Does Hiding Current Insurance policies Result in Rejection? Sure, allow us to perceive the significance of twenty fifth February 2025 Supreme Court docket Judgement. That is an eye-opener for all of us.
Many people whereas shopping for life insurance coverage deliberately or unintentionally could cover the prevailing insurance policies. In some instances, we depend on middlemen to fill within the knowledge and we hardly take into look of what she or he is filling. We simply want the coverage to be issued (greater than you the middlemen). This poses an enormous danger on your declare settlement.
Supreme Court docket’s Eye-Opening Verdict: Does Hiding Current Insurance policies Result in Insurance coverage Declare Rejection?
Mahaveer Sharma vs Exide Life Insurance coverage Firm Restricted on 25 February 2025
In a big judgment on February 25, 2025, the Supreme Court docket of India addressed the implications of non-disclosure of present insurance coverage insurance policies by policyholders within the case of Mahaveer Sharma vs. Exide Life Insurance coverage Firm Restricted. This judgment gives readability on the obligations of policyholders and the grounds on which insurers can repudiate claims based mostly on such non-disclosures.?
Case Background
The appellant, Mahaveer Sharma, is the son of the deceased policyholder, Ramkaran Sharma. Ramkaran had obtained a life insurance coverage coverage from Exide Life Insurance coverage Firm Restricted on June 9, 2014, with a sum assured of Rs.25 lakhs. Following Ramkaran’s unintentional dying on August 19, 2015, Mahaveer filed a declare underneath this coverage. Nonetheless, Exide Life Insurance coverage repudiated the declare on March 3, 2016, citing the non-disclosure of present insurance coverage insurance policies by Ramkaran on the time of making use of for the coverage.?
Particularly, whereas Ramkaran had disclosed a Rs.40 lakh coverage from Aviva Life Insurance coverage, he failed to say three different insurance policies from the Life Insurance coverage Company of India (LIC) totaling Rs.2.3 lakhs. The insurer argued that this omission constituted materials suppression of info, justifying the repudiation of the declare. Each the State Client Disputes Redressal Fee and the Nationwide Client Disputes Redressal Fee upheld the insurer’s determination, main Mahaveer to attraction to the Supreme Court docket.
Authorized Points
The first authorized query earlier than the Supreme Court docket was whether or not the non-disclosure of present insurance coverage insurance policies, notably these with comparatively small sums assured, constituted materials suppression of info ample to justify the repudiation of the insurance coverage declare.?
Supreme Court docket’s Evaluation
The Supreme Court docket emphasised that insurance coverage contracts are based on the precept of uberrima fides (utmost good religion), obligating the insured to reveal all materials info that might affect a prudent insurer’s determination to simply accept the chance. Nonetheless, the Court docket additionally famous that not each omission warrants declare rejection; the materiality of the non-disclosed truth have to be assessed on a case-by-case foundation.?
On this case, the Court docket noticed that Ramkaran had disclosed a big coverage from Aviva Life Insurance coverage with a sum assured of Rs.40 lakhs, which was considerably increased than the mixed worth of the undisclosed LIC insurance policies totaling Rs.2.3 lakhs. The Court docket reasoned that the disclosure of the bigger Aviva coverage indicated an intention to offer related data and that the omission of the smaller LIC insurance policies was not a deliberate try and mislead the insurer.?
Moreover, the Court docket distinguished this case from earlier rulings the place non-disclosure of present insurance policies led to assert repudiation. For example, in Reliance Life Insurance coverage Co. Ltd. & Anr. v. Rekhaben Nareshbhai Rathod, the insured had did not disclose a not too long ago obtained substantial coverage, which was deemed materials. In distinction, the non-disclosed insurance policies within the current case had been of comparatively insignificant worth and didn’t materially have an effect on the insurer’s danger evaluation.
The Court docket burdened that insurers should show intentional fraud, not simply errors. Exide failed to point out that Ramkaran intentionally hid the LIC insurance policies to deceive them.
What Does This Imply for Policyholders?
- Disclose All Insurance policies, However Minor Omissions Could Not Sink Your Declare
- All the time point out present insurance policies, however the Court docket acknowledges that small errors or omissions (like forgetting minor insurance policies) could not justify declare denial. However I strongly recommend you irrespective of how a lot small the coverage could also be. It’s higher to reveal it to keep away from the long run battle.
- Unintentional Deaths Are Handled In a different way
- If dying is because of an accident (not hidden well being points), insurers have much less grounds to argue “materials suppression.”
- Brokers’ Errors Matter
- If an insurance coverage agent fills your kind incorrectly, the corporate can’t blame you for unintentional errors. Nonetheless, I insist you fill out the shape by yourself quite than counting on an insurance coverage agent. They might fill out the shape to make it possible for the coverage have to be issued at any price. Therefore, I strongly advocate that by no means permit an agent to fill out your proposal kind.
- Struggle Unfair Denials
- Insurers should show deliberate fraud, not simply technical errors. Don’t hesitate to attraction to increased courts.
The Supreme Court docket’s determination is a win for odd policyholders. It reminds insurers that declare rejections have to be based mostly on actual fraud, not minor errors. However on the similar time, it doesn’t imply that whereas shopping for life insurance coverage we ignore the small coverage particulars or materials info.
Share all of the info correctly, particularly relating to your well being, earnings, and present coverage particulars. Keep away from future issues or the scenario of your loved ones members combating for the declare quantity sooner or later.
What present policyholders can do?
- Test your life insurance coverage insurance policies. If you happen to by chance missed to reveal the sooner insurance policies (on the time of shopping for however not insurance policies which you bought after shopping for the coverage), then higher to reveal with the insurer via electronic mail and in no matter approach you’re feeling snug (however not orally) and preserve the data of the identical for future utilization.
- Do do not forget that it’s important to inform the prevailing insurance coverage solely on the time of shopping for however not the long run shopping for with previous insurers. Therefore, allow us to say Mr.A bought one LIC coverage in 2020 for a sum assured of Rs.2 lakh. In 2021 he utilized to purchase a time period life insurance coverage of Rs.1 Cr with HDFC Life, then he has to reveal the prevailing Rs.2 lakh with HDFC Life. Now, assume that in 2024, he purchased one new time period life insurance coverage with ICICI Life. At that time limit, he has to tell HDFC and LIC life insurance coverage particulars with ICICI Life. However he has no must disclose the ICICI Life insurance coverage particulars with HDFC or LIC.