A) Abstract / Headnote

This case addresses the dispute over the repudiation of life insurance claims under policies issued to the deceased by Future Generali India Life Insurance Company. The insurer denied the claims based on alleged material suppression of existing insurance policies by the insured. The complainant, the insured’s daughter and nominee, contended that the insurer failed to substantiate its allegations with documentary proof. Key legal principles such as Section 45 of the Insurance Act, 1938 (pre-amendment), burden of proof under the Indian Evidence Act, 1872, and the contra proferentem rule guided the Supreme Court’s reasoning. The court scrutinized the insurer’s evidence and observed that the burden of proof for alleging fraudulent suppression rests squarely with the insurer, which it failed to meet. The Court ultimately set aside the repudiation, reinforcing the principle of uberrimae fidei and clarifying the obligations of both insurer and insured in life insurance contracts.

Keywords:

Insurance repudiation, Section 45 of Insurance Act, burden of proof, contra proferentem rule, consumer rights.

B) Case Details

i) Judgment Cause Title:
Mahakali Sujatha v. The Branch Manager, Future Generali India Life Insurance Company Limited & Another

ii) Case Number:
Civil Appeal No. 3821 of 2024

iii) Judgment Date:
10 April 2024

iv) Court:
Supreme Court of India

v) Quorum:
Justice B.V. Nagarathna and Justice Augustine George Masih

vi) Author:
Justice B.V. Nagarathna

vii) Citation:
[2024] 4 S.C.R. 724; 2024 INSC 296

viii) Legal Provisions Involved:

• Insurance Act, 1938, Section 45 (Pre-amendment)
• Evidence Act, 1872, Sections 101-103, 106
• Insurance Regulatory and Development Authority (Protection of Policyholders’ Interests) Regulations, 2002

ix) Judgments Overruled by the Case (if any):
No explicit overruling but distinguished from Reliance Life Insurance Co Ltd v. Rekhaben Nareshbhai Rathod.

x) Case Related to Law Subjects:
Insurance Law, Consumer Law, Contract Law, Law of Evidence.

C) Introduction and Background of Judgment

The case revolves around the repudiation of life insurance claims on grounds of alleged non-disclosure of pre-existing insurance policies. The appellant, Mahakali Sujatha, is the nominee of the deceased insured, who held two policies from Future Generali. The policies promised accidental death benefits. Following the insured’s death in an accident, the claims were rejected, citing fraudulent suppression of material facts. The District Forum and State Commission ruled in favor of the complainant, but the National Consumer Disputes Redressal Commission (NCDRC) reversed the decisions. The appellant approached the Supreme Court challenging the NCDRC’s findings.

D) Facts of the Case

1. The deceased insured took two life insurance policies worth ₹4,50,000 and ₹4,80,000 in 2009 and 2010, respectively. The appellant was the nominee.
2. The insured died in a train accident on 28 February 2011. The appellant filed claims for the policy benefits, which were repudiated by the insurer on 31 December 2011.
3. The insurer alleged the insured suppressed material information about 15 prior insurance policies from other insurers, totaling ₹71,27,702.
4. The appellant contested the insurer’s claims, arguing no documentary evidence substantiated the suppression allegations.
5. While the District Forum and State Commission ruled against the insurer for lack of evidence, the NCDRC accepted the insurer’s version based on an affidavit listing the alleged policies.

E) Legal Issues Raised

1. Whether the insurer was justified in repudiating the claims on grounds of material suppression of pre-existing insurance policies.
2. Whether the burden of proof was adequately discharged by the insurer under Section 45 of the Insurance Act, 1938.
3. Whether the contra proferentem rule applied to the ambiguous terms in the proposal form.

F) Petitioner/Appellant’s Arguments

1. The appellant contended the insurer failed to provide credible evidence proving the insured held prior policies.
2. Section 45 of the Insurance Act required the insurer to establish fraudulent suppression and materiality of facts, which was not done.
3. The insurer relied on unsubstantiated tabulated data without corroborative documentary or oral evidence.
4. Ambiguities in the proposal form’s queries regarding pre-existing policies should be interpreted in favor of the insured, invoking the contra proferentem rule.

G) Respondent’s Arguments

1. The insurer argued that the insured deliberately withheld information about 15 prior insurance policies.
2. The non-disclosure violated the principle of utmost good faith (uberrimae fidei), rendering the policies void.
3. The insurer relied on details listed in an affidavit and contended that these were not refuted by the appellant.
4. The respondent invoked the Supreme Court’s ruling in Reliance Life Insurance Co Ltd v. Rekhaben Nareshbhai Rathod, which upheld repudiation in similar circumstances.

H) Judgment

a. Ratio Decidendi

1. Section 45 of the Insurance Act requires the insurer to prove fraudulent suppression and materiality of non-disclosed facts.
2. The insurer’s evidence (an affidavit listing alleged prior policies) lacked corroboration through documentary or oral evidence.
3. The contra proferentem rule mandated interpreting ambiguities in the proposal form in favor of the insured.

b. Obiter Dicta

1. The principle of uberrimae fidei imposes reciprocal duties of disclosure on both parties to an insurance contract.
2. The NCDRC erred by presuming the insurer’s allegations to be valid without sufficient proof.

c. Guidelines (If Any)

1. Insurers must substantiate allegations of material suppression with clear, corroborative evidence.
2. Courts must carefully examine ambiguities in proposal forms and interpret them in favor of the insured.

I) Conclusion & Comments

The Supreme Court’s judgment reinforces consumer protection principles, emphasizing insurers’ burden of proof in repudiation cases. It underscores the reciprocal duties of good faith in insurance contracts and clarifies the applicability of Section 45 of the Insurance Act. The decision sets a significant precedent, balancing insurer rights with consumer interests.

J) References

a. Important Cases Referred

1. Reliance Life Insurance Co Ltd v. Rekhaben Nareshbhai Rathod (2019) 6 SCC 175
2. Mithoolal Nayak v. Life Insurance Corporation of India AIR 1962 SC 814
3. Manmohan Nanda v. United India Insurance Co. Ltd. (2022) 4 SCC 582
4. Sahara India Life Insurance Co. Ltd. v. Rayani Ramanjaneyulu (2014) SCC OnLine NCDRC 525

b. Important Statutes Referred

1. Insurance Act, 1938, Section 45
2. Evidence Act, 1872, Sections 101-106
3. Insurance Regulatory and Development Authority Regulations, 2002