured had a duty to disclose all existing policies, which was not fulfilled.- The Court reiterated that the principle requires both parties to the contract to make complete disclosures, and any suppression should be materially significant to the risk being insured.4. Burden of Proof:- The Court highlighted that the burden of proof rests on the party asserting the affirmative of the issue. In this case, the insurance company, which alleged suppression, had to prove it with evidence.- The Court found that the insurance company did not provide sufficient evidence to prove the existence of other policies, as required under the law of evidence.5. Contra Proferentem Rule:- The Court applied the contra proferentem rule, which interprets any ambiguity in contractual terms against the drafter, in this case, the insurance company.- The questions in the proposal form were found to be ambiguous, and thus, could not be used to negate the benefit of the policy by repudiation.Conclusion:The Supreme Court set aside the NCDRC's order, directing the insurance company to pay the claim amounts under both policies to the appellant, with interest. The appeal was allowed, emphasizing the need for clear evidence and proper interpretation of insurance contract terms.