The Supreme Court has held that the life insurance claims should not be rejected mechanically
It is an established position of law that a contract of insurance is one of uberrima fides, that is to say, a contact of utmost good faith.
The insurer is entitled to ask for all information that influence its opinion about the risk being incurred and the premium that should be charged.
This, however, does not mean that the person taking out an insurance policy must disclose the most trivial details about his family history or for that matter every ailment he has suffered, howsoever insignificant that it might have been.
The fact however remains that quite a large number of life insurance claims have been repudiated simply on the ground that the insured had not stated certain details about previous ailments.
A glance over the case law on the subject reveals that there are many claims that would have been rejected but for the courts, and more particularly the consumer courts.
In the case of Life Insurance Corporation of India vs Parmod Chander 2001 CTJ 524 (CP) Smt Rama Devi had taken out an insurance policy for Rs 50,000 commencing from July 28, 1989. Rama Devi suddenly died on October 10, 1989 that is 2 1/2 months after the policy commenced.
Her son Parmod Chander, who was named as nominee filed an insurance claim which was rejected by the Life Insurance Corporation (LIC) on the ground that the deceased while submitting the proposal form had suppressed the fact that she suffered from Parkinson
