Can Non-Disclosure of Prior Illness on the Proposal Form Be a Ground for Repudiation of the Claim When the Policy Was Issued After Examination of Medical Records of the Insured?

In a case of the Manmohan Nanda v. United India Assurance Co. Ltd., the Supreme Court considered whether non-disclosure of prior illness on the proposal form can be a ground for repudiation of a Mediclaim policy claim, when the policy is issued after examining necessary medical records.

The brief facts of the case are that the insured in the present case had applied for a mediclaim policy and the same was issued to the Appellant after medical examination of the Appellant at the instance of the insurer. The insured had a heart attack at the San Francisco Airport and was admitted to hospital where angioplasty was performed and three stents were inserted to remove blockages from the heart vessels. The insured then raised a claim for treatment expenses which was rejected by the insurer on the ground that the Appellant failed to disclose the fact that he had a history of hyperlipidaemia and diabetes. The National Consumer Dispute Redressal commission upheld the repudiation on the ground that insurance contracts are based on the principle of Uberrimae fidei or utmost good faith. Hence the Appellant preferred an appeal before the Supreme Court of India.

The Supreme Court while considering the question as to whether there is a breach of the principle of Uberrimae fidei held that the duty of full disclosure comes to an end at the time of conclusion of the contract and that the insured is not liable to disclose any information that comes to his knowledge at a later stage. Further, the court also pointed out that the test to determine whether a particular fact is material is dependent on whether it would affect the judgement of a prudent insurer not a particular person and therefore the onus is on the insurer to act as a prudent insurer while making an underwriting decision. The Supreme Court also noted that it could not be concluded that the Appellant’s heart attack was a direct result of hyperlipidaemia and diabetes. Hence, the Appellant had not suppressed any material fact and in consequence the repudiation of the claim was invalid.