Holding

Non‑disclosure of the insured's chronic renal failure and diabetes constituted suppression of material facts, justifying the insurer's repudiation of the mediclaim contract.

Summary

The Supreme Court examined an appeal by Satwant Kaur Sandhu challenging the repudiation of a mediclaim policy by New India Assurance Company Ltd. The insurer rejected the claim on the ground that the deceased had concealed his chronic renal failure and diabetes in the proposal form, which the Court held to be material facts. The Court reiterated that a mediclaim policy is a contract of uberrimae fidei, obligating the proposer to disclose all facts within his knowledge that could influence the insurer's risk assessment. It defined a "material fact" as any information that would affect a prudent insurer's decision on premium or acceptance of risk, citing the IRDA Regulations and established case law. The Court found the non‑disclosure to be a clear suppression of material facts, thereby justifying the insurer's repudiation. Consequently, the appeal was dismissed, upholding the earlier orders of the consumer dispute forums.

Issues considered

The statement of health in the proposal form is a material fact for a mediclaim policy.
Whether non‑disclosure of such material fact permits the insurer to repudiate the contract.
Whether Section 45 of the Insurance Act, 1938 applies to a mediclaim policy.

Legislation cited

Insurance Act, 1938s. 45
IRDA (Protection of Policyholders’ Interests) Regulations, 2002s. Regulation 2(1)(d)

Subjects

mediclaimmaterial factnon-disclosureinsurance contractuberrimae fideirepudiationSection 45IRDA regulationsconsumer dispute

Judgment

[2009] 10 S.C.R. 560

•
A SATWANT KAUR SANDHU
v.
NEW INDIA ASSURANCE COMPANY LTD.
(Civil Appeal No. 2776 of 2002)
JULY 10, 2009
B
[D.K. JAIN AND R.M. LODHA, JJ.]

Insurance:

Medic/aim policy - Statement in proposal form as
c regards state of health of insured - Held: Factum of illness
of insured is a material fact for medicalim policy - Its non-
disclosure will tantamount to suppression of material facts,
enabling the insurance company to repudiate its liability .
under the policy - On facts, there was suppression of material
D
facts in respect of health of insured - Insurer justified in
repudiating insurance contract.

Medic/aim Policy - Nature of - Discussed.

E Words and Phrases - 'Material fact' - Meaning of, in the
context of medic/aim policy - Insurance Regulatory and
development Authority (Protection of Policyholders' Interest) ~
Regulations, 2002 - Regulation 2 (1) (d).

The question for consideration in the present case
F was whether statement in proposal form as regards state
of health, the factum of illness of the policy-holder was a
'material' fact for the purpose of a mediclaim policy and
whether its non-disclosure, would tantamount to
suppression of material fact, enabling the Insurance
G Company to repudiate its liability under the policy. } ~

Dismissing the appeal, the Court

H
HELD: 1. The statement made by the insured in the
560 -
SATWANT KAUR SANDHU v. NE'(V INDIA 561
ASSURANCE COMPANY LTD.
proposal form as to the state of his health was palpably A
untrue to his knowledge. There was clear suppression of
material facts in regard to the health of the insured and,
therefore, the respondent-insurer was fully justified in
repudiating the insurance contract. [Para 22] [572-H; 573-
A-B] B
2. A mediclaim policy is a non-life insurance policy
meant to assure the policy-holder in respect of certain
expenses pertaining to m1ury, accidents or
hospitalizations. Nonetheless, it is a contract of insurance
falling in the category of contract uberrimae fidei, C
meaning a contract of utmost good faith on the part of
the assured. Thus, when an information on a specific
aspect is asked for in the proposal form, an assured is
under a solemn obligation to make a true and full
disclosure 'of the information on the subject which is D
within his knowledge. It is not for the proposer to
determine whether the information sought for is material
for the purpose of the policy or not. Of course, obligation
to disclose extends only to facts which are known to the
applicant and not to what he ought to have known. The E
obligation to disclose necessarily depends upon the
knowledge one possesses. His opinion of the materiality
of that knowledge is of no moment. [Para 12] [568-E-H]
United India Insurance Co. Ltd. vs. M.K.J. Corporation F
1996 (6) SCC 428 and Modern Insulators Ltd. vs. Oriental
Insurance Co. Ltd. 2002(2) SCC 734 - relied on ..
Joel vs. Law Union and Crown Ins. Co. (1908) 2 K.B. 863;
Carter vs. Boehm, 1766 (3) Burr, 1905, referred to.
'Mac Gillivray on Insurance Law' (Tenth Edition) - G
referred to.
3. The term "material fact" means any fact which
.. would influence the judgment of a prudent insurer in
fixing the premium or determining whether he would like H
562 SUPREME COURT REPORTS (2009] 10 S.C.R.

