RELIANCE LIFE INSURANCE CO LTD & ANR. versus REKHABEN NARESHBHAI RATHOD

Citation: [2019] 6 S.C.R. 733 · Decided: 24-04-2019 · Supreme Court of India · Bench: D.Y. CHANDRACHUD · Disposal: Appeal(s) allowed

Cited by 5 judgment(s) · cites 2 · see the full citation network in Lexace

Judgment (excerpt)

A
B
C
D
E
F
G
H
733
RELIANCE LIFE INSURANCE CO LTD & ANR.
v.
REKHABEN NARESHBHAI RATHOD
(Civil Appeal No. 4261 of 2019)
APRIL 24, 2019
[DR DHANANJAYA Y CHANDRACHUD AND
HEMANT GUPTA, JJ.]
Consumer Protection Act, 1986: Deficiency of service –
Insurance policy – Repudiation of claim – Spouse of the respondent
took a policy from insurance company – Two months later he
submitted proposal for life insurance policy of the appellant-
insurance company and in the proposal form, on the query as to
whether the proposer was currently insured or had applied for life
insurance cover, his answer was in negative – Appellant issued a
policy to him – After about a year he died – Appellant repudiated
the claim of respondent on the ground of suppression of material
fact relating to details of life insurance policies held by her husband
– Consumer complaint by respondent – Held: s.45 curtails the
common law rights of the insurer after lapse of two years from the
date the cover for life insurance was effected – However, the
repudiation in the instant case was within a period of two years
from the commencement of the insurance cover – The contracts of
insurance are governed by the principle of utmost good faith – The
duty of mutual fair dealing requires all parties to a contract to be
fair and open with each other to create and maintain trust between
them – The duty of full disclosure requires that no information of
substance or of interest to the insurer is omitted or concealed –
Whether or not the insurer would have issued a life insurance cover
despite the earlier cover of insurance is a decision which was
required to be taken by the insurer after duly considering all relevant
facts and circumstances – Prior to undertaking the risk, this
information could potentially allow the insurer to question as to
why the insured had in such a short span of time obtained two
different life insurance policies – Such a fact is sufficient to put the
insurer to enquiry – The information which was sought by the insurer
was indeed material to its decision as to whether or not to undertake
   [2019] 6 S.C.R. 733
733
A
B
C
D
E
F
G
H
734
SUPREME COURT REPORTS
[2019] 6 S.C.R.
a risk – The proposer was aware of the fact, while making a
declaration, that if any statements were untrue or inaccurate or if
any matter material to the proposal was not disclosed, the insurer
may cancel the contract and forfeit the premium – The failure of the
insured to disclose the policy of insurance obtained earlier in the
proposal form entitled the insurer to repudiate the claim under the
policy – Insurance Regulatory and Development Authority
(Protection of Policyholders’ Interests) Regulations 2002 – Regn
2(d).
Insurance Act 1932: s.45 – Repudiation of policy of life
insurance – Limitation period – Held: s.45 stipulates restrictions
upon the insurer calling into question a policy of life insurance
after the expiry of two years from the date on which it was effected
–  Beyond two years, the burden lies on the insurer to establish the
inaccuracy or falsity of a statement on a material matter or the
suppression of material facts – In addition to this requirement, the
insurer has to establish that this non-disclosure or, as the case may
be, the submission of inaccurate or false information was
fraudulently made and that the policy holder while making it knew
of the falsity of the statement or of the suppression of facts which
were material to disclose – s.45 curtails the common law rights of
the insurer after two years have elapsed since the cover for life
insurance was effected.
Doctrines/Principles: Doctrine of uberrima fidei – Insurance
is governed by the doctrine of uberrima fidei – This postulates that
there must be  complete good faith on the part of the insured – The
relationship between an insurer and the insured is recognized as
one where mutual obligations of trust and good faith are paramount
–  In a contract of insurance, the insured can be expected to have
information of which she/he has knowledge – This justifies a duty
of good faith, leading to a positive duty of disclosure – Insurance.
Insurance Regulatory and Development Authority  (Protection
of Policyholders’ Interests) Regulations 2002: Regn 2(d) – Proposal
form – Held:  Regn 2(d) specifically defines the expression “proposal
form” as a form which is filled by a proposer for insurance to furnish
all material information required by the insurer in respect of a risk
– The purpose of the disclosure is to enable t

Excerpt shown. Read the full judgment & AI analysis in Lexace.