2026 Supreme(Online)(NCDRC) 325

NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
J. Rajendra, Presiding Member, Anoop Kumar Mendiratta, Member
Rohini Balaji Goli – Appellant
Versus
Aditya Birla Sunlife Insurance Company Ltd. – Respondent
CONSUMER COMPLAINT NO. 642 OF 2018

A contract of insurance is uberrimae fidei (utmost good faith). Suppression of material facts, including significant prior insurance coverage, that would influence a prudent insurer's decision-making regarding risk assessment and premium underwriting justifies the repudiation of a policy claim.

Headnote:(A) Insurance - Contract of Insurance - Principles of Utmost Good Faith - Non-disclosure of material facts - Repudiation of claim - Whether non-disclosure of existing insurance policies and prior physical disability constitutes material suppression sufficient to void policy - Insurer must prove that suppressed information would have been considered material by a prudent insurer (Paras 18-20, 29).

(B) Insurance - Material Fact - Evaluation of risk - Disclosure of previous insurance policies - Partial disclosure versus fraudulent suppression - Whether non-disclosure of minor policies and misstatement of sum assured in larger policies amounts to breach of duty - The test of materiality involves whether the knowledge of the fact would affect a prudent insurer’s decision to accept the risk or fix the premium (Paras 19, 29).

Facts of the case:
The complainant sought to claim the death benefit under two life insurance policies initiated by the deceased life assured. The insurer repudiated the claims on the ground that the deceased failed to disclose a prior partial permanent disability resulting from a vehicular accident and suppressed information regarding several other insurance policies held with different providers. The complainant argued that the deceased was medically examined by the insurer’s panel doctor and found fit, and that the cause of death was unrelated to the past accident.

Findings of Court:
The court held that the non-disclosure of the previous physical disability did not constitute a material suppression because the deceased was cleared by the insurer's own medical examiner and the injury was unrelated to the cause of death. Regarding the multiple insurance policies, the court distinguished between the two policies. It found the repudiation for the first policy unjustified as the partial disclosure occurred and minor policies were deemed immaterial to a prudent insurer. However, it upheld the repudiation for the second policy due to complete failure to disclose significant prior insurance coverage, which was vital for risk assessment.

Issues: Whether the non-disclosure of physical disability and previous insurance policies constitutes material misrepresentation justifying the repudiation of claims, and whether the insurer is entitled to selectively honor insurance contracts based on the completeness of disclosures in individual proposal forms.

Ratio Decidendi: Insurance contracts are based on 'utmost good faith.' A fact is material if it would influence a prudent insurer's decision. While minor non-disclosures or partial disclosures that do not affect the risk profile do not necessarily void a contract, the systematic suppression of substantial existing insurance coverage is a material misrepresentation that entitles an insurer to repudiate the contract.

Result: Complaint partially allowed; insurer directed to honor the first policy, with the repudiation of the second policy upheld.