-
A to accept the risk. Any fact which goes to the root of the ~

contract of insurance and has a bearing on the risk
involved would be "material". [Para 17] [570-E-F]

Indian Contract and Specific Relief Acts by Mui/a,
referred to.
B
4. In a contract of insurance, any fact which would
influence the mind of a prudent insurer in deciding I
whether to accept or not to accept the risk is a "material
fact". If the proposer has knowledge of such fact, he is
c obliged to disclose it particularly while answering
questions in the proposal form. Any inaccurate answer
will entitle the insurer to repudiate his liability because
there is clear presumption that any information sought for
in the proposal form is material for the purpose of
D entering into a contract of insurance. [Para 20] [571-F-H;
572-A]

o. In the instant case, it would be beyond anybody's
comprehension that the insured was not aware of the
state of his health and the fact that he was suffering from
E
Diabetes as also chronic Renal failure, more so when he
was stated to be on regular haemodialysis. There can
hardly be any scope for doubt that the information ..
required in the afore-extracted questions was on material
facts and answers given to those questions were
F definitely factors which would have influenced and
guided the respondent-Insurance Company to enter into
the contract of Mediclaim Insurance with the insured. In
the claim form, the appellant had stated that the deceased
was suffering from Chronic Renal Failure and Diabetic
G Nephropathy from 1st June, 1990, i.e. within three weeks
of taking the policy. [Para 22] [572-E-G]
, .
6. It is not correct to say that reliance could not be
placed on the certificate obtained by the respondent from
H the hospital, where the insured was treated. Apart from
SATWANT KAUR SANDHU v. NEW INDIA 563
ASSURANCE COMPANY LTD.

-,. the fact that at no stage the appellant had pleaded that A
the insured was not treated at hospital where he
..;..:. ultimately died. It is more than clear from the said
certificate that information about the medical history of
the deceased must have been supplied by his family
members at the time of admission in the hospital, a B
normal practice in any hospital. Significantly, even the
declaration in the proposal form by the proposer
, authorises the insurer to seek information from any
hospital he had attended or may attend concerning any
desease or illness which may affect his health. [Para 22] c
(573-B-D]

Case Law Reference:
,.,
(1908) 2 K.B. 863 Referred to. Para 12
... 1996 (6) sec 428 Relied on. Para 13 D

., 2002 (2) sec 734 Relied on. Para 13
1766 (3) Burr, 1905 Referred to Para 15

CIVIL APPELLATE JURISDICTION : Civil Appeal No. E
2776 of 2002.

From the Judgment & Order dated 8.12.2000 of the
... National Consumer Disputes Redressal Commission at New
"'-
Delhi in Revision Petition No. 322 of 1999.
F
Deven S. Lambat and R.S. Lambat for the Appellants.

Sharmila Upadhyay (NP) for the Respondents.

The Judgment of the Court was delivered by
G
D.K. JAIN, J. 1. This appeal, by special leave, is directed
- ... against the judgment and order dated 8th December, 2000
passed by the National Consumer Disputes Redressal
Commission, ("the National Commission" for short) in Revision
Petition No.322 of 1999 whereby the Commission has affirmed H
564 SUPREME COURT REPORTS [2009) 10 S.C.R.

