It is often that we see that the previous policy details were incorrectly declared by the insured. Such wrong declaration could be on account of apathy on part of the insured for the insurance process or could be a purposeful concealment to claim benefits from the new insurer.
In certain policies like motor policies, customers stand to claim discount in policy premium in case no claim is detected against the previous policy number. In other products also an insurer may provide benefits in terms of premium or addon's to customer claiming blank slates.
Whereas basis the Doctrine of Uberrima fidesis (utmost good faith), the parties to an insurance contract must behave in good faith and provide a complete statement of all important facts set out in the insurance policy, it's consideration in court of law has been subjective.
For instance, one such case of incorrect previous policy details happened when Rekhaben Rathod bought a life insurance policy from Reliance Life Insurance Co while already having a life insurance policy from Max Life. On July 10, 2009, the insured purchased a life insurance policy from Max New York Life Insurance Company for a maximum of Rs. 11 lakhs. The fact of the previous insurance being taken had been suppressed by the insured while the questions being asked by the Reliance Life Insurance regarding whether any policy has already been taken.
When Mrs Rathod raised a claim upon death of her husband, Reliance life insurance co denied the claim on grounds of non disclosure of material facts. The insured approached District Consumer Redressal Commission, but the commision agreed with the insurer on claim denial due to non-disclosure. Insured then approached the State and National Commission, they acknowledged the appeal and declared that the disclosure of a prior insurance policy would not change a prudent insurer's decision. Reliance life insurance co appealed against the State and National Consumer Redressal Commission's ruling in the Supreme court. The Apex court considered all facts of the matter and allowed insured fort half of the claim amount.
The Apex court judged partially in favor of the insured since it felt that the fact in question was not a material fact as knowing same may not have changed the Insurers decision to insure subject life. Thereby it can be understood that if a material fact is misdeclared, notwithstanding anything contrary in the policy wordings, a claim can be rightfully rejected.
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