The Hindu : Front Page : LIC policy can be rejected for suppression of fact: Court

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Thursday, Nov 22, 2007
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LIC policy can be rejected for suppression of fact: Court

Legal Correspondent

Insurance contracts are based on the utmost faith

New Delhi: The Life Insurance Corporation is not liable to pay the insurance amount to legal heirs/claimants in the event of non-disclosure and mis-statement in the proposal form furnished by the insured person at the time of his or her taking the policy, the Supreme Court has held.

“The proposal can be repudiated if a fraudulent act [by the insured person] is discovered,” said a Bench.

“A deliberate wrong answer which has a great bearing on the contract of insurance, if discovered, may lead to the policy being vitiated in law.”

Writing the judgment, Justice Sinha pointed out that Section 45 of the Insurance Act postulated repudiation of such policy within two years. “If a person makes a wrong statement with the knowledge of the consequence therefor, he would ordinarily be estopped from pleading that even if such a fact had been disclosed, it would not have made any material change.”

It was a well-settled law that insurance contracts were based on the utmost faith and every material fact must be disclosed, otherwise there was good ground for rescission, the Bench pointed out.

In the instant case, the insured person, in the proposal form, gave “No” as the answer to the questions, “Did you ever have any operation, accident or injury?” and “Have you remained absent from place of your work on ground of health during the last 5 years?” To the question, “What has been your state of health?,” the answer was, “Good.”

It was an admitted fact that the insured person had undergone an operation for adenoma thyroid but this information was suppressed. When the person died within six months of taking the policy, the claimants P.C. Chacko and another sought recovery of the insurance amount. While the trial court decreed in their favour, on appeal the Kerala High Court reversed the decree.

The apex court dismissed Mr. Chacko’s appeal against this judgment.

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