Cancelling the policy at the stage of claim

(How far it is correct?) 

Case law :Mahakali Sujatha V/S Branch Manager Future Generali India Life Insurance Company &Others (SC)

Civil appeal no 38210f 2024 decided on 10.4.2024

Legal issues :

1. Section 45 of Insurance Act -Stage & reason for Cancelling the Policy

 2. What is material fact and who is Burdened to prove it.

3. What is fraudulently given false information and who is to prove it 

First Issue :

Law Applicable : (Section 45 of Insurance (amendment) Act 2015)

Recalling policy on two grounds only within three years and with prior notice

45 (1) No policy of life insurance shall be called in question on any ground whatsoever after the expiry of three years from the date of the policy,

Rejecting the claim under section 45 of Insurance Act

·        In case of fraud no refund of premium amount

·        In case of misrepresentation or concealment of facts, refunding premium

 How three years calculated

a)from the date of issuance of the policy

b) the date of commencement of risk or

c)the date of revival of the policy or

d) the date of the rider to the policy, whichever is later

 

Supreme Court Held

1.     “Insurer cannot question policy after expiry of time period and if it does, Burdon rests on insurer to establish the materiality of fact supressed and knowledge of insured about such suppression ”

2.     “Onus was on insurer to show that the insured had fraudulently given false information and said information was related to material fact

3.     Facts and circumstances decide this factor says SC

 

Second issue

1.What is non-disclosure of material fact?

SC in  the matter of Asha rani Goel v/s LIC of India 2009 

·         Insured concealed the material fact

·         Fact so concealed was of such importance that insurance may not have issued policy

·         The facts so alleged having concealed was known the  insured

2. Who is to prove misrepresentation ?

Duty of Insurance Company to notice

Insurer shall have to communicate in writing to the insured or the legal representatives or nominees or assignees of the insured the grounds and materials on which such decision to repudiate the policy of life insurance is based:

Third Issue

3.What is Fraud?

 the expression "fraud" means any of the following acts committed by the insured or by his agent, with intent to deceive the insurer or to induce the insurer to issue a life insurance policy:—

(a)    the suggestion, as a fact of that which is not true

(b)   the active concealment of a fact by the insured having knowledge or belief of the fact;

(c)     any other act fitted to deceive; and

(d)     any such act or omission as the law specially declares to be fraudulent.

(e)    Mere silence as to facts likely to affect the assessment of the risk by the insurer is not fraud, unless the circumstances of the case are such that regard being had to them, it is the duty of the insured or his agent keeping silence, to speak, or unless his silence is, in itself, equivalent to speak.

FoForfeature Rule 

·        In case of repudiation of the policy on the ground of misstatement or suppression of a material fact, and not on the ground of fraud, the premiums collected on the policy till the date of repudiation shall be paid to the insured or the legal representatives or nominees or assignees of the insured within a period of ninety days from the date of such repudiate

·        In case of fraud   no refund. Insured to prove no fraud

“Onus was on insurer to show that the insured had fraudulently given false information and said information was related to material fact ”

Once insurer alleges with reason ,insured has to prove not guilty

Dr Prem Lata

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