Insurance Regime “Criteria for accidental death benefit :

In Alka Shukla V Life Insurance Corporation of India, the Supreme Court comprising of Justice D.Y.
Chandrachud and Justice Hemant Gupta found that there was no evidence to show that any injury suffered because of a fall from the motorcycle led to the insured having a heart attack. The insured died because of a heart attack which was not related to the accident. Hence, the insurer was correct to repudiate the claim of the insured under the accidental benefit component of the insurance policy.

The insured obtained three insurance policies from the Life Insurance Corporation of India. The policies were payable only if the insured sustained any bodily injury resulting solely and directly from the accident caused by “outward, violent and visible means” leading to his death. Insurance company repudiated the claim on the ground that insured dies because of heart attack and not an accident. The appellant filed a consumer complaint before the district forum and district forum directed the insurance company to pay the insurance amount under the three policies along with interest. The State Commission confirmed the order given by district forum. The insurer filed the revision petition before the National Commission and the commission reversed the order of district forum and set aside the award of compensation. Award passed by the National Commission is challenged before the Supreme Court of India.

Supreme Court observed that, claim in case of accident, is payable only if the following conditions are satisfied. The insured sustained injuries directly and solely from the accident; the accident was caused by violent, outward and visible means, and that injury solely and directly of other causes results I the death of the insured person.

Supreme Court in the present case held that there is no evidence to show that any bodily injury was suffered due to fall from the bike or that led to the insured suffering a heart attack. There is no evidence to show that the accident took place as a result of any violent, outward and visible means. For the reasons stated above, Supreme Court is of the view that judgment of the NCDRC does not suffer from any error and the appeal shall stand dismissed.

whose ages would vary. Therefore, the age of the dependents would have no nexus with the computation of compensation. In the present case, since the deceased was 21 years old, the Multiplier of 18 was applicable as per the table set out in the Sarala Verma case.

Oriental Insurance Company v. Mahendra Construction

The Supreme Court by its judgment on 1 April 2019, has absolved insurance companies of the burden to follow up an inadequate disclosure of material facts by the Insured. The Court held that it is not the duty of the insurer to conduct a line of enquiry with previous insurers with regard to the nature and settlement of prior claims, if any.

The Apex Court was hearing an appeal by Oriental Insurance Company (“Insurer”) from a decision of the National Consumer Dispute Redressal Commission (“NCDRC”) which had partly allowed Mahendra Construction’s (“Insured”) appeal against the decision of State Consumer District Redressal Commission(“SDRC”).

The Insured had purchased a hydraulic excavator machine in 2004, which was insured with New India Assurance Company Limited (“previous Insurer”) from 15 November 2004 to 14 November 2005. The excavator caught fire on 12 April 2005, for which a claim was lodged and settled by the previous Insurer. The excavator was under repair till 10 October 2006, post which it was insured with the Insurer from 11 October 2006 to 10 October 2007. The excavator again caught fire on 15 October 2006 and a claim was lodged with the Insurer. The Insurer repudiated the claim on 25 November 2008 on the ground that all material facts which were required to be disclosed by the Insured for the Insurer to assess the risk profile of the good insured, had not been disclosed. More specifically, the stand of the Insurer was that the proposal form has contained a specific question with regard to the details of the claims lodged in the preceding three years. The same had not been answered and the Insured had instead enclosed the insurance policy it had with the previous insurer, with the proposal form.

A complaint was instituted before the SDRC which allowed the claim of the Insured. The NCDRC in appeal, concurred with the findings of the SDRC and held that as the previous insurance policy was attached with the proposal form, the Insurer could have made himself aware of any prior claims by undertaking an ordinary due diligence and/or conducting an enquiry with the previous Insurer.

The Apex Court dismissing the findings of both the SDRC and NCDRC held that the law of insurance is governed by the principle of utmost good faith, which imposes a duty of complete disclosure on the Insured with regard to material facts. The court discussed the duty of disclosure placing reliance on ‘MacGillivray on Insurance Law’ which states as follows:

“The assured must disclose to the insurer all facts material to an insurer’s appraisal of the risk which are known or deemed to be known by the assured but neither known or deemed to be known by the insurer. Breach of this duty by the assured entitles the insurer to avoid the contract of insurance so long as he can show that the non-disclosure induced the making of the contract on the relevant terms….”

The Court also placed reliance on its prior ruling in Satwant Kaur Sandhu v. New India Assurance Co. Ltd, where it had held that when information on a specific aspect is asked for in the proposal form, the assured is under a solemn obligation to make true and complete disclosure of all the information within its knowledge in that regard.

The Court after considering the facts and circumstances of the matter before it, observed that any
information sought for in a proposal form amounts to a material fact. A mere enclosure of the previous insurance policy does not discharge the duty of the Insured to make a full, true and complete disclosure of the claims that were lodged under the previous insurance policy in the preceding three years. A bare perusal of the previous policy could not have in any way brought to the notice of the Insurer that a prior claim was lodged under the prior policy which had been settled by the previous Insurer. This fact came to light by way of an affidavit in evidence filed by the Insured on 6 January 2017. The Court reasoned that the omission to mention a prior settled claim against a specific question to that effect in the proposal form amounted to material suppression of facts, on part of the Insured as it had a bearing on the Insurer’s analysis of proposed risk and decision to accept the proposal of Insurance.

Holding that the foregoing suppression went to the root of the contract of insurance and validated the grounds of repudiation, the Supreme Court reversed and set aside the decision of the NCDRC.