Reveal all details about policy terms and conditions: Supreme Court to insurance companies

The top court directed Future General India Life Insurance Company Limited to indemnify the life insurance claim of complainant, Mahakali Sujatha, sole legal heir to the originally insured person, S. Venkateswarlu, who died in February 2011

R. Balaji, TT, New Delhi, 12.04.24 : The Supreme Court has ruled that just as the insured has a duty to disclose all relevant facts, the insurance company too is under a statutory obligation to inform the insured about the policy terms and conditions without suppressing any details.

"Just as the insured has a duty to disclose all material facts, the insurer must also inform the insured about the terms and conditions of the policy that is going to be issued to him and must strictly conform to the statements in the proposal form or prospectus, or those made through his agents," the bench of Justices B.V. Nagarathna and Augustine George Masih said in a judgment.

The top court directed Future General India Life Insurance Company Limited to indemnify the life insurance claim of complainant, Mahakali Sujatha, sole legal heir to the originally insured person, S. Venkateswarlu, who died in February 2011.

It wasn’t clear from the judgment what exactly the company had suppressed, but the firm had contended that Venkateswarlu had not informed it that he held multiple insurance policies from different companies.

“The impugned order dated 22.07.2019 passed by the NCDRC (National Consumer Disputes Redressal Commission) is set aside. The respondent company is directed to make the payment of the insurance claim under both the policies to the appellant, amounting to Rs 750,000 and Rs 960,000, with interest at the rate of 7% per annum from the date of filing the complaint till the actual realisation,” Justice Nagarathna said.

The NCDRC had rejected the complainant’s claim and allowed the company’s stand that the policy could not be honoured as the deceased had taken out as many as 15 life insurance policies from various firms without making the disclosure to Future General India, which amounted to suppressing material facts.

The apex court noted that the insurance company had not produced any documentary evidence before the district forum to prove that the insured had taken out multiple insurance policies from different companies and had suppressed the fact.

Before the state commission, the company had provided a tabulation of the 15 different policies taken by Venkateswarlu amounting to Rs 7,127,702. However, the tabulation was not supported by any other documentary evidence.

“It is clear that the principle of utmost good faith puts reciprocal duties of disclosure on both parties to the contract of insurance. These reciprocal duties mandate that both the parties make complete disclosure to each other, so that the parties can take an informed decision and a fair contract of insurance exists between them. No material facts should be suppressed, which may have a bearing on the risk being insured and the decision of the party to undertake that risk.”