Reliance Life Insurance vs Rekhaben Nareshbai Rathod - Supreme Court Important Judgment 2019

 Reliance Life Insurance Co. Ltd. & Anr. v. Rekhaben Nareshbai Rathod - Supreme Court Important Judgment 2019 - 

On 24th April, 2019, in the case of Reliance Life Insurance Co. Ltd. & Anr. v. Rekhaben Nareshbai Rathod [Civil Appeal No.4261 of 2019], wherein about two months before the contract of insurance was entered into with the appellant, the insured had obtained another insurance cover for his life”, the Supreme Court held that “the failure of the insured to disclose the policy of insurance obtained earlier in the proposal form entitled the insurer to repudiate the claim under the policy.”

The Supreme Court observed that “contracts of insurance are governed by the principle of utmost good faith” and “in a contract of insurance, the insured can be expected to have information of which she/he has knowledge” and “this justifies a duty of good faith, leading to a positive duty of disclosure.” It was held that “proposal forms are a significant part of the disclosure procedure and warrant accuracy of statements” and “any suppression, untruth or inaccuracy in the statement in the proposal form will be considered as a breach of the duty of good faith and will render the policy voidable by the insurer.”

It was held that in the present case, “disclosure of the earlier cover was material to an assessment of the risk which was being undertaken by the insurer” and “the proposer was aware of the fact, while making a declaration, that if any statements were untrue or inaccurate or if any matter material to the proposal was not disclosed, the insurer may cancel the contract and forfeit the premium.” 

The Supreme Court was “not impressed with the submission that the proposer was unaware of the contents of the form that he was required to fill up or that in assigning such a response to a third party, he was absolved of the consequence of appending his signatures to the proposal” and said that “the proposer duly appended his signature to the proposal form and the grant of the insurance cover was on the basis of the statements contained in the proposal form.” The consumer complaint filed by respondent-nominee (under the policy issued by appellant) was accordingly dismissed.