A the order passed by the State Consumer Disputes Redressal
Commission, New Delhi (for short "the State Commission"), •
rejecting appellant - complainant's claim against the respondent
- Insurance Company for compensation on account of
deficiency in service for not processing her claim under a
B mediclaim policy.
2. Succinctly put, the material facts giving rise to the
present appeal are as follows:

On 7th May, 1990 appellant's husband, late Shri Pritpal
c Singh Sandhu, 48 years old and an advocate by profession,
after completing necessary formalities insured himself under a
mediclaim policy provided by the respondent. The policy was
for a period from 7th May, 1990 to 6th May, 1991. The annual
premium of Rs.1500/- was also paid by him. On 11th
D September, 1990, Pritpal Singh suddenly fell ill and was •
admitted in Dayanand Medical College and Hospital, Ludhiana.
On 7th December, 1990 he ""as shifted to Madras Institute of
Nephrology also known as, Vijaya Health Centre, Chennai
where his condition deteriorated, ultimately leading to his death
E on 26th December, 1990. The appellant informed the
respondent about the death of her husband on 17th January,
1991. On 29th April, 1991 she filed a claim for Rs.23,217.80
for reimbursement of the expenses incurred on hospitalization.
t.
3. The respondent - Insurance Company made inquiries
F from Madras Institute of Nephrology (Vijaya Health Centre) and
obtained a certificate dated 6th May, 1992, (Annex.P-6) stating
that the deceased was a known case of "Chronic Renal Failure/
Diabetic Nephropathy"; was on regular haemodialysis at his
place and after admission on 7th December, 1990 with sev~re
G breathlessness developed sudden cardiac arrest on 26th
December, 1990 leading to his death. The certificate also
stated that the insured was a known diabetic for the last 16 > ~

years. Thereupon, the respondent vide letter dated 30th August,
1993 informed the appellant that her claim had been
H repudiated. Being aggrieved, the appellant filed Consumer
SATWANT KAUR SANDHU v. NEW INDIA 565
ASSURANCE COMPANY LTD. [D.K. JAIN, J.)

y'-
Complaint Case No. 48 of 1996 before the Consumer Dispute A
Redressal Forum No.IV at Bunkar Vihar Nand ~~agri, New Delhi
- ("l:>istrict Forum" for short) with the prayer that the Insurance
Company should be directed to pay the claim amount of
Rs.23,217.80 along with interest @ 24% per annum and
compensation for agony as also the litigation expenses. B
4. Before the District Forum, the stand of the respondent
was that the claim preferred by the appellant had been
' repudiated on the basis of the report supplied by Vijaya Health
Centre, Chennai where appellant's husband had died. In the
c
written statement filed by the respondent before the District
Forum, it was stated that while filling up the proposal form,

-,,
" against queries No.10 and 11, the insured had stated that he
was in sound health and had not undergone any treatment or
operation in the last 12 months, whereas the medical report
revealed that he was a known case of "Chronic Renal Failure/ D
Diabetic Nephropathy" being diabetic for the last 16 years. It
was also added that the opinion of two independent doctors
was obtained to affirm that the claim could not be honoured as
material facts relating to the health of the insured were
concealed at the time of taking out the policy. E

5. The District Forum vide its order dated 20th May, 1997,
refuted the opinion of the independent doctors on the ground
' that they had never personally treated the deceased. The Forum
noted that report of Vijaya Hospital was not supported by any F
circumstantial evidence and was, therefore, unreliable. The
policy was repudiated on 30th August, 1993 i.e. almost 2 years
and 8 months after the death of the deceased. Preferring to rely
on the letter written by the elder brother of the deceased, Col.
Gurcharanjit Singh on 21st June, 1993 to the Asstt. Manager,
G
.. . New India Assurance Co. stating that deceased became unwell
some time in September/October, 1990 and thereafter his
condition deteriorated fast resulting ultimately in his death, the
District Forum concluded that the Insurance Company was guilty
of deficiency in service because repudiation was not based on
- H
566 SUPREME COURT REPORTS [2009] 10 S.C.R.

A full material information and that there was inordinate delay in
deciding the claim under the policy. The District Forum
.•
accordingly directed the respondent to pay the claimed amount
with interest at 12% per annum from 1st April, 1991 i.e., 3
months after the death of the insured till the date of actual
-
B payment. The respondent was also required to pay Rs.1000/-
as cost of litigation.

