In a recent judgment, the Supreme Court said that failure on the part of a person to reveal his past history of disease is valid ground for repudiation of his insurance policy benefits. A bench of Justices DY Chandrachud and Hemant Gupta in Life Insurance Corporation of India vs Manish Gupta said that a contract of insurance involves “utmost good faith”, and the failure of the insured to disclose his past history of cardiovascular disease is valid ground for repudiation.
The LIC policy was taken by Manish Gupta in June 2008 under the category of non-medical general (NMG) insurance for a sum of Rs 1.6 lakh. Under the NMG policy, no medical exam is done and the policy is subject to self-disclosure by the person taking the insurance of the presence or absence of a disease. In the insurance form, Gupta denied having any pre-existing heart disease. The next year, he submitted a claim after undergoing a mitral valve replacement (MVR). The claim was denied by the Life Insurance Corporation of India (LIC) on the ground that he was suffering from a pre-existing illness.
When this decision was challenged before the District Consumer Disputes Redressal Forum, Ambala, it passed an order in Gupta’s favour and directed the LIC to pay him Rs 2.21 lakh with interest. This order was upheld first by the State Consumer Disputes Redressal Commission and later, the National Consumer Disputes Redressal Commission (NCDRC). The LIC subsequently moved the apex court.
The Supreme Court bench said that the treatment record indicated that Gupta was operated on for rheumatic heart disease. The bench further noted that in Satwant Kaur Sandhu vs New India Assurance Company Ltd, the Court had held, “Thus, it needs little emphasis that when information on a specific aspect is asked for in the proposal form, an assured is under a solemn obligation to make a true and full disclosure of the information on the subject which is within his knowledge. The obligation to disclose extends only to facts which are known to the applicant and not to what he ought to have known. The obligation to disclose necessarily depends upon the knowledge one possesses.”
Willful non-disclosure is also a fraud, the Court said. “Moreover, non-disclosure of any health event is specifically set out as a ground for excluding the liability of the insurer. The terms of the policy envisage, “xii. Fraud If any of the Insured or the Claimant shall make or advance any claim knowing the same to be false or fraudulent as regards amount or otherwise, this Policy shall immediately become void and all claims or payments in respect of all the insured under this Policy shall be forfeited. Non-disclosure of any health event or ailment/condition/sickness/surgery which occurred prior to the taking of this Policy, whether such condition is relevant or not to the ailment/disease/surgery for which the Insured is admitted/treated, shall also constitute Fraud.”
