Non-Disclosure of Prior Accidents in Car Insurance Not Always 'Fundamental Breach': NCDRC Reduces Claim by 50% - 2025-04-17

NCDRC Upholds Car Insurance Claim, But Reduces Payout by 50% Citing Non-Disclosure of Accident History

New Delhi, March 21, 2025 – The National Consumer Disputes Redressal Commission (NCDRC) has partly allowed a revision petition filed by New India Assurance Company Ltd., directing the insurer to pay 50% of a car insurance claim. While overturning the District Forum's dismissal, the NCDRC also modified the State Commission's order for a full claim minus No Claim Bonus (NCB), citing the insured's non-disclosure of prior accidents as a significant factor, though not a 'fundamental breach' warranting complete repudiation.

The bench, comprising Hon’ble Mr. Suresh Chandra , Presiding Member, and Hon’ble AVM J. Rajendra (Retd), Member, delivered the judgment on March 21, 2025, in Revision Petition No. 358 of 2024. The case arose from a claim by Khushi Ram Tayal (now represented by legal heirs) for damages to his Renault Duster, insured with New India Assurance.

Case Background: Accident, Repudiation, and Appeals

Khushi Ram Tayal ’s car met with an accident on September 28, 2017, during the policy period. He informed the police on the same day but notified New India Assurance six days later. A surveyor assessed it as a total loss, but the insurance company repudiated the claim, alleging delayed intimation and misrepresentation regarding NCB. The insurer argued Tayal had suppressed his car's accident history to avail a 20% NCB, violating the principle of ‘utmost good faith’.

The District Forum dismissed Tayal ’s complaint, citing delayed intimation and non-joinder of the Karnal branch (issuing office) as a necessary party. However, the State Commission partly allowed Tayal ’s appeal, ordering payment of the claim amount after a 20% deduction for the NCB benefit wrongfully availed, along with compensation and costs. New India Assurance then approached the NCDRC in revision.

Arguments and Contentions

Petitioner (New India Assurance): Advocate Mr. C.K. Gola argued that the State Commission erred by not considering the fundamental breach of ‘utmost good faith’. He cited Supreme Court judgments like Oriental Insurance Co. Ltd. vs. Mahendra Construction (Civil Appeal No. 3359/ 2019), emphasizing that non-disclosure of material facts invalidates the insurance contract. He also argued against proportionate deduction of NCB, stating it was overruled by the Supreme Court. Furthermore, he pointed to the delay in intimation and the breach of policy condition requiring immediate notice, referencing Gurshinder Singh vs Shriram General Insurance Co Ltd & Ors (MANU/SC/0083/2020) on the importance of timely intimation for surveyor assessment. He claimed the State Commission wrongly applied NCDRC precedents on proportionate NCB deduction and that the insured’s declaration about NCB was false, warranting full claim rejection.

Respondent ( Khushi Ram Tayal 's LRs): Ms. Vasudha Saini , representing the respondent, supported the State Commission's order. She argued that the police were informed immediately, and the six-day delay in informing the insurer was inconsequential, especially as the surveyor had already assessed the loss. She cited IRDA guidelines against rejecting claims on technical grounds and NCDRC precedents like United India Insurance Company Ltd. Vs. MIs Jindal Poly Buttons Limited (RP No.2920 of 2015) and Anjani Gupta Vs. Future Generally India Insurance Company (Revision Petition No.1051 of 2017) which allowed for proportionate claim reduction instead of outright rejection for wrongful NCB claims, particularly when insurers have the means to verify declarations.

NCDRC's Observations and Decision

The NCDRC acknowledged the delay in intimation was not a valid ground for repudiation, citing Gurshinder Singh Vs. Shriram General Insurance Company Ltd . However, it addressed the core issue of non-disclosure. The commission referred to the Supreme Court's judgment in Ashok Kumar versus New India Assurance Co. Ltd., 2023, LiveLaw (SC) 587 , which stated that policy violation should be a "fundamental breach" to warrant claim denial.

The NCDRC quoted from Ashok Kumar , emphasizing that carelessness might not constitute a fundamental breach leading to total repudiation, especially when the loss event (in Ashok Kumar , theft; in this case, accident) is undisputed.

> “Even if there was some carelessness, on the peculiar facts of this case, it was not a fundamental breach of Condition No.5 warranting total repudiation. It was rightly so ordered by the District Forum and affirmed by the State Commission.” (Referring to a 75% non-standard claim approval in Ashok Kumar )

However, the NCDRC distinguished the current case. While acknowledging the insurer could have verified NCB eligibility, it highlighted the complainant’s history: four accidents in four years with insurance switches between companies. This pattern, according to the NCDRC, indicated a deliberate non-disclosure, not mere negligence.

> “Therefore, obtaining of the insurance policy in question by the complainant, by claiming non-entitled NCB cannot be termed as an act without knowledge of its consequences. Therefore, to this extent, this case is distinguishable from the precedents established with respect to such non-disclosure and claiming non-entitled NCB due to negligence or ignorance.”

Considering these factors, the NCDRC deemed a 50% reduction in the surveyor-assessed loss (Rs. 6,14,900) as appropriate, resulting in a payable amount of Rs. 3,07,000. The commission directed New India Assurance to pay this amount with 6% simple interest from the complaint filing date, increasing to 8% in case of delay beyond two months. No costs were awarded.

Implications of the Judgment

This judgment clarifies that while non-disclosure remains a serious issue in insurance contracts, it may not automatically constitute a ‘fundamental breach’ for complete repudiation, especially if the insurer had means to verify information. However, deliberate and repeated non-disclosure, particularly involving a history of claims, can significantly impact the claim amount, leading to substantial reductions even if not full rejection. The NCDRC's decision strikes a balance, acknowledging both the principle of ‘utmost good faith’ and the insurer's responsibility to conduct due diligence.