6. Aggrieved, the respondent - Insurance Company
preferred appeal before the State Commission. The State
Commission vide its order dated 31st December, 1998,
c allowed the appeal and set aside the order of the District
Forum. The relevant part of the order reads as under:

D
"Death of the insured occurred within seven months of
taking the mediclaim policy and Section 45 of the
Insurance Act is not even remotely attracted. We are of the
-
considered view that repudiation of the claim was on a
consideration of the aforesaid record of the Madras
Institute of Nephrology and, therefore answer to col. 10 of
the proposal form amounted to mis-representation and
E suppression of material facts regarding health made by the
policy holder. No case of deficiency in service has been
established."

7. Being aggrieved by the order of the State Commission,
the appellant filed Revision Petition before the National
F Commission. As noted earlier, the National Commission has
dismissed the Revision Petition, by a short order, which reads
thus:

"It is a case of concurrent finding of fact recorded both by
G the District Forum and the State Commission. We do not
find any reason to interfere with the order passed by the
State Commission. The Revision Petition is dismissed." • ..
8. Mr. D.S. Lambat, learned counsel appearing for the
H
appellant contended that the National Commission has grossly
-
,. SATWANT KAUR SANDHU v. NEW INDIA 567
ASSURANCE COMPANY LTD. [D.K. JAIN, J.]
erred in upholding the State Commission's order on the A
"' premise of "concurrent finding of fact" by the Fora below when
' both the Forums had arrived at different findings regarding
suppression of material facts about the state of health of the
insured. It was, thus, urged that the National Commission misled
itself in passing an order which did not bear consonance with B
the factual position on record. Learned counsel also submitted
that the State Commission had erred in relying on inadmissible
~ and unproved contents of a document viz. certificate dated 6th
May, 1992, to reverse a logical and cogent finding by the District
Forum. Lastly, it was contended that the National Commission
""!' acted illegally in dismissing appellant's Revision Petition without
c
assigning any reason and appreciating the fact that the claim
'
was repudiated after 30 months, which, according to the
counsel, by itself amounted to deficiency of service by the
respondent.
D
9. Per Contra, learned counsel for the respondent
submitted that the repudiation of claim was fully justified
because at the time of submission of the proposal form, the
respondent had made a false declaration that he was
possessing sound health and had not undergone any treatment E
in the last 12 years and taking the facts disclosed as correct
the policy was issued. It was urged that a mediclaim policy is
> issued solely on the basis of the facts disclosed and the
representation made by an insured in the proposal form filled
in and submitted by him without subjecting the insured to any F
medical tests. It was also pointed out that the proposal form
contains a declaration to the effect that if after the insurance is
effected, it is found that the statement, answers or particulars
stated in the proposal form and its questionnaire are incorrect
or untrue in any respect, the insurance company shall incur no G
. liability under this insurance. It was, thus, asserted that the
insured having suppressed the fact that he was suffering from
Diabetic Nephropathy/Chronic Renal Failure, which fact was
within his knowledge, the respondent was justified in repudiating
the claim.
H
568 SUPREME COURT REPORTS [2009] 10 S.C.R.

10. The core question for consideration is whether the fact ...
-
A
that at the time of taking out the mediclaim policy, the policy
holder was suffering from chronic Diabetes and Renal failure
was a material fact and, therefore, on account of non-disclosure
of this fact in the proposal form, the respondent - Insurance
B Company was justified in law in repudiating the claim of the
appellant?

11. Having bestowed our anxious consideration to the
matter, we are of the opinion that in the light of the material on
record, answer to the question posed has to be in the
c affirmative.
'i-

12. There is no dispute that Section 45 of the Insurance
Act, 1938 (for short "the Act"), which places restrictions on the
right of the insurer to call in question a life insurance policy on
D the ground of mis-statement after a particular period, has no
application on facts at hand, inasmuch as the said provision
applies only in a case of life insurance policy. The present case
relates to a mediclaim policy, which is entirely different from a
life insurance policy. A mediclaim policy is a non-life insurance
E policy meant to assure the policy holder in respect of certain
expenses pertaining to injury, accidents or hospitalizations.
Nonetheless, it is a contract of insurance falling in the category
of contract uberrimae fidei, meaning a contract of utmost good
faith on the part of the assured. Thus, it needs little emphasis
•
that when an information on a specific aspect is asked for in
F
the proposal form, an assured is under a solemn obligation to
make a true and full disclosure of the information on the subject
which is within his knowledge. It is not for the proposer to
determine whether the information sought for is material for the
purpose of the policy or not. Of course, obligation to disclose
G extends only to facts which are known to the applicant and not
to what he ought to have known. The obligation to disclose
necessarily depends upon the knowledge one possesses. His
opinion of the materiality of that knowledge is of no moment.

