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Be careful in furnishing information while buying an insurance policy. Giving incorrect information can lend you in trouble in the form of repudiation of the policy. So says a ruling of the Supreme Court.
The apex court dismissed a petition filed by claimants seeking recovery of the amount of insurance on the death of one Chackochan, the insured. The insured took an insurance policy on Feb 21, 1987. He died on July 6 of the same year. On his death, the appellants claimed the insured amount.

The insured had undergone an operation. But in the application form for taking the policy he had not said this.

The insurer LIC repudiated the policy on Feb 10, 1989. Non-disclosure and mis-statement in the proposal form was the reason for the repudiation of the contract of insurance.

Upholding the decision of the insurer, a SC bench comprising Justice SB Sinha and Justice HS Bedi said: “The purpose for taking a policy of insurance is not, in our opinion, very material. It may serve the purpose of social security but then the same should not be obtained with a fraudulent act by the insured. Proposal can be repudiated if a fraudulent act is discovered. The proposer must show that his intention was bona fide.”

The court said that onus does not lie on the insurer to verify the correctness of the information given.

“It was not necessary for the insurer to establish that the suppression was fraudulently made by the policy holder or that he must have been aware at the time of making the statement that the same was false or that the fact was suppressed which was material to disclose. A deliberate wrong answer which has a great bearing on the contract of insurance, if discovered may lead to the police being vitiated in law,” said Justice Sinha writing the verdict.

However, according to Section 45 of the Insurance Act, a time limitation of two year has been imposed within which the insurer can repudiate the policy in such cases, court noted. The fact that the information given by the insured were incorrect was not in dispute.

The single judge of Kerala High Court had said that there was nothing to indicate that if the injured had disclosed the previous operation, the corporation might not have inclined to insure and insisted on a higher premium and thus there was no material to show that the non-disclosure was a material fact justifying repudiation of the policy by the corporation. This was turned down by a division bench of the high court against which the claimants had come to the apex court.

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