Mr. Pawan, aged 40 Years purchased an Insurance Policy for the Sum Assured of ₹1 Crore from XYZ Company Limited. The proposal date was 22.02.2024 and has paid one year premium of ₹30,733/-. In the proposal form, he nomin

CS Professional · Insurance - Law & Practice · PYQS · June 2025
Mr. Pawan, aged 40 Years purchased an Insurance Policy for the Sum Assured of ₹1 Crore from XYZ Company Limited. The proposal date was 22.02.2024 and has paid one year premium of ₹30,733/-. In the proposal form, he nominated his second wife Ms. Aparna and minor son Mr. Abhiroop who was born to his first wife as beneficiaries of 50% share of each for policy benefits. As his son is minor, his second wife Ms. Aparna is considered as legal trustee/guardian for the minor son. His first wife Ms. Karuna passed away on 1-2-2021 with post-partum problems leaving behind a son. Since his first wife passed away in 2021, he has been using anti-depressant medicines to come out from his bereavement and also married Ms. Aparna on 20-12-2023 to take care of his two-year-old son Mr. Abhiroop. The usage of depressant medicines is not mentioned in the proposal form as he thought that was not a material fact. His business also got affected with his mental depression and to raise money for his business continuation he assigned this ₹1 Crore insurance policy to his creditor on 25.06.2024 against the loan of ₹30 lakhs. Within 7 months of the proposal date, he died on 28.08.2024. The cause of death was reported in the discharge form of deceased life assured as sudden cardiac arrest in the sleep due to atherosclerosis (hardening of the arteries). As Ms. Aparna is not biological mother to Abhiroop and father passed away, parents of Ms. Karuna the biological mother of Mr. Abhiroop approached the insurance company for the policy benefits in the name of minor son Mr. Abhiroop under the trustee of biological grandparents. As it is an early claim, the investigation on death of the insured is initiated and the insurance company could not prove that it is a suicide though they come acrossed the rumors of suicide from neighborhood due to his depressive mentality. But on investigation, it is identified that life assured had suppressed or concealed the material fact of using anti-depressant medicines. Research showing that antidepressants might contribute to atherosclerosis by affecting factors like blood pressure, platelet aggregation, inflammation and endothelial function within the blood vessels which may lead to heart failure. Insurer put on hold the claim based on the following issues: Suppression of material facts or breach of the condition of 'utmost good faith' from the life assured. Early claim with a suspicion of suicide. Litigation on Trustee/Guardian for the minor son. Part of Insurance policy benefits is assigned to creditor. Mr. Pawan did not mention his usage of anti-depressant medicines in the application form. Usage of anti-depressants may lead to the failure of heart due to atherosclerosis (hardening of the arteries) and he died with heart failure. As per the insurance company, the policyholder concealed or suppressed the material fact that he is using anti-depressants. On this ground in this case, can an Insurance Company repudiate the Claim? Justify your answer by quoting the relevant section of Insurance Act, 1938.

Answer & Explanation:

The insurance company can repudiate the claim based on the suppression of material facts. Section 45 of the Insurance Act, 1938 provides that if a policyholder has made any statement that is false or has suppressed any material fact, the insurer can void the policy after two years from the date of commencement of the policy. However, this provision is particularly applicable if the suppression or misrepresentation is material to the risk. As a result of the investigation conducted by the life insurer, it is established that a material fact which was critical for assessment of the risk was not disclosed at the time of application in the Proposal form, the Life Insurance Company has right to re-assess the underwriting keeping in mind the facts revealed by the Investigation Report. Had this fact been revealed to the insurance company at the time of submitting the proposal form-what would have been the impact of underwriting (decision to accept the risk and issue a Policy) where fraud or misrepresentation is established, surrender value shall be paid. As per the Sec. 45 of the Insurance Act, 1938 , no claim shall be repudiated on any reason after a period of 3 years from the commencement of the policy. In this case, it is less than a year. Hence, this clause is not restricting them to repudiate the claim on the grounds of suicide or on the grounds of suppression/concealment of material fact.

Topics: Life Insurance Claims

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