Policyholders are required to disclose all material facts that may influence a prudent insurer’s decision to assume risk, as failure to do so can result in claim repudiation, and at the same time, the insurers must clearly communicate policy terms, ensuring fair obligations for both parties
The Supreme Court’s (SC) ruling in Mahaveer Sharma v. Exide Life Insurance Co. Ltd 2025 SCC OnLine SC 435 upholds the doctrine of uberrima fides (utmost good faith) in insurance contracts, giving significance to the reciprocal duty of both the insured and the insurer.
“Policyholders are required to disclose all material facts that may influence a prudent insurer’s decision to assume risk, as failure to do so can result in claim repudiation, and at the same time, the insurers must clearly communicate policy terms, ensuring fair obligations for both parties,” says Raadhika Chawla, advocate, Supreme Court of India.
In this case, the court, while relying upon Mahakali Sujatha v. Branch Manager, Future Generali India Life Insurance Company Limited and Another (2024) 8 SCC 712, clarified that when an insurer repudiates a claim on the ground of suppression of material facts, the burden of proof lies on the insurer. The insurer must establish not only that there was non-disclosure but also that such non-disclosure was fraudulent in nature.
Furthermore, the court held that whether a fact is material must be assessed based on its actual impact on the insurer’s decision. “In the instant case, since the insurer was already aware of a larger disclosed policy and still proceeded to issue the disputed policy, the non-disclosure of smaller policies was deemed immaterial to the underwriting decision,” says Chawla.
Make Complete And Accurate Disclosures
“The ruling underscores how essential it is to make complete and accurate disclosures. This follows the well-settled position that Insurance contracts are to be made in utmost good faith,” says Kapil Arora, Partner, Cyril Amarchand Mangaldas.
The ruling does not alter the expected standard of disclosure. Rather, only a clarification- and a very important one, that prior/other policies must be disclosed if asked for.
“In the claims which are pending, if the insurance company has asked for any other policy in the form and the same is not disclosed by the policyholder, the court may construe this as material non-disclosure and may reject the claim if under the policy it was provided that this material non-disclosure may result in dismissal of the claim,” says Arora.
For future claims, there is the likelihood that all insurance companies may ask the policyholders to disclose other life insurance policies.
What To Know
“Keep a folder with copies of every insurance document you sign. When applying, bring a list of all your policies - amounts, companies, everything,” says Kunal Varma, CEO and co-founder, Freo, an app-based credit line.
And insurers need to stop hiding behind fine print. “Their forms should clearly explain that missing information can invalidate claims years later. Most people have no idea they're one oversight away from having their family's financial safety net disappear,” says Varma.
However, an important aspect of this judgment was substantial disclosure. “Thus, so long as facts relevant for the insurer to assess the risk are stated, omission of some other matters, which would not otherwise impact the decision to insure, cannot be considered as concealment. This protects the insured and ensures the insurer is accountable. Irrelevant grounds cannot be taken to invalidate the policy,” says Arora.
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