Uberrima fides (good faith) is warranted on part of assured, in contract of insurance: SC

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Read Judgment: Life Insurance Corporation of India & Another vs. Sunita

Pankaj Bajpai

New Delhi, November 3, 2021: The Supreme Court has observed that claim for extra Accident benefit of insurance policy being not in force on the date of accident as per the conditions of policy, merits rejection. 

In a contract of insurance there is a requirement of Uberrima fides i.e. good faith on the part of the assured, added the Court.

A Division Bench of Justice Sanjiv Khanna and Justice Bela M. Trivedi observed that conduct on the part of the complainant in not disclosing about the accident to the insurance corporation not only amounted to suppression of material fact and lacked bona fides but smacked of mala fide intention. 

The observation came to passed in reference to an appeal preferred by LIC challenging the judgment passed by the National Consumer Disputes Redressal Commission, New Delhi (NCDRC) affirming the order of District Forum in directing the Corporation to pay additional accident claim benefit. 

The grievance of the corporation was that the day when the husband of the complainant met with an accident, the insurance policy had already lapsed on account of non-payment of the due premium. 

Speaking for the Bench, Justice Trivedi noted that eleventh condition of the Insurance Policy clearly stipulated that the policy has to be in force when the accident takes place.

In the instant case, the policy had lapsed on October 14, 2011 and was not in force on the date of accident, and it was sought to be revived on March 9, 2012 after the accident in question, and that too without disclosing the fact of accident which had taken place on Mar 06, 2012, found Justice Trivedi. 

Thus, the Bench observed that the respondent-complainant had not come with clean hands to claim add on/extra Accident benefit of the policy in question. 

It is not disputed that the husband of the complainant had taken the life insurance policy on 14.04.2011, that the next premium had fallen due on 14.10.2011 but was not paid by him, that the husband of the complainant met with an accident on 06.03.2012, that thereafter the premium was paid on 09.03.2012 and that he expired on 21.03.2012. It is also not disputed that at the time of making payment of premium on 09.03.2012, it was not disclosed by the complainant or her husband to the appellant-Corporation about the accident which had taken placed on 06.03.2012”, observed the Bench. 

The Top Court found that the terms of the policy permitted the renewal of discontinued policy, and therefore the appellant-Corporation had revived the policy of the respondent-complainant by accepting the payment of premium after the due date and paid Rs. 3,75,000 as assured under the policy, nonetheless for the Accident benefit, the policy had to be in force for the full sum assured on the date of accident as per the condition. 

The Apex Court further found that the Accident benefit could have been claimed and availed of only if the accident had taken place subsequent to the renewal of the policy, which, in the instant case was lying in a lapsed condition since October 14, 2011. 

Therefore, since the policy was not in force as on March 6, 2012, resultantly, the claim over Accident benefit was not payable to the respondent as per the conditions of the contract of insurance, added the Court.

The Apex Court therefore set aside the order passed by the NCDRC and rejected the claim of respondent towards Accident benefit.

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