H
SATWANT KAUR SANDHU v. NEW INDIA 569
ASSURANCE COMPANY LTD. [D.K. JAIN, J.]

(See: Joel Vs. Law Union & Crown Ins. Co. 1 ) A
""
13. In United India Insurance Co. Ltd. Vs. M.K.J.
Corporation 2 , this Court has observed that it is a fundamental
principle of insurance law that utmost faith must be observed
by the contracting parties. Good faith forbids either party from B
non-disclosure of the facts which the party privately knows, to
draw the other into a bargain, from his ignorance of that fact
;
and his believing the contrary. (Also see: Modem Insulators
Ltd. Vs. Oriental Insurance Co. Ltd. 3).

14. MacGil/ivray on Insurance Law (Tenth Edition) has c
summarised the assured's duty to disclose as under:

" ... 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 D
known nor deemed to be known by the insurer. Breach of
this d1,1ty 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." E
15. Over three centuries ago, in Carter Vs. Boehm4 , Lord
Mansfield had succinctly summarised the principles
necessitating a duty of disclosure by the assured, in the
following v;ords:-
F
"Insurance is a contract of speculation. The special facts
upon which the contingent chance is to be computed lie
most commonly in the knowledge of the assured only; the
underwriter trusts to his representation, and proceeds upon
confidence that he does not keep back any circumstance G
~ 1. [1908] 2 K.B. 860.
2. (1996) 6 sec 428.
3. (2000) 2 sec 734. , ~

4. (1766) 3 Burr. 1905. H
570 SUPREME COURT REPORTS [2009] 10 S.C.R.

A in his knowledge to mislead the underwriter into a belief
that the circumstance does not exist. The keeping back
such circumstance is a fraud, and therefore the policy is
void. Although the suppression should happen through
mistake, without any fraudulent intention, yet still the
B underwriter is deceived and the policy is void; because the
risque run is really different from the risque understood and
intended to be run at the time of the agreement. .. The policy
would be equally void against the underwriter if he
concealed ... Good faith forbids either party, by concealing
c what he privately knows, to draw the other into a bargain
from his ignorance of the fact, and his believing the
contrary."

16. Having said so, as noted above, the next question for
consideration would be as to whether factum of the said illness
D was a "material" fact for the purpose of a mediclaim policy and
its non-disclosure was tantamount to suppression of material
facts enabling the Insurance Company to repudiate its liability
under the policy?

E 17. The term "material fact" is not defined in the Act and,
therefore, it has been understood and explained by the Courts
in general terms to mean as any fact which would influence the
judgment of a prudent insurer in fixing the premium or
determining whether he would like to accept the risk. Any fact
F which goes to the root of the Contract of Insurance and has a
bearing on the risk involved would be "material".
18. As stated in Pollock and Mufla's Indian Contract and
Specific Relief Acts 'any fact the knowledge or ignorance of
which would materially influence an insurer in making the
G contract or in estimating the degree and character of risks in
fixing the rate of premium is a material fact.'

19. In this regard, it would be apposite to make a reference
to Regulation 2(1)(d) of the Insurance Regulatory and
H Development Authority (Protection of Policyholders' Interests)
SATWANT KAUR SANDHU v. NEW INDIA 571
ASSURANCE COMPANY LTD. [D.K. JAIN, J.]
Regulations, 2002, which explains the meaning of term A
"material". The Regulation reads thus:

"2. Definitions.-ln these regulations, unless the context
otherwise requires,-

(a) xxx xxx xxx B

(b) xxx xxx xxx
(c) xxx xxx xxx
(d) "Proposal Form" means a form to be filled in by C
the proposer for insurance, for furnishing all material
information required by the insurer in respect of a risk, in
order to enable the insurer to decide whether to accept or
decHr:ie. to undertake the risk, and in the event of
acceptance of the risk, to determine the rates, terms and D
conditions of a cover to be granted.

Explanation: "Material" for the purpose of these
regulations shall mean and include all important, essential
and relevant information in the context of underwriting the E
risk to be covered by the insurer."

Thus, the Regulation also defines the word "material" to mean
and include all "important", "essential" and "relevant" information
in the context of guiding the insurer to decide whether to
undertake the risk or not. F

20. The upshot of the entire discussion is that in a Contract
of Insurance, any fact which would influence the mind of a
prudent insurer in deciding whether to accept or not to accept
the risk is a "malarial fact". If the proposer has knowledge of G
~ such fact, he is obliged to disclose it particularly while
answering questions in the proposal form. Needless to
emphasise that any inaccurate answer will entitle the insurer to
repudiate his liability because there is clear presumption that
any information sought for in the proposal form is material for H
572 SUPREME COURT REPORTS [2009] 10 S.C.R.

A the purpose of entering into a Contract of Insurance.

21. Bearing in mind the aforestated legal position, we may
advert to the facts in hand. As noted earlier, the proposal form
contained the following two questions:
B "10. Details of illness/would which : Sound Health
may require treatment in near future

11. Details of Treatment/surgical Nil
operation in the last two months
c Details of Treatment

Duration of Treatment

Doctor/Hospital From ..... to ..... .
D
If fully recovered, attached certificate

For attending Doctor/Surgeon"

22. Answers given by the proposer to the two questions
E were "Sound Health" and "Nil" respectively. It would be beyond
anybody's comprehension that the insured was not aware of
the state of his health and the fact that he was suffering from
Diabetes as also chronic Renal failure, more so when he was
stated to be on regular haemodialysis. There can hardly be any
F scope for doubt that the information required in the afore-
extracted questions was on material facts and answers given
to those questions were definitely factors which would have
influenced and guided the respondent - Insurance Company
to enter into the Contract of Mediclaim Insurance with the
G insured. It is also pertinent to note that in the claim form the
appellant had stated that the deceased was suffering from
Chronic Renal Failure and Diabetic Nephropathy from 1st June,
1990, i.e. within three weeks of taking the policy. Judged from
any angle, we have no hesitation in coming to the conclusion
H that the statement made by the insured in the proposal form
SATWANT KAUR SANDHU v. NEW INDIA 573
ASSURANCE COMPANY LTD. [D.K. JAIN, J.]

~ as to the state of his health was palpably untrue to his A
knowledge. There was clear suppression of material facts in
regard to the health of the insured and, therefore, the
respondent - insurer was fully justified in repudiating the
insurance contract. We do not find any substance in the
contention of learned counsel for the appellant that reliance B
could not be placed on the certificate obtained by the
respondent from the hospital, where the insured was treated.
,. Apart from the fact that at no stage the appellant had pleaded
that the insured was not treated at Vijaya Health Centre at
Chennai, where he ultimately died. It is more than clear from c
the said certificate that information about the medical history
of the deceased must have been supplied by his family
members at the time of admission in the hospital, a normal
~
practice in any hospital. Significantly, even the, declaration in
' ;. the proposal form by the proposer authorises the insurer to seek D
information from any hospital he had attended or may attend
concerning any decease or illness which may affect his health.

23. Before parting with the case, we may also deal with
the submission of learned counsel for the appellant that the
order of the National Commission is flawed because it has E
declined to interfere on a wrong premise that both the Fora
below had arrived at "concurrent findings", which was not so. It
is true that there is an apparent error in the order of the National
Commission, inasmuch as the State Commission had, in fact,
disagreed with the view taken by the District Forum but having F
regard to the fact that on our independent examination of the
material on record, the claim by the appellant has been found
to be fraudulent, we are of the opinion that no useful purpose
would be served by remitting the matter to the National
Commission for fresh adjudication on merits. G
,,;
24. In view of the foregoing discussion, we do not find any
merit in this appeal, which is dismissed accordingly but with
no order as to costs.

K.K.T. Appeal dismissed. H